United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
June 12, 2006
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
Clerk
No. 05-10986
PRECIS, INC., an Oklahoma Corporation; DAVID MAY,
Plaintiffs-Appellants,
versus
FEDERAL INSURANCE CO. an Indiana Stock Insurance
Company; ZURICH AMERICAN INSURANCE CO.
Defendants-Appellees.
Appeal from the United States District Court
for the Northern District of Texas
(05-CV-411)
Before GARWOOD, DAVIS, and GARZA, Circuit Judges.
PER CURIAM:*
In this insurance coverage dispute, plaintiffs-appellants
Precis, Inc. (Precis) and David May (May) appeal from the district
court’s finding of no coverage and the subsequent summary judgment
in favor of defendants-appellees Federal Insurance Co. (Federal)
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
and Zurich American Insurance Co. (Zurich). We affirm.
Background
Precis purchased an “Executive Protection Policy” from Federal
(the Federal policy) under which Federal agreed to cover certain
losses relating to certain written demands asserted against Precis
or its directors and officers. The Federal policy was in effect
from September 1, 2001, to September 1, 2003.
On December 2, 2002, Eugene Kennedy (Kennedy) sent a letter to
May, General Counsel of Precis, demanding “consideration and
adjustment” for damages that Kennedy claimed were a result of
Precis’s intentional delay in granting consent for Kennedy to
execute a cashless exercise of Kennedy’s 15,000 purchase warrants
for the common stock of Precis. In his letter, Kennedy claimed
that the company’s wrongful delay deprived him of more than
$120,000 and he suggested payment to him by Precis of $5 per
warrant, or $75,000. Kennedy also threatened litigation in the
event he could not obtain an appropriate adjustment from Precis.
On December 9, 2002, Robert Kirk (Kirk) sent a letter to
Judith Henkels, CEO of Precis, complaining of “the deliberate
actions and stalling of David May” that wrongfully denied Kirk and
his group of warrant holders the ability to cash in their warrants.
Kirk claimed that the group’s damages exceeded $1.5 million and he
threatened litigation if a settlement could not be reached.
Precis, which received the letters in December 2002, did not notify
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Federal (and Federal was not aware) of the Kennedy and Kirk
letters, or either of them, at the time they were received or until
sometime after September 10, 2003.
Precis subsequently purchased a “Directors and Officers
Liability and Reimbursement Policy” from Zurich (the Zurich policy)
under which Zurich agreed to cover certain losses relating to
certain written demands asserted against Precis or its directors
and officers. The Zurich policy was in effect from September 1,
from September 1, 2003 to September 1, 2004.
On August 29, 2003, Kennedy, Kirk, and other plaintiffs filed
suit (the Kirk suit) against Precis and May in state court in
Texas. The underlying conduct complained of in the Kirk suit was
the same conduct complained of in the Kennedy and Kirk letters in
December 2002. The Kirk suit made a claim against Precis and May
of the type covered by both the Federal policy and the Zurich
policy. The Kirk suit was served on Precis and May on September
10, 2003. Following service, Precis requested coverage under both
the Federal policy and the Zurich policy. On March 23, 2004,
Zurich denied coverage because the claims in the Kirk lawsuit had
first been made in the Kennedy and Kirk letters in December 2002,
which was prior to coverage under the Zurich policy. On April 22,
2004, Federal also denied coverage, pointing to the December 2002
letters and noting that the claims had not been reported to Federal
“as soon as practicable,” as required by the policy.
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On July 8, 2004, Precis and May sued both Federal and Zurich
in state court in Oklahoma, seeking a declaratory judgment
concerning coverage under the policies, a judgment for coverage,
and costs including attorneys’ fees. Federal and Zurich removed
the case to the United States District Court for the Western
District of Oklahoma and, on Federal’s motion, the case was
transferred to the Northern District of Texas. All parties moved
for summary judgment. On July 12, 2005, the district court granted
defendants’ motions for summary judgment, denied plaintiffs’
motions for summary judgment, and entered final judgment in
defendants’ favor. Plaintiffs filed a timely appeal.
Jurisdiction and Standard of Review
The district court had jurisdiction based on diversity of
citizenship, 28 U.S.C. § 1332, and this court has jurisdiction
under 28 U.S.C. § 1291. We review a district court’s grant of
summary judgment de novo. Summary judgment is proper if, after
adequate opportunity for discovery, the pleadings, depositions,
answers to interrogatories, and admissions on file, together with
any affidavits filed in support of the motion, show that there is
no genuine issue as to any material fact and that the moving party
is entitled to judgment as a matter of law. Young v. Equifax
Credit Information Services, Inc., 294 F.3d 631, 635 (5th Cir.
2002).
Discussion
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The district court determined, as a matter of law, that the
December 2002 letters from Kirk and Kennedy were “claims” for the
purposes of both the Zurich policy and the Federal policy. We
agree. Both policies define a claim as, inter alia, “a written
demand for monetary damages.” Appellants claim that the district
court’s determination was erroneous because both letters fall short
of making a demand for monetary damages. As there is no other
purpose for these letters, we disagree. Both letters allege
monetary damages and threaten litigation in the event that an
appropriate resolution is not obtained. While the Kennedy letter
merely “suggests” a payment of $75,000, we are convinced that it is
a demand for money, especially considering the amount of monetary
damages identified earlier in the letter. Kennedy’s use of the
word “suggest” indicates that $75,000 is his opening proposal, it
does not indicate that he is not demanding money. Similarly, the
Kirk letter claims damages of over $1.5 million and offers either
settlement or litigation. The fact that Kirk does not propose a
specific amount for settlement does not mean that the letter is not
a demand for money. We agree with the district court that the
December 2002 letters were, as a matter of law, claims as defined
in both the Federal and Zurich policies.
The determination that the December 2002 letters were claims
disposes of appellants’ claim for coverage under the Zurich policy
as that policy does not cover claims first made prior to the
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effective date of the policy. Therefore, we affirm the summary
judgment in favor of Zurich.
Appellants argue that, even if the December 2002 letters were
claims, coverage is still available under the Federal policy. The
district court determined, as a matter of law, that the delay of
over nine months from the receipt of the claims in December 2002 to
notification of Federal in September 2003 was not “as soon as
practicable,” and, therefore, coverage under the Federal policy was
not triggered. Appellants do not challenge the court’s
determination (with which we agree) that as a matter of law
notification was not made as soon as practicable, but instead argue
that Texas law requires Federal to show prejudice from the late
notice in order to avoid liability. Under our holding in Federal
Insurance Co. v. CompUSA, Inc., 319 F.3d 746 (5th Cir. 2003) (per
curiam), appellants’ argument fails. The CompUSA case involved an
Executive Protection Policy with the same relevant policy language
at issue here,1 and we held that an insurer is not required by
Texas law to show prejudice from late notice to avoid coverage
under this type of claims-made policy containing language making
timely notification a condition precedent to coverage. “[A] prior
1
In this case, the policy at issue provided: “The Insureds
shall, as a condition precedent to exercising their rights under
this coverage section, give to [Federal] written notice as soon
as practicable of any Claim made against any of them for a
Wrongful Act.” The CompUSA case involved identical language.
See 319 F.3d at 748.
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panel’s interpretation of state law has binding precedential effect
on other panels of this court absent a subsequent state court
decision or amendment rendering our prior decision clearly wrong.”
Ford v. Cimarron Ins. Co., Inc., 230 F.3d 828, 832 (5th Cir.
2000). As there has been no such subsequent decision or amendment,
appellants’ argument on this issue is foreclosed by CompUSA.
Conclusion
For the foregoing reasons, the summary judgment in favor of
Federal and Zurich is affirmed.
AFFIRMED.
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