The U.S. Fifth Circuit Court of Appeals recently affirmed a ruling in favor of an insurer that it did not owe defense or indemnity because the insurer did not receive notice of the lawsuit until over 40 days after the entry of a default judgment against its insured. Nautilus Insurance Co. v. Darwin Vargas d/b/a Houston Star Security Patrol, et al., Case No. 17-20261 (5th Cir. (Tex.) Oct. 20, 2017).

A waitress was shot while working at a nightclub where the insured contracted to provide security services. The waitress sued the security company and took a default judgment against it. Six weeks later, the claimant’s counsel sent a letter to the security company’s insurer seeking “a resolution, and payment of the judgment amount.” This was the insurer’s first notice. The insurer sought declaratory judgment. The district court concluded that, under Texas law, the delay by the insured in providing notice of the suit to the insurer before the default judgment was taken abrogated any duty to defend or indemnify the insured and the claimant could not recover against the insurer. The claimant appealed.

The Fifth Circuit affirmed because the insured did not notify its insurer of the lawsuit brought against it and the insurer had been prejudiced by the late notice because the default judgment had been taken by the time it learned of the suit.