SingleEntry.Com Inc v. St Paul Fire Mrne Co

United States Court of Appeals
Fifth Circuit
F I L E D
December 7, 2004
Charles R. Fulbruge III
Clerk
REVISED DECEMBER 29, 2004
In the
United States Court of Appeals
for the Fifth Circuit
_____________________
m 04-50110
Summary Calendar
_____________________
SINGLEENTRY.COM, INC.,
Plaintiff-Appellant,
VERSUS
ST. PAUL FIRE & MARINE INSURANCE COMPANY,
Defendant-Appellee.
____________________
Appeal from the United States District Court
for the Western District of Texas
m A-03-CV-94-SS
____________________

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Before DAVIS, SMITH, and DENNIS,
Circuit Judges.
JERRY E. SMITH, Circuit Judge:*
SingleEntry.com, Inc. (“SingleEntry”), ap-
peals a summary summary judgment in favor
of St. Paul Fire and Marine Insurance Com-
pany (“St. Paul”). SingleEntry, as assignee of
ThinkSpark Corporation’s rights, contends
that ThinkSpark provided notice of a claim
within its policy period under a claims-made
technology errors and omissions policy. In ad-
dition, SingleEntry avers that St. Paul is re-
quired to show prejudice for failure to provide
notice and was required to provide a defense
to ThinkSpark under article 21.55 of the Texas
Insurance Code. We affirm.
I.
St. Paul issued ThinkSpark a claims-made
technology errors and omissions policy cover-
ing the period from November 9, 2000, to
November 9, 2001. SingleEntry hired Think-
Spark to design and build a website. In the
spring of 2000, a dispute arose between Sin-
gleEntry and ThinkSpark. SingleEntry sued
ThinkSpark on December 5, 2000, alleging
fraud, breach of contract, violations of the
Texas Deceptive Trade Practices Act, and an
alternative claim for negligent misrepresenta-
tion.
ThinkSpark knew of the litigation no later
than December 7, 2000, but did not inform St.
Paul until September 18, 2001, when Think-
Spark’s insurance broker sent St. Paul a copy
of the petition. SingleEntry and ThinkSpark
submitted their dispute to arbitration, and on
August 7, 2002, SingleEntry obtained an arbi-
tration award against ThinkSpark.
St. Paul denied coverage to ThinkSpark for
the claims assert ed by SingleEntry in the un-
derlying litigation. On February 11, 2003, the
state court ordered a turnover that assigned
ThinkSpark’s claims against St. Paul to Sin-
gleEntry, which then sued St. Paul, alleging
status as an assignee and judgment creditor or
third-party beneficiary of the policy and seek-
ing indemnification under the policy. St. Paul
removed to federal court on the basis of diver-
sity jurisdiction.
SingleEntry and St. Paul filed cross-mo-
tions for summary judgment on the legal ques-
tion whether the provision in the policy that
required ThinkSpark to notify St. Paul of a
loss “as soon as possible” is a mandatory not-
ice requirement and therefore a condition pre-
cedent to coverage. The district court denied
Single-Entry’s motion for partial summary
judgment and granted St. Paul’s cross-motion
for summary judgment, determining that
ThinkSpark had failed to comply with the
notice requirements.
II.
An assignee steps into the shoes of the as-
signor and takes the assigned rights subject to
all defenses that an opposing party might be
able to assert against the assignor. Burns v.
Bishop, 48 S.W.3d 459, 466 (Tex.
App.SSHouston [14th Dist.] 2001). A third-
party beneficiary judgment creditor of the in-
sured steps into the shoes of the insured. State
Farm Lloyds Ins. Co. v. Maldonado, 963
S.W.2d 38, 40 (Tex. 1998). The judgment
creditor must show that the insured complied
with the conditions precedent and terms of the
policy. Id.
* Pursuant to 5TH CIR. R. 47.5, the court has
determined that this opinion should not be pub-
lished and is not precedent except under the limited
circumstances set fort in 5TH CIR. R. 47.5.4.

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When interpreting an insurance policy un-
der Texas law, a court must construe ambig-
uities against the insurer and in favor of the in-
sured. Nat’l Union Fire Ins. Co. v. Willis, 296
F.3d 336, 339 (5th Cir. 2002). The primary
goal is to give effect to the written expression
of the parties’ intent. Id. This is necessary to
ensure that the interpretation of the policy will
give effect to each term in the contract so that
none will be rendered meaningless. Id. An
insurance policy will be considered ambiguous
if, when considered as a whole, it is reasonably
susceptible to more than one meaning. Mata-
dor Petroleum Corp. v. St. Paul Surplus Lines
Ins. Co., 174 F.3d 653, 657 (5th Cir. 1999)
(quoting Forbau v. Aetna Life Ins. Co., 876
S.W.2d 132, 134 (Tex. 1994)). A court
should not strain to find ambiguities that may
defeat the parties’ probable intention. Id. Fur-
thermore, an insurance contract will be given
its certain legal meaning or interpretation if
possible. Id.
The terms in an insurance contract are
given their ordinary and generally accepted
meaning, unless the policy shows that the
words were meant in a technical or different
sense. New Era of Networks, Inc. v. Great N.
Ins. Co., 2003 WL 23573645, at *8 (S.D. Tex.
2003) (citing Am. States Ins. Co. v. Hanson
Indus., 873 F. Supp. 17, 22 (S.D. Tex. 1995)).
The purpose of a notice requirement is to
enable the insurer to investigate the circum-
stances 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 be as-
serted against persons covered by its policy.
Id. (citing 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)).
Compliance with the provision that notice
be given as soon as practicable is a condition
precedent, the breach of which voids policy
coverage. Id. (citing Broussard v. Lumber-
mens Mut. Cas. Co., 582 S.W.2d 261, 2662
(Tex. App.SSBeaumont 1979); Duzich v.
Marine Office of Am. Corp., 980 S.W.2d 857,
866 (Tex. App.SSCorpus Christi 1998). Ac-
cordingly, “failure to give timely notice is a
breach of the insurance contract and relieves
the insurer of its obligation to defend or
indemnify. Id. (citing Assicurazioni Generali
SpA v. Pipe Line Valve Specialties Co., 935 F.
Supp 879, 887 (S.D. Tex. 1996)). Where an
insurance policy requires notification of an oc-
currence or a lawsuit as soon as practicable or
immediately, courts must consider the reason-
ableness of a delay in notification if the facts
are undisputed. Id. Notice requirements are
strictly interpreted, because the parties specifi-
cally negotiate them. Matador, 174 F.3d at
657.
A claims-made policy is distinguishable
from an occurrence policy, where an occur-
rence during the policy triggers coverage. Id.
Alternatively, under a claims-made policy,
providing notice triggers the insured’s cover-
age. Id. An insurer is not required to show
prejudice from late notice where a claims-
made policy is involved. Id. at 659. Courts
will not rewrite policies to permit notice-pre-
judice to be applied to claims-made policies,
because to do so would interfere with the
right to contract. Id. A party rightly should
be held to know the conditions of the policy
and the conscious choice that it made in select-
ing a claims-made policy instead of an occur-
rence policy. Hirsch v. Tex. Lawyers Ins.
Exch., 808 S.W.2d 561, 565 (Tex. App.SSEl
Paso 1991, wrti denied). Therefore, the failure
to provide proper notice under a claims-made
policy negates coverage, regardless of whether

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the insurer has been prejudiced. Id. A show-
ing of prejudice is required only in narrowly
defined cases involving bodily injury and
property damage. Dairyland County Mut. Ins.
Co. v. Roman, 498 S.W.2d 154, 157 n.2 (Tex.
1973).
The instant policy sets forth definite re-
quirements with which ThinkSpark must com-
ply to secure coverage. Under the policy
section titled “When this Policy Provides
Liability Protection,” the policy states: “If an
accident, error, event, offense, or wrongful act
happens that may involve liability protection
provided in this policy, you or any other pro-
tected person involved must tell us or our
agent what happened as soon as possible.”
ThinkSpark, however, did not notify St. Paul
until nine months after SingleEntry had filed
suit.
In addition, ThinkSpark did not give notice
to St. Paul when SingleEntry failed to pay over
$219,952 worth of invoices on May 9, 2000.
Also, in June 2000, ThinkSpark referred the
controversy with SingleEntry to an attorney,
and its chief financial officer predicted that the
dispute would result in litigation. St. Paul’s
policy states that “it is reasonable that a pro-
tected person could foresee a claim or suit
being made or brought if one of your custom-
ers refused to pay all or part of your charges
for those products or services.” Consequently,
the actual period of time during which Think-
Spark failed to notify St. Paul is actually much
longer than nine months.
Analogously, there is ample Texas authority
that taking eleven months to notify an insurer
is not “as soon as practicable.” Chicago Ins.
Co. v. W. World Ins. Co., 1998 WL 51363, at
*3 (N.D. Tex. 1998). Therefore, the district
court correctly found that ThinkSpark failed to
fulfill the notice requirement of the policy.
The terms and conditions of the policy demon-
strate that this notice requirement was meant
to be a condition precedent. Accordingly, be-
cause SingleEntry took the assigned rights
from ThinkSpark subject to all the defenses St.
Paul is able to assert, the district court prop-
erly granted St. Paul’s cross-motion for sum-
mary judgment.
III.
SingleEntry’s assertion that notice was pro-
vided before the expiration of the policy is
unavailing. The policy specifically mandated
that notice be provided “as soon as possible.”
Therefore, under Texas law, ThinkSpark’s
delay of notification from May 2000 until
December 2001 fails to fulfill the condition
precedent of providing notice. Moreover,
although SingleEntry repeatedly cites the lang-
uage of the policy stating that “failure to com-
ply could affect coverage,” this language must
be read along with the requirement that notice
must be given “as soon as possible.” Accord-
ingly, St. Paul was properly granted summary
judgment on SingleEntry’s suit as the assignee
of ThinkSpark’s claim.
St. Paul also defends SingleEntry’s claims
by noting that the policy did not cover the
dispute that arose between ThinkSpark and
SingleEntry. Specifically, the policy states that
“[w]e won’t cover loss that results from any
delay in delivery of, or failure to deliver your
computer or electronic products or services.”
The dispute between SingleEntry and
ThinkSpark arose because ThinkSpark failed
to complete the requested website for Single-
Entry by the deadline of May 1, 2000.
We affirm based on ThinkSpark’s failure to
fulfill the condition precedent of providing no-
tice to St. Paul “as soon as possible.” This de-
cision, moreover, is bolstered by the conclu-

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sion that the claim was not covered by the pol-
icy. Therefore, summary judgment was prop-
erly awarded because SingleEntry, as assignee,
is subject to all defenses St. Paul may raise
against ThinkSpark.
IV.
SingleEntry argue that in Texas, for there
to be a condition precedent, terms such as “if”
or “provided that” or “on condition that” nor-
mally must be used. Criswell v. European
Crossroads Shopping Ctr. Ltd., 792 S.W.2d
945, 948 (Tex. 1990). Furthermore, Single-
Entry tries to distinguish Fed. Ins. Co. v.
CompUSA, 319 F.3d 746, 748 (5th Cir. 2003),
because the contract in that case stated that
“the insured shall, as a condition precedent to
exercising their rights” give written notice.
Therefore, SingleEntry contends that the lang-
uage “condition precedent” must be used for a
notice requirement to act as a condition prece-
dent.
In Gemmy Indus. Corp. v. Alliance General
Ins. Co., 190 F. Supp. 2d 915, 921 (N.D. Tex.
1998), however, the insurance policy in con-
troversy did not explicitly have the words
“condition precedent” for the notice require-
ment, but rather stated that notice must be
given as soon as practicable. Id. The court
found that a delay of more than one year be-
fore notifying the insurer was insufficient, re-
gardless of the fact that the notice requirement
was not specifically labeled as a “condition
precedent.” Id.
Similarly, in Assicurazioni, 935 F. Supp. at
887, the policy at issue required notice as soon
as practicable, yet the insured notified its in-
surer almost seventeen months after the occur-
rence and two months after receipt of the orig-
inal petition. The policy listed the notice re-
quirements under the condition section of the
policy, yet the terms did not explicitly state
that the notice requirement was a “condition
precedent” to coverage. Again, although the
notice requirement was not specifically labeled
as a “condition precedent,” the court found
that the delays violated the requirements set
out in the policy. Id.
SingleEntry further urges that ThinkSpark
had discretion to determine when the need for
coverage may exist. SingleEntry cites Em-
ployers Ins. v. Bodi-Wachs Aviation Ins.
Agency, Inc., 39 F.3d 138 (7th Cir. 1994), to
illustrate that the insured has discretion in de-
termining when an insurer must be given not-
ice. In Bodi-Wachs, the insured gave notice to
its insurer directly after an amended pleading
was filed against it for fraud and negligence.
Id. Notably, the decision of the district court
granting coverage to the insured did not dem-
onstrate that the insured has discretion of
when to provide notice, but that the insured
fulfilled the requirements of the policy.
Alternatively, ThinkSpark had reason to be-
lieve that coverage would be needed when it
failed to reach its deadline for SingleEntry’s
website on May 1, 2000. Furthermore, in June
2000, the chief executive officer of Think-
Spark noted that litigation would likely result.
Consequently, ThinkSpark had the obligation
to notify St. Paul of possible litigation no later
than June 2000, and its failure provide notice
until September 2001 constituted a failure to
provide the proper notice.
V.
SingleEntry argues that St. Paul had a duty
to provide defense and pay the final judgment
on behalf of ThinkSpark under article 21.55 of
the Texas Insurance Code. SingleEntry is in-
correct, because it is not making a first-party
claim in this dispute. Under Article 21.55

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§ 1(3), claims are defined as a first-party claim
made by an insured or policyholder under an
insurance policy or contract or by a beneficiary
named in the policy or contract that must be
paid by the insurer directly to the insured or
beneficiary. An illustration of a first-party
claim can be found in Hartman v. St. Paul Fire
& Marine Ins. Co., 55 F. Supp. 2d 600, 603
(N.D. Tex. 1998), showing that a first-party
claim is an immediate direct diminution of the
insured’s assets, in contrast to a third-party
claim, which goes through the first-party as a
conduit.
SingleEntry’s claim is not a first-party claim
for damage suffered directly by the insured.
Therefore, because ThinkSpark’s policy was
not a first-party insurance policy, Single En-
try’s third-party claim is not covered by article
21.55. In addition, SingleEntry is not the
holder of the policy or a named beneficiary.
Accordingly, SingleEntry does not meet the
requirements of article 21.55, so summary
judgment was properly awarded to St. Paul.
AFFIRMED.

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