REVISED December 30, 2009

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 07-40904

consolidated w/08-40300

EAST TEXAS MEDICAL CENTER REGIONAL HEALTHCARE SYSTEM

Plaintiff-Appellant

v.

LEXINGTON INSURANCE CO

Defendant-Appellee

Appeal from the United States District Court

for the Eastern District of Texas

Before KING, STEWART, and SOUTHWICK, Circuit Judges.

Leslie H. Southwick, Circuit Judge:

East Texas Medical Center sued its insurer, Lexington Insurance

Company, for failure to cover a claim filed against it by a patient. A jury found

for the Medical Center. The district court then granted Lexington a judgment

as a matter of law. The Medical Center appeals. For reasons we will explain,

we VACATE and REMAND for additional proceedings.

I. FACTS

This case concerns Lexington’s denial of the Medical Center’s claim for

coverage under a “claims-made” liability insurance policy it purchased from

United States Court of Appeals

Fifth Circuit

F I L E D

July 10, 2009

Charles R. Fulbruge III

Clerk
No. 07-40904

consolidated w/08-40300

2

Lexington. The dispute centers on the notice and reporting requirements of the

policy. The specific issue is whether the Medical Center properly gave notice of

the claim and of a subsequent lawsuit to Lexington.

A. The Policy

Lexington issued a one-year, $5 million claims-made medical malpractice

liability policy to the Medical Center. The policy period was from June 8, 2002,

to June 8, 2003. The policy provided excess liability insurance coverage to the

Medical Center, covering claims above a self-insured retention of $2 million per

claim. The Medical Center also purchased excess coverage policies from other

insurers to cover claims exceeding the policy’s $5 million coverage layer. 

Under the Medical Center’s arrangement with its insurers, the Medical

Center was the first link in its risk management chain. The Medical Center had

responsibility for processing claims and monitoring all incidents potentially

giving rise to medical malpractice claims (“medical incidents”). The Medical

Center had discretion to resolve any claim within its $2 million retention. If a

lawsuit was filed on any claim, the Medical Center could retain counsel of its

own choosing for its defense. When Lexington was notified of a claim by the

Medical Center, Lexington had discretion to decide which claims it would

investigate or otherwise pursue.

The pertinent parts of the policy in dispute relate to the Medical Center’s

notice responsibilities. If the Medical Center wanted coverage, it was required

to provide “written notice” to Lexington of three different matters: medical

incidents, claims, and lawsuits. The issues at trial concerned notice of claim and

notice of lawsuit. No questions have been raised about notice of a medical

incident. 

In addition to being required to give notice of claims and lawsuits, the

Medical Center also had to provide relevant documents. It was to send
No. 07-40904

consolidated w/08-40300

1 A “4590i letter” notifies a healthcare provider that an injured party is asserting a

healthcare liability claim against the provider. SeeTex. Civ. Prac. & Rem. Code Ann. § 74.051.

A 4590i letter must be submitted to the healthcare provider at least 60 days before the filing

of a suit based on a healthcare liability claim. Id. The term “4590i letter” dates from an

earlier numerical codification of this requirement in the statutes. Id. § 74.001 et seq.

2 Loss runs sent by the Medical Center to Lexington typically included: the

identification of the type of claim, the initial reserve, and the status of each claim. 

3

“immediately”to Lexington copies of any demands, notices, summonses, or legal

papers received in connection with a claim or lawsuit.

B. The Underlying Claim

In March 2003, the Medical Center received a medical malpractice claim

that was in the form of what is called a 4590i letter.1 The claim was on behalf

of David Wayne Cornelius. This is the claim that has generated the present

lawsuit. The letter indicated that Cornelius had suffered unspecified personal

injuries at the Medical Center’s Athens, Texas facility. In April 2003, the

Medical Center entered information about the Cornelius claim on a computergenerated spreadsheet, which is referred to as a “loss run.” Each loss run

document that is in the record contains entries for about 40 claimants.

A key dispute at trial was whether Lexington accepted loss runs as claim

notice. There was evidence that Lexington acknowledged receipt of three other

claims submitted on loss runs. Lexington did not acknowledge receipt of the

Cornelius claim when it appeared on a loss run. The Cornelius claim was

included on three different loss runs provided to Lexington before the policy

period ended, each of which noted that there was a 4590i letter.2 At the end of

the policy period, the loss run remained the only notice given Lexington.

C. The Underlying Lawsuit

On May 27, 2003, Cornelius’s mother filed a medical malpractice lawsuit

on his behalf in state court against the Medical Center. The Medical Center
No. 07-40904

consolidated w/08-40300

3 The other excess insurers are either no longer parties or the proceedings relating to

them have been stayed pending arbitration. 

4

assigned defense of the case to an attorney. The suit was timely answered on

behalf of the Medical Center. Less than two weeks later, on June 8, 2003, the

policy period expired. At the time, the Medical Center did not consider the

Cornelius lawsuit to be one with a high risk of exposure, nor did it believe that

its liability for the claim would exceed its self-insured retention or impact the

Lexington policy coverage layer and those of other excess insurers. 

D. Notice of Claim and Lawsuit

Following depositions in the Cornelius lawsuit in December 2003, the

Medical Center realized for the first time that its liability for the lawsuit was

likely to exceed the Medical Center’s $2 million self-insured retention.

In January 2004, very soon after the depositions but about seven months

after both the lawsuit was filed and the policy period expired,the Medical Center

first gave written notice of the Cornelius lawsuit to Lexington. It also sent

copies of the claim and suit papers. Later that month, Lexington denied the

claim, asserting thatthe Medical Center had failed to comply with theLexington

policy’s notice provisions. 

E. Procedural History

The Medical Center brought this lawsuit against Lexington and other

insurers3, alleging causes of action arising from Lexington’s denial of its claim

in connection with the Cornelius lawsuit. The Medical Center’s claims against

Lexington included breach of contract, violation of the Texas Insurance Code,

and negligent misrepresentation. Lexington counter-claimed, alleging breach

of contract, asking for a declaration of noncoverage under the Lexington policy,

and seeking reimbursement for settlement of the underlying Cornelius lawsuit.

Before this coverage suit was tried, the Cornelius lawsuit was settled. 
No. 07-40904

consolidated w/08-40300

5

The parties proceeded to trial. Before the case went to the jury, Lexington

abandoned its request for a declaratory judgment. The jury returned a verdict

in favor of the Medical Center on all claims. Awarded were approximately $1.7

million in damages. Lexington moved for a judgment as a matter of law. It

asserted that there was insufficient evidence to support the jury findings on any

of the claims. The district court granted the motion, rendering judgment in

favor of Lexington and against the Medical Center on all claims.

II. DISCUSSION

This court gives de novo review to a district court’s ruling on a motion for

a judgment as a matter of law (“JMOL”). Poliner v. Tex. Health Sys., 537 F.3d

368, 375-76 (5th Cir. 2008). Such a judgment is appropriate when “a party has

been fully heard on an issue during a jury trial and the court finds that a

reasonable jury would not have a legally sufficient evidentiary basis to find for

the party on that issue.” Fed. R. Civ. P. 50(a)(1). When considering a Rule 50

motion, “‘the court must review all of the evidence from the record, draw all

reasonable inferences in favor of the nonmoving party, and may not make

credibility determinations or weigh the evidence.’” Poliner, 537 F.3d at 376

(quoting Ellis v. Weasler Eng’g, Inc., 258 F.3d 326, 337 (5th Cir. 2001)). A court

is to consider all the evidence presented attrial in the light mostfavorable to the

nonmoving party. It should disregard all evidence favorable to the moving party

that the jury is not required to believe. Reeves v. Sanderson Plumbing Prods.,

Inc., 530 U.S. 133, 150-51 (2000). 

The Medical Center claims several defects in the grant of a JMOL. First,

though, we must address an argument that would moot all the Medical Center’s

issues. This leads to a total of five issues to be decided in this appeal. To start,

we consider Lexington’s argument that (1) loss runs are not a sufficient notice

of claim under the policy. We end up not accepting that argument. 
No. 07-40904

consolidated w/08-40300

6

We therefore address four other arguments: (2) the policy does not require

that Lexington receive separate notice of a “suit,” if notice of a “claim” on the

same incident had previously been given; (3) Texas law requires Lexington to

demonstrate prejudice from any failure to provide notice ofthe suit, and further,

Lexington waived the claim of a failure to give notice; (4) the jury erred in

finding that Lexington waived its right to enforcement of another policy

provision requiring the immediate forwarding of claim and suit papers; and (5)

the district court improperly denied the Medical Center’s statute-based claims.

(1) Loss Runs as Notices of Claims

Lexington argues thatloss runs are, by their nature, insufficientto satisfy

the policy’s requirement for a written notice of claim. Therefore, as a legal

matter,Lexington had no notice of the underlying claim until seven months after

the policy expired. 

The point was contested and made into an issue for the jury. The jury was

asked whether the Medical Center failed “to provide Lexington . . . with written

notice of the David Cornelius claim as soon as possible.” The jury’s answer was

“no.” The district court upheld this portion of the verdict. 

The loss runs offered in evidence were computer-generated spreadsheets

containing relatively scant information about multiple patients’ claims. As an

excess insurer, Lexington concerned itself with the total on the loss runs, in

order to gauge, to a rough degree, how close the Medical Center was to its $2

million self-insurance limit. The loss run estimated the value of the Cornelius

claim at only $25,000. After the suit was filed, the Medical Center estimated its

value to be “in excess of $10,000,000.” It would be unreasonable, it says, to

interpret “written notice” of a claim to include a document so lacking in the

relevant particulars as the loss run. Those points are relevant, but they are not

conclusive to the result.
No. 07-40904

consolidated w/08-40300

7

The Medical Center relies on letters sent by Lexington to the Medical

Center regarding three unrelated claims that had been reported through loss

runs. The first line of each letter from Lexington states that the letter is an

“acknowledgment of receipt of the notice of claim on the above captioned

patient.” Lexington suggests a distinction between acknowledging coverage and

acknowledging receipt of information. According to Lexington, the letters it sent

did only the latter. No doubt there are distinctions between the two, but we are

examining the policy provision requiring “written notice of the claim or suit.”

Lexington sent letters, in response to loss runs, acknowledging “receipt of the

notice of claim.” A jury did not need to find that loss runs were accepted by

Lexington as written notices of claims, but these letters are evidence of that.

To be clear, we are not saying that Lexington waived a provision of the

policy and accepted less notice than that to which it was entitled. There is no

language in the policy that limits “written notice” to a particular format.

Lexington presented testimony of various insurance company employees and

experts about the inappropriateness of loss runs as claim notices. Its conclusion

was that “even if the loss run somehow contained all of the necessary

information, it would still not qualify as an individual and official report of a

claim.” That too was evidence for jurors to consider, giving it such weight as

they thought proper.

In Texas, as elsewhere, ambiguities in insurance contracts must be

interpreted to favor the insured. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v.

Hudson Energy Co., Inc., 811 S.W.2d 552, 555 (Tex. 1991). We do not find that

the bare requirement for a “written notice of any claim” has sufficiently clear

meaning so as to avoid the just-stated interpretive principle. No level of detail

is specifically required. Of some relevance, perhaps, is that a separate,

subsequent policy provision that we will discuss requires immediate forwarding
No. 07-40904

consolidated w/08-40300

8

of all papers related to the claim. That requirement suggests that the notice of

the claim was not designed to bear the entire informational burden. Lexington’s

letters accepting loss runs as notice of claims in the other cases supports thatthe

jury’s finding was reasonable. A jury issue existed, and a valid answer was

given, that loss runs could provide the notice of claims.

(2) Separate Notice of Claim and Suit

The district court interpreted the policy’s language as requiring separate

notice of both a claim and a suit arising from the same incident in order to

preserve coverage. Subsection V.C.2.b. of the policy states that the Medical

Center was to send Lexington written notice of claim or a suit “as soon as

practicable.” This is important because, at most, the loss runs gave notice of the

claim. There was no notice of the suit until seven months after the policy

expired. That expiration was within a few weeks of when the suit was filed. 

The district court found the policy provision established three duties –

“recording [the specifics of the claim or suit], giving written notice of the claim

or suit, and sending claims or suit papers.” Each of these duties was set forth

in its own subsection, with the word “and” linking each. We agree with the

district court that the three subsections, linked as they are, set forth

requirements that must each be met by the insured. What still needs to be

resolved are the form of the notice and the effect of any delay.

The Medical Center argues thatthe disjunctive construction ofthe phrase

“notice of the claim or suit” indicates that only one or the other is required for

a given medical incident. It also points to the definitions of “claim” and “suit”

given earlier in the policy. A “claim” is defined to include a “suit,” while a “suit”

is “a civil action”for damages arising from, among other things,“a claim.” These
No. 07-40904

consolidated w/08-40300

9

definitions suggest, it argues, that notice of claim “by definition includes any

subsequently filed suit on that claim.” Accordingly, no additional notice of the

Cornelius lawsuit was required.

The Medical Center’s interpretation of the use of the word “or” is

unreasonable. If the insured had an option of which of the two events to report

for any given medical incident, it would mean, as here, that the Medical Center

was not required to report a suit subsequent to a claim so long as it had reported

the claim. But it would also mean that an insured would have no duty to report

a claim, so long as it planned to report the eventual filing of a suit, perhaps

months later (there apparently would be no duty ever to report anything were

a suit not actually filed). It is not clear how this view would interact, under the

Medical Center’s theory, with the vital importance of reporting claims under a

claims-made policy, a topic discussed in the next section. We find the policy

required separate notice of claim and of suit.

The Medical Center’s reliance on the policy definitions is equally

unavailing. The fact that a “claim” is defined to include a “suit” does not mean

that all claims are thereby converted into suits, such that only one notice is

required. If the first notice of claim a hospital received was the claim in a

lawsuit, then it would make sense for the hospital to provide only one notice to

its insurer, both as a matter of the policy definitions and of common sense. 

But this does not work in reverse, because all claims are not suits, as the

facts of this case demonstrate. The initial claim made to the Medical Center

came not in the form of a lawsuit, but rather in the form of the 4590i letter

regarding Cornelius’s injuries. It is not consistent with logic or the ordinary use

of language to regard the suit filed in late May 2003 as somehow already having

been reported to Lexington by notice of a simple claim filed two months earlier.

The making of a claim in March 2003 gave rise to a duty to notify Lexington
No. 07-40904

consolidated w/08-40300

10

about it. The filing of the lawsuit in May gave rise to a new duty to report the

suit. Texas law is not to the contrary. See Members Mut. Ins. Co. v. Cutaia, 476

S.W.2d 278, 279-80 (Tex. 1972). We cite Cutaia not for its discussion of

prejudice, which has been superceded by subsequent developments in Texas

insurance law. Rather, the case illustrates that requiring notice of the filing of

suit even when an insurer has actual notice of the underlying incident is by no

means an unprecedented or inexplicable requirement in an insurance contract.

Because notice of the suit was required, it is important that the district

court found notification of the suit seven months after it was filed was not, as a

matter of law, notification “as soon as practicable.” We agree.

(3) Necessity of Showing Prejudice

We have concluded that the district court was correct to find that the

Medical Center violated the policy’s requirement to give separate written notice

of the filing of the Cornelius lawsuit as soon as practicable. We now turn to

whether Lexington should have been required to show it was prejudiced by the

lack of prompt notice. 

At trial, the Medical Center proposed a jury instruction to require a

finding that Lexington was prejudiced by a failure to be notified “as soon as

practicable” of a lawsuit or to be sent documents “immediately” received about

any suit. The district court refused to submit the instruction. It found that on

this issue of prejudice, Texas law distinguishes between two kinds of policies.

The contract here was a claims-made policy. The district court found that under

Texas law, no showing of prejudice is needed before late notice bars coverage.

For occurrence policies,though, prejudice must be shown before inadequacies of

notice will bar a claim. Matador Petroleum Corp. v. St. Paul Surplus Lines Ins.

Co., 174 F.3d 653, 658 (5th Cir. 1999) (applying Texas law).
No. 07-40904

consolidated w/08-40300

11

After oral argument on the present appeal, the Supreme Court of Texas

decided two cases that guide us. See Prodigy Comm. Corp. v. Agric. Excess &

Surplus Ins. Co., No. 06-0598, 2009 WL 795530 (Tex. Mar. 27, 2009); Fin. Indus.

Corp. v. XL Specialty Ins. Co., No. 07-1059, 2009 WL 795529 (Tex. Mar. 27,

2009). The parties have filed supplemental briefs addressing these new cases.

Prodigy involved a claims-made policy with a provision requiring notice of

claim “as soon as practicable. . . but in no event later than ninety days after the

expiration of the Policy.” 2009 WL 795530, at *1. The court assumed that even

though the notice was given within the ninety-day period, it was not given as

soon as practicable. In order to deny coverage, though, the insurer was required

to show it was prejudiced by a failure to give notice as soon as practicable. Id.

at *3. This was because that provision was not “an essential element of the

bargained for exchange” between the parties. Id. at *4.

Prodigy held that a requirement of notice “as soon as practicable” was not

essential to the bargain. Such promptness will “‘maximiz[e] the insurer’s

opportunity to investigate, set reserves,’” and plan for possible payment of a

claim. Id. at *5 (quoting 13 LEE R. RUSS & THOMAS F. SEGALA, COUCH ON

INSURANCE § 186:13 (3d ed. 2005)). By contrast, the requirement that a claim

be made within the policy period “‘is directed to the temporal boundaries of the

policy’s basic coverage terms [and] . . . defines the limits of the insurer’s

obligation.’” Id. (quoting 13 COUCH ON INSURANCE § 186:13). Importantly, the

same is true of “a notice provision requiring that a claim be reported to the

insurer during the policy period or within a specific number of days thereafter.”

Id. Such a provision “‘define[s] the scope of coverage by providing a certain date

after which an insurer knows it is no longer liable under the policy.’” Id.

(quoting Resolution Trust Corp. v. Ayo, 31 F.3d 285, 289 (5th Cir. 1994)).
No. 07-40904

consolidated w/08-40300

12

This last point led the Prodigy court to articulate a distinction, though it

may not be one directly relevant to this case’s outcome. A claims-made policy

containing a requirement that claims must be reported to the insurer during a

specified period is known as a “claims-made and reported” policy. Id. In such

a policy, a provision will require not only that a claim be made but also that it

be reported to the insurer within the specified time period. Both reports are

“considered essential to coverage” such that “an insurer need not demonstrate

prejudice to deny coverage when an insured does not give notice within the

policy’s specified time frame.” Id. Because of our sustaining the jury’s finding

that loss runs could provide notice of claim, here there was such notice within

the policy period. After Prodigy, though, prejudice must be shown to use failure

to give notice “as soon as practicable” as a bar to recovery, even under the terms

of a claims-made or claims-made and reported policy. 

The policy in Prodigy was a claims-made and reported policy, but the

insured complied with the 90-day time limitation in that policy. It ran afoul only

of the “as soon as practicable” requirement. Thus, the insurer was required to

show it had been prejudiced in order to deny coverage. See also PAJ, Inc. v.

Hanover Ins. Co., 243 S.W.3d 630, 631 (Tex. 2008) (explaining the “noticeprejudice” principle generally).

In the companion case, XL Specialty, the Supreme Court of Texas applied

the same principle to a more traditional claims-made policy. By that, we mean

one without a “clear-cut reporting deadline” for the reporting of claims to the

insurer, but with an “as soon as practicable” requirement. 2009 WL 795529, at

*1-2. The insured had failed to report a claim as soon as practicable, but had

done so before the expiration period of the policy. Id. at *2. The court held that,

because notice had been received before the end ofthe policy period,“XL was not
No. 07-40904

consolidated w/08-40300

13

denied the benefit of the claims-made nature of its policy,” and could not deny

coverage without showing prejudice. Id.

With this new law to guide them, both parties in the present case agree

that the policy here is more like the one in XL Specialty than that in Prodigy.

The Lexington policy does not establish a particular number of days within

which all claims must be reported. Section V.A.1. of the policy provides for a 60-

day “Optional Extended Reporting Period” added to the expiration date of the

policy if certain conditions are met, but under the facts of this case we need not

address the import of this provision.

As we held earlier, the jury was entitled to find that the Medical Center

reported the claim to Lexington within the policy period via the loss runs. We

also held,though,thatthe policy required separate notice of“claims” and “suits.”

Itis undisputed thatthe Cornelius lawsuit,though filed within the policy period,

was not reported to Lexington until nearly seven months after the expiration of

that period. Thus, it did not meet the “as soon as practicable” requirement. 

Before we too quickly apply the Prodigy and XL Specialty approach, we

must recognize that nothing in those cases requires the same analysis to be

applied to each of two separate notices. Both of those cases dealt with notice of

the claim. The Medical Center has overcome that notice hurdle, though it took

fact finding by a jury to get them over. Must an insured jump two notice

hurdles? We have already concluded that this policy requires separate notices

for claims and suits. We have been pointed to no case law indicating that once

around the notice track is enough. Yet neither have we been shown case law

stating that the notices must keep being given or coverage is lost. 

We find no principled basis on which to rule that Prodigy and XL

Speciality, once satisfied as to a claim, are no longer relevant for later notices

required under the policy. But we do not find that a second notice, the one given
No. 07-40904

consolidated w/08-40300

14

of the filing of a suit, “is directed to the temporal boundaries of the policy’s basic

coverage terms [and] . . . defines the limits of the insurer’s obligation.” Prodigy,

2009 WL 795530, at *5 (quotation marks omitted). Notice of suit does not need

to be given within the coverage period or any other reporting time. That is

because a suit based on a claim that arose during the policy period might not be

filed until long after the policy’s end. As long as notice of the underlying claim

had been timely given, coverage would exist under either a claims-made or

claims-made and reported policy. Once a claim has been timely reported, the

insurer would be unable to obtain the bargained-for benefit of closing its books

until it had ascertained whether a suit would actually be filed. We find, then,

that notice of suit is an obligation that is subject to the need to show prejudice.

On remand, an issue will be whether Lexington suffered any actual

prejudice as the result of the Medical Center’s failure to send notification of the

Cornelius lawsuit as soon as practicable.

(4) Waiver by Lexington of Having Suit Papers “Immediately” Sent

Next, in light of our disposition of the preceding issue, we address a

question arising from another subsection of the policy. Subsection V.C.2.c.

required the Medical Center to send immediately to Lexington “copies of any

demands, notices, summonses, or legal papers received in connection with any

suit or claim.” The district court found as a matter of law that the Medical

Center failed to comply with this requirement. The Medical Center does not

contestthatfinding. There was a failure to forward immediately the 4590i letter

relevant to the claim, as well as to send the legal papers arising from the suit.

The district court then gave to the jury the question whether this failure to

forward the papers was nonetheless “excused,” or in effect,“waived” under Texas

law. The jury answered in the affirmative. In the post-verdict opinion
No. 07-40904

consolidated w/08-40300

15

explaining the grant of JMOL, the district court found that Lexington could and

did waive the entitlement of immediate receipt of the suit papers. 

The uncontested definition of waiver given the jury was this:

Waiver occurs when (1) the insurer waived by its conduct the

enforcement of a particular policy provision, (2) the insured relied

to its detriment on the insurer’s conduct, and (3) it would be unjust

to allow the insurer to enforce the policy provision under the given

circumstances.

Lexington argues on appeal that it could not have waived this part of the

policy, because doing so would impermissibly “change, re-write and enlarge the

risks covered by the policy.” Tex. Farmers Ins. Co. v. McGuire, 744 S.W.2d 601,

603 (Tex. 1988). The provision, though, is distinct from the notice provisions

discussed earlier. Waiver of this provision would not substantively “create

insurance coverage where none exists by the terms of the policy,” as in McGuire.

Id. at 602-03; see also Ulico Cas. Co. v. Allied Pilots Ass’n, 262 S.W.3d 773, 778-

80 (Tex. 2008). It is a procedural requirement designed to give the insurer

prompt notice of the details of claims and lawsuits filed. Though useful to the

insurer, it does not change the kind or scope of claims and suits covered by the

policy. Its violations would not affect coverage absent proof of prejudice.

We are more troubled, though, by the district court’s conclusion that the

jury was entitled to find that Lexington had actually waived this provision. This

finding was based entirely on the three letters, referred to earlier, which

Lexington sent the Medical Center after receiving loss runs. The district court

found that because these letters “asked [the Medical Center] to forward copies

of certain medical records and correspondence with counsel, butfailed to request

any legal documents related to the reported claim,” the jury could have found

that Lexington waived its right to immediate forwarding. 

We do not see how Lexington’s sending a letter requesting internal

hospital documents – which the policy does not appear to require – can mean
No. 07-40904

consolidated w/08-40300

16

that it waived its right to enforcement of an unrelated policy provision requiring

immediate production of claim and suit papers. “Waiver is the intentional

relinquishment of a right actually known, or intentional conduct inconsistent

with claiming that right.” Ulico, 262 S.W.3d at 778. For all Lexington knew,

there were not yet any such papers. The Medical Center has argued, and we

agreed, that these letters were usable evidence that Lexington accepted loss runs

as notices of claim. But quite differently, the elliptical nature of the loss runs

would give Lexington no idea what documents the hospital had in its possession.

It had to rely on the Medical Center to fulfill its policy obligations.

If these letters from Lexington that have been found to reveal acceptance

of loss runs as notice of claim also constituted waivers of receiving thorough

documentation of the claim and any litigation, the insurer would be in a

quandary. To avoid this result, perhaps the insurer could restate in all

correspondence such other policy provisions as required further information, and

state that such information was still needed. No Texas precedent shown to us

suggests such a result. It was not reasonable for the jury to find that Lexington

waived its rights under this provision. We conclude there was no waiver. 

On remand, Lexington will still need to show thatit was prejudiced by the

Medical Center’s failure to abide by this policy provision.

(5) Texas Insurance Code Claim

Last, we address the Medical Center’s claims for misrepresentation under

the Texas Insurance Code. The jury found that Lexington committed an

actionable misrepresentation. The district court overturned the verdict and

granted a JMOL to Lexington on these claims.

The alleged misrepresentation was a statement, made by Lexington in its

January 2004 letter denying the Cornelius claim, that it will deny any claim

unless the insured strictly complies with the insurance policy’s notice
No. 07-40904

consolidated w/08-40300

17

requirements. This statement was allegedly false because Lexington’s conduct

with respect to other claims supported by loss runs indicates that it does not in

fact require such strict compliance. Lexington’s stated reason for denying the

claim would therefore be a sham.

The district court found that there was nothing misleading in Lexington’s

letter. The letter referred to the Medical Center’s failure to report the suit as

soon as practicable, and to the failure to forward suit papers immediately. The

Medical Center also cited the three letters acknowledging notice of claims on the

basis of loss runs as evidence of Lexington’s disparate treatment of claims. The

district court found, though, that the letters simply acknowledged receipt of

claims, while the reasons cited for denial of the Cornelius claim related to

distinct policy provisions.

As explained above,the Medical Center, withoutlegitimate dispute,failed

to comply with the policy provisions cited in the January 2004 letter. The effect

of that noncompliance remains an open issue, though, because of the question

of prejudice. In addition, the June 2003 letters that responded to other claims

did not create a waiver of the requirement to forward papers immediately.

There also was not a waiver of the right to receive notice of the suit. 

While the issue of prejudice remains to be determined,the Medical Center

cites no Texas case in which an insurer has been held to have committed either

intentional or negligent misrepresentation by citing valid reasons for rejecting

a claim. Even if the Medical Center ultimately prevails because Lexington was

not prejudiced, “mere breach of contract, without more, does not constitute a

‘false, misleading, or deceptive act.’” Crawford v. Ace Sign, Inc., 917 S.W.2d 12,

14 (Tex. 1996) (quoting Ashford Dev., Inc. v. USLife Real Estate Serv., 661

S.W.2d 933 (Tex. 1983)). The Medical Center did not show either that the
No. 07-40904

consolidated w/08-40300

18

statement in the letter was false, or that the statement caused it any damage.

The jury’s verdict on this point was unsustainable.

III. CONCLUSION 

We have found no error as to some issues. As to others, there is a need for

further proceedings. Whether to order further proceedings on all becomes the

question. A United States District Court has the right to “grant a new trial on

all or some of the issues . . . .” Fed. R. Civ. P. 59(a). This court has the same

authority. Anderson v. Siemens Corp., 335 F.3d 466, 475 (5th Cir. 2003). 

In using the authority, we should order a new trial on the entire case when

the issues on which reversal is granted “cannot be submitted to the jury

independently . . . without confusion and uncertainty, which would amount to

a denial of a fair trial” to the party whose unfavorable results from the first trial

were not reversed. Id. (quoting Gasoline Prod. Co. v. Champlin Ref. Co., 283

U.S. 494, 500 (1931)). In different words, a new trial just on part of a case is

permitted when “it appears that the issue to be retried is so distinct and

separable from the others that a trial of it alone may be had without injustice.”

Colonial Leasing of New England, Inc. v. Logistics Control Int’l, 770 F.2d 479,

481 (5th Cir. 1985) (quoting Gasoline Prod., 283 U.S. at 500). With those

principles in mind, we review where we have found error and where we have not.

Using the enumeration of issues that we followed in our earlier analysis,

we have sustained the following: (1) that the loss runs constituted sufficient

notice of claim under the policy; (2) that the policy required separate notices for

the claim and for the suit; and (5) that Lexington was entitled to a JMOL on the

Texas Insurance Code claims. We have found error in the district court’s

conclusions that (3) Lexington did not have to show it was prejudiced by failure

to file separate notice of the suit; and (4) that Lexington waived its right to

require immediate forwarding of papers related to the suit and claim. We
No. 07-40904

consolidated w/08-40300

19

reverse only because Lexington must be shown to have been prejudiced by the

late notice of the suit and by not being sent the legal documents that were being

submitted to the Medical Center about the patient’s claim.

Under the Gasoline Products analysis, we conclude that the issues on

which we have found reversible error are distinct from those on which we have

not. A new trial on the prejudice issues alone would not be unfair to any party.

We VACATE the judgment and REMAND for further proceedings on the

third and fourth issues. The district court’s damages and cost awards will need

to be reconsidered once the questions about prejudice are answered.

VACATED AND REMANDED.