Opinion ID: 2831296
Heading Depth: 2
Heading Rank: 2

Heading: Hernandez

Text: Twenty-two years after Cutaia, the Court changed course in Hernandez v. Gulf Group Lloyds, 875 S.W.2d 691 (Tex. 1994). Hernandez involved uninsured motorist coverage under an automobile policy that—like the policy at issue in the present case—required the insured to obtain the insurer’s consent prior to any settlement. Unlike the present case, the consent provision was expressed as an exclusion to the coverage that the policy otherwise provided. Id. at 692 n.1 (policy provided that “[t]his insurance does not apply” to liability incurred through a settlement without consent). The insured settled a claim without obtaining the insurer’s prior consent, but the trial court found that this caused the insurer “no material prejudice.” Id. at 692. Without citing or discussing Cutaia, we held that “an insurer may escape liability on the basis of a settlement-without-consent exclusion only when the insurer is actually prejudiced by the insured’s settlement . . . .” Id. Although we noted in Hernandez that “[m]ost other jurisdictions presented with this issue have likewise imposed a prejudice requirement, primarily on public policy grounds,” id. at 693 n.4, we did not characterize our holding as one based on public policy considerations. Instead, we reasoned that the insured breached the agreement by failing to obtain the insurer’s consent, but the breach was not material because it did not cause harm or prejudice to the insurer, and it therefore did