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by Alexander Masotto

On August 29, 2025, Judge James Wesley Hendrix in Indiana Affordable Storage, Inc. v. The Ohio Casualty Insurance Company, No. 5:24-cv-00050-H-BV (N.D. Tex. Aug. 29, 2025) granted summary judgment in favor of The Ohio Casualty Insurance Company (“Ohio Casualty”), holding that Indiana Affordable Storage (“Indiana Storage”) failed to provide prompt notice of its loss as required by the insurance policy, and that this delay prejudiced Ohio Casualty, thus voiding coverage under Texas law. All contractual and extra-contractual claims were dismissed with prejudice, including claims for violations of the Texas Insurance Code, the DTPA, and breach of the duty of good faith and fair dealing.

This case involved a storage facility operator and owner, who was insured by Ohio Casualty under a builders risk policy for ten self-storage buildings constructed in Lubbock, Texas, effective August 27, 2018, through August 27, 2019.

The storage facility construction began in August 2018, and the last building was completed in October 2019. Following construction of eight of the ten buildings, several storms occurred in May 2019 at the property. After completion, Indiana Storage insured the property under a different policy with Starr Surplus lines (“Starr”), that became effective November 1, 2019.

One year later, a May 2020 storm also impacted the property. Immediately following the May 2020 storm, Indiana Storage filed notice of a claim under the Starr policy. Following the investigation, Starr advised that any observed damage was cosmetic in nature and thus excluded from coverage under the policy’s cosmetic damage exclusion.

Following the Starr denial, Indiana Storage filed notice of a claim two years later with Ohio Casualty on May 20, 2021, for storm damage caused by the May 2019 storm. Notably, Indiana Storage asserted that it was “unaware” of the May 2019 storm damage. Without inspecting the property, Ohio Casualty denied the claim because Indiana Storage failed to provide “prompt notice,” and its insurable interest ceased after Indiana Storage accepted the building.

Indiana Storage proceeded to retain counsel and requested that Ohio Casualty reconsider its position. Under a reservation of rights, Ohio Casualty agreed to inspect the property with an engineer. The inspection revealed that a total of eight hail events occurred at the property between May 2019 and May 2020, and the May 2020 storm produced the largest hail. Ultimately, Ohio Casualty reaffirmed its denial, and Indiana Storage filed suit.

During the course of litigation, Ohio Casualty moved for summary judgment on all claims asserted by Indiana Storage, arguing that: (1) Indiana Storage’s untimely notice prejudiced Ohio Casualty; and (2) Indiana Storage could not meet it burden to segregate damage under the concurrent causation doctrine.

Notice of the loss was not prompt.

As a condition to coverage, Ohio Casualty’s policy requires that Indiana Storage “must promptly notify” Ohio Casualty in the event of a loss, and that notice must be in writing. Although most insurance policies do not define “prompt notice,” many Texas courts have construed this phrase to mean that notice must be given within a reasonable time after the occurrence. Alaniz v. Sirius Int’l Ins. Corp., 626 F. App’x 73, 76 (5th Cir. 2015). In the event an insurer demonstrates that notice was untimely, the insurer must also prove that it was prejudiced by lack of prompt notice. Id. at 78.

The principal role of notice provisions “is to allow the insurer to investigate the incident close in time to the occurrence, while the evidence is fresh, and so that it may accurately determine its rights and liabilities under the policy (and take appropriate remedial action).” Id.

Here, it was undisputed that Indiana Storage reported the loss two years after the May 2019 storm. Nonetheless, Indiana Storage argued that the delay was reasonable under the circumstances because: (1) the hail damage was difficult for a non-expert to see because it does not manifest until debris collects or leaks begin; (2) the COVID-19 pandemic made it difficult for Indiana to inspect the Property; and (3) the buildings were still under construction at the time of the storm and it was impossible to conduct on roof inspections during construction. The Court held that a two-year delay was not prompt.

While the Court acknowledged that the Texas Supreme Court and other Texas federal district courts have held the discovery of damage is irrelevant when evaluating prompt notice, the Court analyzed the surrounding facts and circumstances. See e.g. Don’s bldg. Supply Inc. v. OneBeacon Ins. Co., 267 S.W.3d 20, 24 (Tex. 2009); Hamilton Props, v. Am. Ins. Co., No. 3:12-CV-5046-B, 2014 WL 3055801, at *8 (N.D. Tex. July 7, 2014). After considering the evidence, the Court found that Indiana Storage Indiana Storage knew of the May 2019 damage no later than May 2020 and failed to produce any other evidence suggesting otherwise. Even under the unrecognized “discovery approach,” the Court determined the two-year notice delay was untimely.

Indiana Storage’s late notice prejudiced Ohio Casualty.

Regarding prejudice, Ohio Casualty believed it was prejudiced by Indiana Storage’s late notice due to: (1) its inability to properly document the condition of the property immediately after the May 2019 loss; (2) Ohio Casualty suffered financial prejudice because repair costs increased by 17% (2019–2021) and 44% (2019–2024); and (3) the scope of work broadened due to building occupancy and contents manipulation expenses that did not exist at the time of the May 2019 storm.

Although the Court found that a fact issue existed as to whether Ohio Casualty was able to complete a reasonable investigation of the claim, it held that Ohio Casualty suffered financial prejudice due to the increased repair costs, and suffered prejudice by the increased scope of work needed to restore the property.

Lastly, the Court swiftly dismissed the insured’s attempt to “cure any potential prejudice” by stipulating to date-of-loss pricing, as the insured raised this argument for the first time in its objections to the Magistrate Judge’s recommendations.

Takeaways

Texas law does not, and should not, recognize a discovery rule for evaluating the prompt-notice requirement in property insurance claims. Allowing notice to run from the date of discovery undermines an insurer’s critical duty to promptly investigate, assess, evaluate, and pay covered losses in a timely manner.

Thus, Texas courts should not analyze prompt notice defenses under the discovery framework. An insured’s obligation to provide “prompt notice” runs from the date of the loss itself, not from when the insured discovers, or should have discovered, the damage. Courts consistently hold that, unless the policy explicitly allows notice upon discovery, the clock begins at the time of the occurrence. Consequently, arguments that late notice should be excused due to delayed discovery are routinely rejected, and the insured bears the risk of any delay in reporting the loss.

This case also highlights the importance of timely reporting insurance claims and signals that courts applying Texas law will not excuse delays absent substantial justification. Moreover, the prejudice requirement is not merely formal, and can be satisfied by tangible increases in cost, lost investigative opportunities, or other demonstrable harm to the insurer.

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The opinions expressed are those of the authors and do not necessarily reflect the views of the firm or its clients. This article is for general information purposes and is not intended to be and should not be taken as legal advice.