Opinion
CIVIL ACTION NO. H-01-1841
August 3, 2003
ORDER
Pending before the Court are Defendant Hartford Fire Insurance Company's Motion for Summary Judgment (Instrument No. 69) and Defendants Great Northern Insurance Company and Federal Insurance Company's Cross Motion for Summary Judgment on the Issue of Notice. (Instrument No. 76). Based on the submissions of the parties and the applicable law, the Court finds that the above motions should be GRANTED.
I.
The Original Complaint was filed in this Court on June 1, 2001, by Plaintiff New Era of Networks, Inc. ("New Era") against Defendants Hartford Fire Insurance Co. ("Hartford"), Great Northern Insurance Company ("Great Northern"), and Federal Insurance Company ("Federal"), seeking a declaratory judgment and alleging breach of contract, breach of implied covenant of good faith and fair dealing and statutory violations under Texas law. (Instrument No. 1).New Era is a corporation with its principal place of business in Englewood, Colorado organized under the laws of the State of Delaware. In January 1996, New Era applied for registration of the trademark "NEON," claiming that they had used the mark as early as November 1, 1993 in interstate commerce. Neon Systems, Inc. ("Neon") a Delaware Corporation with its principal place of business in Fort Bend County, Texas, maintains that their use of "NEON" predates New Era's use of the mark. (Instrument No. 69, at Exh. 10). Both New Era and Neon are computer software companies that create "middleware," which is computer software that is involved in networking of computer systems. (Instrument No. 1, Exh. A). Neon Systems requested New Era to immediately stop using "NEON" via a September 20, 1996 cease and desist letter. The September 20, 1996 letter alerted New Era of its alleged offenses and of Neon Systems' intention to file suit if the matter was not resolved. (Instrument No. 72 Exh. 10). Based on the record, neither company had a registered trademark at this time.
On December 24, 1998 New Era filed a declaratory judgment action against Neon in Colorado. (Instrument No. 72, at Exh. 8). Plaintiff sought a declaration from the court permitting their use of the trademarks "NEON, New Era of Networks, Inc., NEONet and NEONSOFT." (Id.) The parties have not indicated to the Court the disposition of this suit.
In June 1999, Neon filed a separate civil action against New Era in the Judicial District Court of Fort Bend County, Texas, alleging trademark infringement in violation of Texas law ("underlying lawsuit"). (Instrument No. 1, at ¶ 20). The Texas state case proceeded to trial on May 15, 2001and on June 1, 2001 a jury found in favor of Neon awarding Neon $14,000,000 in compensatory damages and $25,000,0000 in punitive damages. Subsequently, New Era and Neon were able to come to an agreement, to settle the case for $16,500,000. (Instrument No. 69, at 3-4).
Also on June 1, 2001 New Era filed its Original Complaint in this Court against its insurance carriers, Great Northern, Federal and Hartford, claiming that the Defendants each issued to New Era a business liability policy or umbrella policy which covered New Era's obligations for any "personal injury" or "advertising injury," (Id. at ¶¶ 7-16). Plaintiff admits that this is not a claim for bodily injury or property damage, and that the underlying lawsuit did not trigger bodily injury or property damage coverage. (Instrument No. 81, at 1).
New Era alleges eight causes of action against the insurers: two claims for breach of contract, alleging a failure to defend and failure to indemnify New Era under the policies; a breach of implied covenant of good faith and fair dealing claim; claim for declaratory relief, asserting that the insurance companies have a duty to both defend and indemnify New Era; Unfair Claims Settlement Practice Act Violation claims pursuant to Article 21.21 of the Texas Insurance Code; Texas Deceptive Trade Practices Act claim, alleging the violation of Texas Business Commercial Code sec. 17.41; and Prompt Payment of Claims Act claim pursuant to Article 21.55 of the Texas Insurance Code. (Instrument No. 1).
The Plaintiff's claims stem from allegations that all three Defendants, Hartford, Great Northern, and Federal ("Defendants") were obligated but failed to provide a defense and indemnification with respect to the underlying lawsuit brought in state court against New Era by Neon Systems. (Instrument No. 1, at 2). Moreover, New Era contends that Neon's claims are within the coverage of the policies. (Id. at ¶ 20). New Era submits, that the three insurers were timely and properly notified of the underlying lawsuit filed by Neon, and prompt demands for defense and indemnification were allegedly made. (Id. at ¶ 23-25). New Era avers that sometime during the pre-trial stage of the underlying lawsuit they received a settlement demand for $8 million from Neon, they then "timely and properly forwarded the demand to Defendants. The insurers, according to New Era, "did not respond to New Era's demands regarding the settlement," (Id. at ¶ 27). New Era seeks coverage from Defendants for both the costs of defending the underlying lawsuit, as well as for the judgment that ultimately was entered against New Era in that action. (Instrument No. 62, at 3).
On September 13, 2002 Plaintiff filed a Motion for Partial Summary Judgment, in which Plaintiff seeks a judgment that Defendants have the burden to establish that they were prejudiced by the alleged late notice, in order to raise a late notice defense. Plaintiff also seeks a ruling on whether Defendants' alleged admissions that they would have denied New Era's claim regardless of when they received notice preclude Defendants from presenting their late notice defenses as a matter of law. (Instrument No. 62, at 2).
New Era claims that the eighteen liability insurance policies it bought from the Defendants provide New Era with liability coverage for certain periods between 1994 and 2002 (Id.). Although the versions of notice provisions at issue are not identical among all of the policies, Plaintiff contends that the most stringent versions state, in essence, that the insured is to provide notice to the insurer of a claim "as soon as possible" and of a suit against the insured "immediately." (Id.). According to Plaintiff, Defendants' affirmative defense that New Era breached the notice condition and forfeited coverage entirely by providing late notice of Neon's claims and/or lawsuit against New Era, is not supported by the evidence, which according to New Era indicates that "defendants actually had been placed on notice of Neon Systems' claims and lawsuit much earlier." (Instrument No. 62, at 4).
Plaintiff contends that an insurance company may not escape liability based on late notice unless it can prove that it was prejudiced by such late notice. In addition, New Era argues that the application of established Texas and Fifth Circuit law, holding that an insurance company is precluded in certain circumstances from relying on a "late notice" defense-renders moot the question of exactly when defendants were on notice. (Id., at 4). However, on July 30, 2003 this Court denied Plaintiff's Motion for Partial Summary Judgment. This Court found that in this case, prejudice is not a required element of Defendants' late notice defense, and that Defendants are not precluded from raising late notice as a defense at the same time as maintaining that coverage would have been denied based on other issues outside of the issue of late notice.
On September 23, 2002 Defendant Hartford filed a motion for summary judgment (Instrument No. 69), asserting that they are entitled to the judgment because New Era failed to notify Hartford of the underlying lawsuit until "704 days after that suit was filed, five years after New Era was originally threatened with suit, and three days into trial." (Id., at 4). Hartford contends that this late notice constitutes a clear breach of the condition precedent to coverage contained in Hartford's insurance policies issued to New Era. (Id., at 1). In addition, Hartford argues that their Policy terminated on January 1, 1998 before, according to the factual allegations contained in the petitions filed in the underlying lawsuit against New Era, New Era's offenses allegedly occurred. (Id.). Finally Hartford alleges that New Era judicially admitted in related proceedings that it began using and publishing the "NEON" mark or name "at least" as early as 1993. Because, according to Hartford, coverage under any Hartford policy did not commence until March 18, 1994, and because the policy clearly excludes coverage for claims involving "personal injury" or "advertising injury" arising out of oral or written publication of material whose first publication took place before the beginning of the policy period, Hartford's policies provide no coverage as a matter of law. (Id. at 2).
On October 7, 2002 Defendants Great Northern Insurance Company and Federal Insurance Company (collectively hereinafter "Chubb Defendants"), filed a motion in opposition to New Era's motion for partial summary judgment and a cross-motion for summary judgment on the issue of notice. (Instrument No. 76). Chubb Defendants claim that they were notified of the underlying lawsuit when New Era filed a claim on May 17, 2001, two days after trial began. (Id., at 6), Chubb Defendants request that this Court deny Plaintiff's motion for partial summary judgment because Plaintiff's delay in reporting the underlying lawsuit is a breach of conditions precedent established by the policies at issue; "prejudice" is not an element of Defendants' late notice defense; Chubb Defendants were prejudiced, nonetheless, by late notice of the offense, claim and underlying lawsuit; Defendants may challenge late notice even though they determined that Plaintiff's claim was not covered for other reasons; and Plaintiff's delay in providing notice of the offense, claim, and underlying lawsuit precludes recovery under the policies at issue. (Instrument No. 76, at 2).
Chubb Defendants claim that the grounds asserted in their response also support their Cross-Motion for Summary Judgment which requests dismissal of the Complaint and entry of a take-nothing judgment. Fed.R.Civ.P. 56. (Id., at 18). Thus, all three Defendants contend that each of the policies at issue require prompt notice of any offense, claim, or suit and that they received late notice. Great Northern and Federal's policies inception date is January 1, 1998 and state in relevant part that:
You must see to it that we are notified as soon as practicable of an occurrence or an offense which might result in a claim. . . . If a claim is made or suit is brought against any insured, you must . . . notify us in writing as soon as practicable. . . . You and any other involved insured must immediately send us copies of any demands, notices, summons or legal papers received in connection with the claim or suit. . . . (CGL Policy by Great Northern: Appendix I Item A).
You must see to it that we and your underlying insurers are notified as soon as possible of any occurrence which may result in a claim if the claim may involve this policy or any underlying insurance; [and that insurers] receive notice of the claim or suit as soon as possible. . . . (Umbrella Policy by Federal: Appendix I, Item B).
You or any other insured must see to it that we are notified as soon as possible of an occurrence which may result in a claim. . . .
If a claim is received by you or by any insured, you or any other inured must notify us in writing as soon as possible. . . . (International Policy by Great Northern: Appendix I, Item C).
(Instrument No. 76, at 9).
The language in Hartford's policy beginning in March 1994, contains similar language to the Chubb Defendants' policies. Under the subheading of "Duties in The Event of Occurrence, Claim or Suit," Hartford's policy states in relevant part:
You must see to it that we are notified promptly of an "occurrence" or an offense which may result in a claim. To the extent possible, notice should include:
(1) How, when and where the "occurrence" or offense took place;
(2) The names and addresses of any named persons and witnesses; and
(3) The nature and location of any injury or damage arising out of the "occurrence" or offense.
. . . .
If a claim is made or "suit" is brought against any insured, you must:
(1) immediately record the specifics of the claim or "suit" and the date received; and
(2) Notify us as soon as practicable. . . . You must see to it that we receive a written notice of the claims or "suit" as soon as practicable.
. . . .
You and any other involved insured must:
(1) Immediately send us copies of any demands, notices, summonses or legal papers received in connection with the claim or "suit"
(2) Authorize us to obtain records and other information;
(3) Cooperate with us in the investigation, settlement or defense of the claim or "suit"; and
(4) Assist us upon or request, in the enforcement of any right against any person or organization that may be liable to the insured because of injury or damage to which this insurance may also apply,
(Instrument No. 69, at 14-15)
Under the subheading Legal Action Against Us, Hartford's policy says in relevant part: No person or organization has the right under this policy:
. . . .
(b) To sue us on this policy unless all of its terms have been fully complied with,
(Id.)
All three Defendants contend that Plaintiff did not notify Defendants of Neon Systems' trademark infringement claims, including the existence of the underlying lawsuit until, at the earliest, May 17, 2001. Notification, according to the Chubb Defendants occurred, five years after Plaintiff was originally threatened with litigation, almost two years following the filing of the underlying lawsuit, and two days into trial making it impossible for Defendants to investigate Neon's claims or provide any meaningful defense. (Instrument No. 76, at 6 Instrument No. 69, at 4). Defendants argue that New Era's late notice comes without any excuse, and was therefore a complete violation of the policies' notice provisions — conditions precedent to any contractual duty to defend or indemnify owed by Defendants. (Instrument No, 69, at 4). Defendants also claim that it is undisputed that Plaintiff made disclosures in two lawsuits representing that it had no insurance coverage for any of the infringement claims raised by Neon. (Instrument No. 76, at 11). Further, Defendants claim that although there is no prejudice requirement in this case under Texas law, New Era's late commencement-of-trial notice clearly prejudiced Defendants, because Defendants were not given a reasonable opportunity to participate in the defense of the complicated trademark infringement case. (Instrument No, 69, at 4). Defendants also contend that there is testimony from Plaintiff's employees, brokers, counsel, and insurers that Plaintiff failed to give notice under the policies prior to May 17, 2001. (Id.).
Hartford claims they were not notified until May 18, 2001, three days into the underlying lawsuit. (Instrument No. 69, at 4).
In New Era's response to Chubb Defendants' cross motion for summary judgment on notice, filed on November 5, 2002, Plaintiff claims that the Chubb Defendants' "motion can be defeated by a showing of `evidence, direct, circumstantial, or inferential' of notice to" Defendants. (Instrument No. 94, at 4). Plaintiff claims that Great Northern and Federal had notice of the Neon Systems dispute as early as 1997 via New Era's 1997 Prospectus, which was provided to Defendants as part of the application for and underwriting of insurance with Defendants. Plaintiff also asserts that their 1997 Annual report and that their June 1997 Quarterly Report "contains substantially the same disclosures about the Neon Systems' dispute as does the prospectus." (Id., at 7). New Era's June, 18,1997 Report states in relevant part:
The Company [New Era] is also aware that an number of organizations are utilizing the names Neon, New Era, and Neonet as either a trademark or trade name or both. In particular, the Company has received notices from NEON Systems Inc., and Neon Software, Inc. alleging the Company's use of NEON as a trade name and/or trademark violates such respective companies' proprietary rights. Such claims or additional claims against the Company alleging trademark or tradename infringement could be time consuming and result in costly litigation. A successful claim regarding the infringement of a trademark and/or tradename could result in substantial monetary damages against the Company . . . any monetary damages or injunction could have a harmful effect upon the Company's business, financial condition and operating results.
(Instrument No. 94, at 5).
New Era argues that had Defendants followed their own procedures they would have had full knowledge of the Neon Systems dispute when they were underwriting New Era's insurance policies. (Id., at 8) Plaintiff also claims that Leonard Goldstein, New Era's General Counsel, informed all three Defendants sometime in late 1998 via telephone conversations between Mr. Goldstein and Helga Weiss. Mr. Goldstein testified in his deposition that he asked Ms. Weiss whether there was insurance coverage for the part of the Neon Systems dispute set forth in the cease and desist letter." (Instrument No. 94, at 9). Plaintiff contends that sometime between March 1999 and July 2001, Bradley Cromer, an in-house attorney for New Era, "testified [in his deposition] that it was his custom and practice to talk to HRH . . . about New Era litigation, and that he `probably' discussed the Neon Systems litigation" with HRH. (Id., at 10). Plaintiff also contends that one of Defendants' senior litigation adjusters, Diane Wood, testified that "Neon Systems may have been insured" by Chubb Defendants, and "brought an earlier claim" to Chubb Defendants for the Neon Systems-New Era dispute. (Id.).
According to New Era, Hilb Rogal and Hamilton ("HRH") is an insurance agency, through which Hartford placed New Era's policies. Ms. Helga Weiss was Mr. Goldstein's primary contact at HRH. (Instrument No. 87 at 14); Plaintiff also contends that Ms. Weiss and HRH were Chubb Defendants' agents in connection with the New Era account. (Instrument No. 94, at 9).
Finally, Plaintiff claims that Chubb underwriter, Kathleen Dubia obtained and reviewed the New Era 1999 Annual Report prior to December 2000. Plaintiff claims that Ms. Dubia, underlined in her copy of the report, the following language "a number of organizations utilizing the names Neon and New Era as either a trademark or tradename or both. From this testimony, Plaintiff contends that the trier of fact may conclude that the Chubb Defendants had early notice of the underlying lawsuit via Neon Systems. Therefore, Plaintiff claims that "the record establishes that Chubb was on notice of the Neon Systems' dispute, based on information from [a] myriad of oral and written sources." (Id., at 11-13).
On October 21, 2002, Plaintiff filed its Response to Hartford Fire Insurance Company's Motion for Summary Judgment. (Instrument No. 87). New Era argues that late notice is a disputed fact. Plaintiff contends that HRH is an insurance agency through which Hartford placed New Era's policies and that Helga Weiss was Mr. Goldstein's primary contact at HRH. Therefore, HRH was Hartford's agent, "as confirmed by a written agency agreement between Hartford and HRH." (Id., at 14). Plaintiff asserts that through Mr. Goldstein's deposition testimony a jury could believe that "[b]etween November 18, 1998 and June, 1999 Leonard Goldstein the General Counsel of New Era, notified Helga Weiss of HRH of the Neon Systems dispute." (Id., at 15). Therefore, the question of exactly when Hartford first received notice is not appropriate for summary judgment. Plaintiff also maintains that the Neon Systems' petitions implicate a loss during Hartford's coverage. (Id.).
II.
Summary judgment is appropriate if no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56. A fact is "material" if its resolution in favor of one party might affect the outcome of the suit under governing law. See Anderson v. Liberty Lobby, Inc., 106 S.Ct. 2505, 2510 (1986); see also United States v. Arron, 954 F.2d 249, 251 (5th Cir. 1992). An issue is "genuine" if the evidence is sufficient for a reasonable jury to return a verdict for the nonmoving party. See Anderson, 106 S.Ct. at 2510. If the evidence rebutting the motion for summary judgment is only colorable or not significantly probative, summary judgment should be granted. Id. at 2511; see also Thomas v. Barton Lodge, Ltd., 174 F.3d 636, 644 (5th Cir. 1999). The summary judgment procedure, therefore, enables a party "who believes there is no genuine issue as to a specific fact essential to the other side's case to demand at least one sworn averment of that [specific] fact before the lengthy process continues." See Lujan v. National Wildlife Federation, 110 S.Ct. 3177, 3188-89 (1990).
Under Rule 56(c), the moving party bears the initial burden of informing the district court of the basis for its belief that there is an absence of a genuine issue for trial, and for identifying those portions of the record that demonstrate such absence. See Matsushita Elec. Ind. Co. v. Zenith Radio Corp., 106 S.Ct. 1348, 1355-56 (1986); see also Burge v. Parish of St. Tammany, 187 F.3d 452, 464 (5th Cir. 1999).
Where the moving party has met its Rule 56(c) burden, the nonmovant "must do more than simply show that there is some metaphysical doubt as to the material facts . . . [T]he nonmoving party must come forward with `specific facts showing that there is a genuine issue for trial'" See Matsushita, 106 S.Ct. at 1356 (quoting Fed.R.Civ.P. 56(e)) (emphasis in original); see also Celotex Corp. v. Catrett, 106 S.Ct. 2548, 2552 (1986); Engstrom v. First Nat'l Bank, 47 F.3d 1459, 1462 (5th Cir. 1995). To sustain the burden, the nonmoving party must produce evidence admissible at trial. See Anderson, 106 So. Ct. at 2514; see also Thomas v. Price, 975 F.2d 231, 235 (5th Cir. 1992) ("To avoid a summary judgment, the nonmoving party must adduce admissible evidence which creates a fact issue").
The Court reviews the facts in the light most favorable to the nonmovant and draws all reasonable inferences in favor of the nonmovant. See Brown v. Bunge Corp., 207 F.3d 776, 781 (5th Cir. 2000). "The mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff." See Anderson, 106 S.Ct. at 2512.
III.
The parties agree that on June 14, 1999, Neon Systems filed a lawsuit against New Era in Fort Bend County Texas alleging that "New Era is currently using `NEON' on its products, in its materials and in conjunction with its business . . . [Neon Systems' ] use of `NEON' predates New Era's use of "NEON"." (Instrument No. 72, at Exh.15).Hartford claims that it received notice of the Neon System's lawsuit, for the first time, on May 18, 2001 via " a letter sent to Hartford in Aurora, Illinois (no individual addressee was identified)." (Instrument No. 69, at 11). Hartford argues that New Era's "704 days delay in notifying Hartford of the underlying lawsuit is clearly a significant breach of the Policy, the effect of which is to void the Policy with respect to New Era's current claims for defense costs and indemnification. (Instrument Not 69, at 19). Chubb Defendants contend that New Era did not notify them of the underlying lawsuit until May 17, 2001 via Plaintiff's notice of claim. (Instrument No. 87, at 15). Chubb Defendants also maintain that New Era's delay in reporting the underlying lawsuit is a breach of condition precedent established by the policies at issue, therefore Plaintiff's delay precludes recovery under the policies. (Instrument No. 76, at 2).
Plaintiff, in its pleadings, focuses on the need for Defendants to prove they were prejudiced in order to claim a breach of notice defense, however this Court has already found that there is no prejudice requirement. New Era does also claim, that there is a disputed fact issue regarding whether the notice was late based on the testimony of Leonard Goldstein, the General Counsel of New Era. Plaintiff also claims that Mr. Goldstein notified Helga Weiss, an agent of Hartford, about the Neon Systems dispute sometime between November 18, 1998 and June, 1999. (Instrument No. 87, at 15). Thus, New Era contends that the question of exactly when Hartford and the Chubb Defendants received notice is a question which may not be resolved by summary judgment.
Nevertheless, Plaintiff does not dispute Chubb Defendants' claim that they received the notice of claim form regarding the underlying lawsuit on or about May 17, 2001 and that Hartford received notice on May 18, 2001. However, Plaintiff claims that Defendants "had been placed on notice of Neon Systems' claims and lawsuit much earlier." (Instrument No. 62, at 4). Thus, the question for the Court to consider is whether the notice of claim forms sent to Defendants in May 2001 were the first notices given to the Defendants.
A.
Plaintiff claims that the language in its 1997 Prospectus, June 1997 Quarterly and 1997 Annual reports and subsequent reports, was sufficient to give notice to Defendants about the underlying lawsuit filed in 1999 and that the specific policy requirements are not important.
"The terms in an insurance contract are given their ordinary and generally accepted meaning, unless the policy shows the words were meant in a technical or different sense." Hanson Indus., 873 F. Supp. 17, 22 (S.D. Tex. 1995). "The purpose of the requirement of timely written notice is to enable an insurer to investigate the circumstances of an accident while the matter is fresh in the minds of the witnesses so that it may adequately prepare to adjust or defend any claims that may be then or thereafter asserted against persons covered by its policy." Employers Casualty Co. v. Glens Falls Ins. Co., 484 S.W.2d 570, 575 (Tex. 1972); Bay Elec. Supply, Inc. v. Travelers Lloyds Ins. Co., 61 F. Supp.2d 611, 619 (S.D. Tex. 1999); see also Hanson, 873 F. Supp. at 27 (finding that [t]he purpose of the notice requirement is to enable the insurer to promptly investigate the circumstances of an accident so that it can prepare to defend any claim that my arise.).
Courts in Texas have found that "[compliance with the provision that notice be given `as soon as practicable' is a condition precedent, the breach of which voids policy coverage." Broussard v. Lumbermens Mut. Cas. Co., 582 S.W.2d 261, 262 (Tex.App.-Beaumont 1979); see also Duzich v. Marine Office of Am. Corp., 980 S.W.2d 857, 866 (Tex.App.-Corpus Christi 1998). Accordingly, Texas courts have held that "failure to give timely notice is a breach of the insurance contract and relieves the insurer of its obligation to defend or indemnify." Assicurazioni Generali SpA v. Pipe Line Valve Specialties Co., 935 F. Supp. 879, 877 (S.D. Tex. 1996).
Both Hartford and Chubb's policies require the insured, in this case New Era, to notify the insurer of any specific claims or demands made. Hartford's policy specifically states, "[i]f a claim is made or `suit' is brought against any insured, you must: (1) immediately record the specifics of the claim or `suit' and the date received; and (2) Notify us as soon as practicable. . . . You must see to it that we receive a written notice of the claims or `suit' as soon as practicable. Additionally, the Chubb Defendants' policies mandate that the insured, "must immediately send us copies of any demands, notices, summons or legal papers received in connection with the claim or suit. . . ."
Plaintiffs never address how language included in reports written in 1997 give specific notice to Defendants regarding a lawsuit that was not filed until 1999. Nevertheless, leaving the timeline issue aside, the language included in the reports cited by Plaintiff clearly state that Plaintiff is aware of possible trademark infringement violations. The language is that of a general awareness of potential issues, not a notification to the insurers that the insured has been or is about to be sued for trademark infringement. Specifically the reports state that" a number of organizations are utilizing the name Neon" and that "New Era received notices from Neon Systems Inc. alleging [New Era's] use of NEON as a . . . trademark violates such respective companies' proprietary rights." This language does not give notice to Defendants that New Era has been sued by Neon, served notice, participated in discovery and are scheduled to begin trial in May 2001. Plaintiff does not even allege that they sent Defendants copies of Neon's Complaint or any other legal papers relating to the underlying lawsuit before May 2001. Even if Defendants obtained actual notice of the underlying lawsuit in 1998 via the 1997 reports or subsequent annual reports, this does not relieve the Plaintiff of its obligation to comply with the specific notice condition precedent of the policies. See Federal Insurance Co. v. CompUSA, Inc., 239 F. Supp.2d 612, 615-616 (2002) (finding that notice provision of a policy should be strictly construed and that the parties to an insurance contract may make it in any legal form they desire that is not inconsistent with public policy.).
This interpretation is further supported by Ms. Dubia, a technology underwriter for Chubb Defendants, who highlighted in her copy of New Era's 1997Annual Report, the following, "[a]s is common in the software industry, we from time to time receive notices from third parties claiming infringement by our products of such third parties' proprietary rights."(Instrument No. 94, at 12). Nothing in the language of Plaintiff's reports alerts Defendants to the fact that New Era was sued by Neon in June 1999. Based on the language of the policies in this case and Texas law, the Court finds that timely notice was an express condition precedent to coverage and that Defendants were not notified of the underlying lawsuit via Plaintiff's prospectus, annual or quarterly reports.
B.
Plaintiff claims that the deposition testimony of Leonard Goldstein, New Era's General Counsel, disputes the Defendants' showing that notice was severely late. As stated above, the terms in an insurance contract are given their ordinary and generally accepted meaning, unless the policy shows the words were meant in a technical or different sense." Hanson Indus., 873 F. Supp. 17, 22 (S.D. Tex. 1995). In addition, "[o]ral notice does not satisfy a contractual provision requiring written notice." See Sparks v. Aetna Life Cas. Co., 554 S.W.2d 228 (Tex.Ct.App. 1977)
When asked about his contact with Helga Weiss, Mr. Goldstein's primary contact with Defendants, and whether he informed her of the Neon lawsuit, Mr. Goldstein says, "I believe I had a conversation with Helga." Mr. Goldstein admits that he does not remember when this conversation took place, through what medium, and that he has no memory of what she said or what he said to her. Mr. Goldstein recalls that "I believe I gave her the background and posed the question of whether or not there would be coverage." Mr. Goldstein goes on to admit that he has "[n]o memory of anything in writing that either posed the question or contained a response." (Instrument No. 105, Exh. A, at 90). Mr. Bradley Cromer, an in-house attorney for New Era, testified that he "probably talked to Helga Weiss about [the Texas litigation]." Ms. Wood's, a senior litigation adjuster for Chubb testified that Neon Systems may have been a Chubb insured and brought an earlier claim with Chubb for the Neon Systems/New Era dispute. Ms. Woods testified that she thought the claim occurred several years ago and that coverage was declined.
At best Mr. Goldstein's testimony confirms that he made an inquiry, generally, about New Era's policy coverage to Helga Weiss. There is no assertion that Mr. Goldstein notified Defendants that there were claims made against New Era or that there was a lawsuit. Again, Plaintiff is relying on witnesses that do not assert that they notified or substantially made Defendants aware that they had been sued by Neon Systems in 1999. Neither Mr. Goldstein nor Mr. Cornier give a clear indication of when their conversations occurred with Ms. Weiss or what the substance of those conversations were. They both vaguely assert that they may have mentioned the Neon Systems dispute at some point. Ms. Woods' deposition is also void as to when Neon may have "brought an earlier claim" regarding the trademark controversy with New Era. Furthermore, New Era does not claim that once Neon did actually file a lawsuit against them that they notified their insurance carriers in writing, as required by the policies, before May 17, 2001.
An issue is "genuine" if the evidence is sufficient for a reasonable jury to return a verdict for the nonmoving party. See Anderson, 106 S.Ct. at 2510. If the evidence rebutting the motion for summary judgment is only colorable or not significantly probative, summary judgment should be granted. Id. at 2511; see also Thomas v. Barton Lodge, Ltd., 174 F.3d 636, 644 (5th Cir. 1999). A fact is "material" if its resolution in favor of one party might affect the outcome of the suit under governing law. See Anderson v. Liberty Lobby, Inc., 106 S.Ct. 2505, 2510 (1986); see also United States v. Arron, 954 F.2d 249, 251 (5th Cir. 1992).
No reasonable jury could find that Plaintiff's alleged verbal notification satisfies the Defendants' contractual written notice requirement regarding the underlying lawsuit. Neither Mr. Goldstein's, Mr. Conner's or Ms. Wood's vague deposition testimonies support New Era's claim that they did notify the Defendants of Neon's claims against them prior to May 17, 2001. Therefore, there is no genuine issue of material fact as to the date of the notice given to the Defendants regarding the underlying lawsuit. Thus, the Court finds that actual notice of the underlying lawsuit was not given by New Era to the Chubb Defendants until May 17, 2001 and to Hartford on May 18, 2001.
C.
The Court now considers whether the May 17, 2001 and May 18, 2001 notices are a breach of New Era's insurance policies as a matter of law. "When an insurance policy requires notification of an `occurrence' or a lawsuit `as soon as practicable' or `immediately,' courts must consider the reasonableness of a delay in notification if the facts are undisputed." Assicurazioni Generali SpA v. Pipe line Valve Specialties Co., 935 F. Supp. 879, 877 (S.D. Tex. 1996). In Assicurazioni, the insurance policy at issue required that the insured give notice of and "occurrence" as soon as practicable and required the insured to "immediately forward to the insurer every demand, notice, summons or other process received by him or his representative," similar to the provisions in this case. Id., at 887. Despite these notice requirements, conditions precedent to any coverage, the insured did not notify its insurer of the accident and lawsuit until "almost 17 months after the accident/occurrence and more than two months (68 days) after receipt of the Original Petition." Id. at 887-88. The insured in Assicurazioni provided no reason or excuse for their late notice. Id. at 888. The court held that "[b]y no stretch of the imagination can this notification of the accident be deemed `as soon as practicable.' Moreover, the delay in reporting the litigation also violated [the policy] requirement that the petition be forwarded `immediately' to the insurer." Id. at 888; see also Sandefer Oil Gas, Inc. v. AIG Oil Rig of Tex., Inc., 846 F.2d 319, 325 (5th Cir. 1988) (holding that notice should have been given to the defendants within a reasonable amount of time, not two years later.).
The court in Gemmy Ind. Corp. v. Alliance General Ins. Co., found that the insured "waited more than a year before it notified defendants of the [underlying lawsuit]," and that the "unexplained delay constitutes untimely notice as a matter of law." 190 F. Supp.2d 915, 921 (N.D. Tex. 1998) (citing Bolivar County Board of Supervisors v. Forum Ins. Co., 779 F.2d 1081, 1084 (5th Cir. 1986) (five month delay in providing notice was not "as soon as practicable). In Gemmy, Gemmy Industries Corporation was sued in February, 1996 for among other things, trade dress infringement. Id. at 917. In July, 1996 the plaintiff in the underlying suit against Gemmy amended its petition and asserted an additional claim for copyright infringement, which was subsequently dismissed in December, 1996. Despite the notice provisions in the general liability insurance policies issued to Gemmy, which required notice of a suit or claim "as soon as practicable," Gemmy did not notify its carriers of the underlying suit until June 1997. Id. Therefore, the court found that "Plaintiff breached the notice provisions in the insurance policies and is not entitled to coverage or a defense for that reason." Id. at 922.
Like the insured in Assicurazioni and Gemmy, New Era gives the Court no reasons as to why there was, at minimum, twenty-three months delay in providing notice to the Defendants of the underlying lawsuit. As noted above, the Court finds that New Era's claim that notice was given earlier is not supported by the evidence. Therefore, New Era's nearly two year delay in providing notice of the underlying lawsuit, is clearly a breach of the insurance agreement that serves to void the policies with respect to New Era's current claims for defense costs incurred in the underlying lawsuit and any potential indemnity for the $16,500,000 compromised judgment. Thus, all claims by New Era against Defendants are dismissed.
IV.
For the foregoing reasons the Court GRANTS Defendant Hartford Fire Insurance Company's Motion for Summary Judgment (Instrument No. 69) AND Defendants' Cross Motion for Summary Judgment on the Issue of Notice (Instrument No. 76).The Clerk shall enter this Order and provide a copy to all parties.