                IN THE SUPREME COURT OF TEXAS
                                        ════════════
                                          NO. 12-0867
                                        ════════════

          BOB GREENE, AS NEXT FRIEND OF LEWAYNE GREENE, PETITIONER,

                                                  v.

                      FARMERS INSURANCE EXCHANGE, RESPONDENT
  ════════════════════════════════════════════════════
                    ON PETITION FOR REVIEW FROM THE
             COURT OF APPEALS FOR THE FIFTH DISTRICT OF TEXAS
  ════════════════════════════════════════════════════

       JUSTICE BOYD, joined by JUSTICE WILLETT, concurring.

       “[T]he tendency of the law must always be to narrow the field of uncertainty.” Oliver

Wendell Holmes, Jr., THE COMMON LAW 127 (1909). Today, unfortunately, uncertainty prevails.

       For over a hundred years, this Court enforced insurance policies as written. Then, thirty

years ago, the Court judicially wrote a prejudice requirement into an aviation insurance policy,

concluding that public policy reasons required that result. Ten years later, the Court issued the first

in a series of four decisions in which it continued to impose the prejudice requirement, but in those

cases it relied on a prior-material-breach theory rather than public policy. Today, the Court holds

that the material-breach theory does not apply because the provision at issue does not impose a

breachable obligation on the insured but instead defines the scope of the policy’s coverage, and

thus there has been no breach. The Court’s reasoning is sound and its result is right. But it is not

consistent with our four prior decisions, because they also involved provisions that defined the

scope of coverage rather than imposed a breachable obligation.

       By failing to follow those cases, disapprove of them, overrule them, or adequately

distinguish them, the Court leaves consumers, insurers, the Texas Department of Insurance (TDI),
and Texas courts with no logical basis for predicting when this Court will impose a prejudice

requirement and when it will not. “Those who depend upon the law require continuity and

predictability.” Davis v. Davis, 521 S.W.2d 603, 608 (Tex. 1975). When it comes to insurance

policies and the judicially imposed prejudice requirement, they will find neither.

                                               I.
                                          Introduction

       LaWayne Greene’s homeowners’ insurance policy provides that the coverage for damage

to her house “will be suspended effective 60 days after the dwelling becomes vacant” and will

“remain suspended during such vacancy.” It is undisputed that Greene’s home had been vacant for

more than sixty days when it was damaged by a fire. Greene contends that the vacancy provision

should not apply and the policy should cover her loss because:

      (1) it is unenforceable under an anti-technicality statute, see TEX. INS. CODE § 862.054;

      (2) it is unenforceable under our material-breach coverage cases because the vacancy did
          not contribute to the fire or otherwise prejudice the insurer, see Lennar Corp. v. Markel
          Am. Ins. Co., 413 S.W.3d 750, 755 (Tex. 2013); Prodigy Commc’ns Corp. v. Agric.
          Excess & Surplus Ins. Co., 288 S.W.3d 374, 375 (Tex. 2009); PAJ, Inc. v. Hanover
          Insurance Co., 243 S.W.3d 630, 631 (Tex. 2008); Hernandez v. Gulf Group Lloyds,
          875 S.W.2d 691, 694 (Tex. 1994); and

      (3) it is unenforceable on public policy grounds under Puckett v. U.S. Fire Ins. Co., 678
          S.W.2d 936, 937 (Tex. 1984).

       The Court rejects Greene’s arguments and enforces the vacancy provision, concluding that

section 862.054, our material-breach coverage cases, and Puckett do not apply. I agree that section

862.054 does not apply, and I agree that we should not impose a prejudice requirement in this case,

either under our material-breach cases or under Puckett’s public policy approach. But I do not

agree that our four material-breach coverage cases are distinguishable from this case. In those

cases, we held that insurers could not deny coverage based on policy provisions that defined the

scope of coverage in terms of certain conduct by the insured (specifically, in those cases, the
                                                 2
insured’s untimely notice of a claim or settlement of a claim without the insurer’s consent) unless

the insurer showed that the conduct prejudiced its interests. See Lennar, 413 S.W.3d at 755;

Prodigy, 288 S.W.3d at 375; PAJ, 243 S.W.3d at 632; Hernandez, 875 S.W.2d at 694. Here, we

hold that the insurer can deny coverage based on a policy provision that defines the scope of

coverage in terms of certain conduct by the insured (specifically, the insured’s vacating the home

for more than sixty days) regardless of whether the conduct prejudiced the insurer’s interests.

       As I1 and others before me2 have observed, the Court incorrectly based its holdings in

Hernandez, PAJ, Prodigy, and Lennar on a faulty application of the material-breach rule. Today,

the entire Court agrees that the material-breach rule does not apply, but it cannot meaningfully

distinguish this case from those. For the very reasons the Court finds the material-breach rule does

not apply in this case, it did not apply in Lennar, Prodigy, PAJ, and Hernandez. I would therefore

disapprove of the reasoning in those cases. To promote stability and consistency in our

jurisprudence, I would leave our holdings in those cases in place, but I would expressly decline to

extend those holdings beyond the specific kinds of notice-of-claim and consent-to-settlement

provisions at issue in them. I acknowledge that this is not a perfect solution because, for purposes

of imposing the prejudice requirement, those kinds of provisions are not logically distinguishable

from the vacancy clause at issue in this case. But it is the Court’s best option at this point because

it will fulfill the public expectations that those decisions have created while providing

predictability and certainty for the future. While illogical certainty is admittedly undesirable, it is

at least better than the illogical uncertainty that will result from the Court’s decision in this case.


        1
            See Lennar, 413 S.W.3d at 765–66 (Boyd, J., concurring).
        2
           See Prodigy, 288 S.W.3d at 383–89 (Johnson, J., joined by Hecht and Willett, JJ., dissenting); Id. at 383
(Wainwright, J., concurring); PAJ, 243 S.W.3d at 637–45 (Willett, J., joined by Hecht, Wainwright, and Johnson, JJ.,
dissenting); Hernandez, 875 S.W.2d at 694–95 (Enoch, J., dissenting).

                                                             3
                                                    II.
                                  Early Decisions and Legislative Actions

         For well over a century, this Court consistently enforced insurance contracts as written. If

the contract limited coverage to, or conditioned it upon, circumstances that did not exist or occur,

we repeatedly denied claims for coverage, even if the absence of the circumstances did not harm

or prejudice the insurance company. We did this in several cases involving fire insurance policies,3

including disputes involving vacancy provisions like the one at issue in this case.4 We did it in

cases involving consent-to-settlement provisions like the ones at issue in Hernandez and Lennar.5

And we did it in cases involving prompt-notice-of-claim provisions like the ones at issue in PAJ

and Prodigy.6




          3
            See, e.g., Hibernia Ins. Co. v. Bills, 87 Tex. 547, 551, 29 S.W. 1063, 1064 (1895); E. Texas Fire Ins. Co.
v. Kempner, 87 Tex. 229, 237, 27 S.W. 122, 123 (1894); Fire Ass’n of Philadelphia v. Flournoy, 84 Tex. 632, 636, 19
S.W. 793, 795 (1892); Assur. Co. of London v. Flournoy, 19 S.W. 795 (Tex. 1892); E. Texas Fire Ins. Co. v. Clarke,
79 Tex. 23, 25, 15 S.W. 166, 167 (1890); Lion Fire Ins. Co. v. Starr, 71 Tex. 733, 12 S.W. 45 (1888); Georgia Home
Ins. Co. v. Jacobs, 56 Tex. 366, 370 (1882); E. Tex. Fire Ins. Co. v. Dyches, 56 Tex. 565 (1881); Tex. Banking & Ins.
Co. v. Stone, 49 Tex. 4, 11 (1878); Galveston Ins. Co. v. Long, 51 Tex. 89, 92 (1879).
         4
             Long, which this Court decided 135 years ago, involved contentions similar to those before the Court today.
51 Tex. at 91. The fire insurance policy provided that it would be void “if the [insured] premises shall . . . become
vacant or unoccupied, and so remain for more than thirty days, without notice to and consent of this company, in
writing . . . .” Id. We held that the trial court erred by instructing the jury to render a verdict in favor of the insurer
only if it found that the vacancy had increased the risk. Id. at 91–92. Relying on the language of the parties’ agreement,
we concluded that“[w]hether the risk would be increased by the premises becoming vacant, was not material.” Id. at
92. We reached a similar holding in Kempner, 27 S.W. at 123 (“[T]he policy is exceptionally explicit and apt in the
statement of the terms of liability. It is first stated that the company will not insure vacant houses, and, to enforce the
rule with certainty, it is provided that, if the house should become vacant or unoccupied without the consent of the
company, the policy shall at once become null and void.”).
        5
          See, e.g., Guar. Cnty. Mut. Ins. Co. v. Kline, 845 S.W.2d 810, 811 (Tex. 1992) (citing Ford v. State Farm
Mut. Auto. Ins. Co., 550 S.W.2d 663, 665 (Tex. 1977)).
         6
          See, e.g., Members Mut. Ins. Co. v. Cutaia, 476 S.W.2d 278, 279 (Tex. 1972); Allen v. W. Alliance Ins. Co.,
162 Tex. 572, 577–78, 349 S.W.2d 590, 594–95 (1961); Am. Fid. & Cas. Co. v. Traders & Gen. Ins. Co., 160 Tex.
554, 561, 334 S.W.2d 772, 776 (1959); Klein v. Century Lloyds, 154 Tex. 160, 162–63, 275 S.W.2d 95, 96–97 (1955);
New Amsterdam Cas. Co. v. Hamblen, 144 Tex. 306, 309–10, 190 S.W.2d 56, 58 (1945); Sun Mut. Ins. Co. v.
Mattingly, 77 Tex. 162, 163, 13 S.W. 1016 (1890); Dyches, 56 Tex. at 570; Fire Ins. Ass’n v. Miller Bros., 2 Wilson
288, 290, 1884 WL 8125 (Tex. App. 1884, no writ).



                                                                 4
         Repeatedly and resolutely, we insisted that the Court could not, or at least should not,

judicially inject a prejudice requirement into the parties’ written agreements.7 Instead, we

acknowledged that the Legislature and TDI (or its predecessors) were better suited to make and

enforce policy judgments about whether and when to mandate or alter insurance policy terms. See

e.g., Kemp, 512 S.W.2d at 690 (deferring to “statutes and Board-approved policy provisions”);

Cutaia, 476 S.W.2d at 279 (“[I]t is better policy for the contracts of insurance to be changed by

the public body charged with their supervision, . . . or by the Legislature, rather than for this Court

to insert a provision that violations of conditions precedent will be excused if no harm results from

their violation.”).8

         Our deference to the Legislature was not futile. In 1874, the Legislature began regulating

the business of insurance and created the Department of Insurance, Statistics and History, a

predecessor to TDI.9 In 1891, the Legislature enacted a statute that invalidated any policy provision

“requiring notice to be given of any claim for damages as a condition precedent to the right to sue




         7
            See, e.g., Kemp v. Fid. & Cas. Co. of New York, 512 S.W.2d 688, 690 (Tex. 1974) (“We are bound to
interpret the statutes and Board-approved policy provisions as written.”); Cutaia, 476 S.W.2d at 279 (“[W]hen [a]
condition precedent to liability [i]s breached, liability on the claim [i]s discharged, and harm (or lack of it) resulting
from the breach [i]s immaterial.”); Hamblen, 190 S.W.2d at 58 (“[W]e are not authorized to add the further [provision]
that a showing that no loss or damages resulted from the delay would relieve the insurer of the consequences of his
failure to give immediate notice.”); see also Fortis Benefits v. Cantu, 234 S.W.3d 642, 649 (Tex. 2007) (“Given this
insurance policy’s plain language, we are loathe to judicially rewrite the parties’ contract by engrafting extra-
contractual standards that neither the Legislature nor the Texas Department of Insurance has thus far decided to
promulgate.”).
         8
           See also Fortis Benefits, 234 S.W.3d at 649 (“As we have said before, balancing dueling policy concerns is
generally for non-judicial bodies, and it remains the ‘better policy for the contracts of insurance to be changed by the
public body charged with their supervision, the State Board of Insurance, or by the Legislature, rather than for this
Court’ to contravene the express language of insurance contracts with equitable arguments.”).
         9
             For a discussion of the history of TDI, see TDI’s webpage at www.tdi.texas.gov.



                                                                5
thereon,” unless the provision was “reasonable” and allowed at least ninety days for notice.10 In

1903, the Legislature enacted two “anti-technicality” statutes that imposed a prejudice requirement

on policy provisions that voided the policy if the insured made a false statement in the insurance

contract or application11 or if the insured made a false statement in a proof of loss or proof of

death.12 In 1913, the Legislature enacted two more anti-technicality statutes. The first invalidated

any provision purporting to render the policy void if the covered property was encumbered by a

lien at the time of contracting or became encumbered during the policy term.13 The second, which

is the predecessor to the statute on which Greene relies in this case, provided that a “breach or

violation” of a fire insurance policy covering personal property could not render the policy void

or constitute a defense to coverage “unless such breach or violation contributed to bringing about

the destruction of the property.”14


         10
            Act of March 4, 1891, 22nd Leg., R.S., ch. 17, § 2, 1891 Tex. Gen. Laws 20, 20 (repealed). The current
version of this statute is codified in section 16.071 of the Civil Practices and Remedies Code. See TEX. CIV. PRAC. &
REM. CODE § 16.071.
         11
            Unlike Hernandez and its progeny, the statutory prejudice requirement was not purely backward-looking.
Instead, the statute made the voiding provision enforceable only if the insured’s misrepresentation “actually
contributed to the contingency or event on which said policy became due and payable” or was “material to the risk.”
Act of March 27, 1903, 28th Leg., R.S., ch. 69, § 1, art. 3096aa, 1903 Tex. Gen. Law 94, 94 (repealed). The current
version of this statute is codified in section 705.004 of the Texas Insurance Code. See TEX. INS. CODE § 705.004.

         Another article enacted at the same time prevented the insurer from relying on this type of misrepresentation
provision unless the insurer gave the insured notice of the voidance of the policy within a reasonable time after
discovering the misrepresentation. See Act of March 27, 1903, 28th Leg., R.S., ch. 69, § 1, art. 3096bb, 1903 Tex.
Gen. Law 94, 94 (repealed).
         12
            Under this statute, the voiding provision was enforceable only if the misrepresentation was fraudulent,
material, and either misled the insurer or caused the insurer to lose a valid defense to the policy. Id. art. 3096cc. The
current version of this statute is codified in section 705.003 of the Texas Insurance Code. See TEX. INS. CODE §
705.003.
         13
             Act of March 31, 1913, 33th Leg., R.S., ch. 106, § 18, 1913 Tex. Gen. Law 195, 202. The current version
of this statute is codified in section 2002.002 of the Texas Insurance Code. See TEX. INS. CODE § 2002.002.
         14
             Act of March 29, 1913, 33rd Leg., R.S., ch. 105, § 1, 1913 Tex. Gen. Laws 194, 194. The current version
of this statute is codified in section 862.054 of the Texas Insurance Code.



                                                                6
         By the time we decided Cutaia in 1972, the Legislature had shifted much of the authority

to monitor and regulate the business of insurance to TDI.15 The Insurance Code of 1951 charged

TDI with the duty of prescribing the forms used for a variety of common insurance policies.16 The

year after we deferred to the Legislature and TDI in Cutaia, TDI issued a new amendatory

endorsement, applicable to all Texas commercial general liability (CGL) policies, which

prohibited insurers from denying coverage based on the insured’s failure to give timely notice,

unless the lack of notice prejudiced the insurer.17

         Since then, TDI’s oversight of insurance policy forms has continued to expand. Today, the

vast majority of Texas insurance policies are composed of forms that TDI has drafted or approved,

and the Insurance Code prohibits an insurer from using a form that TDI has not approved for most

types of policies. See TEX. INS. CODE §§ 2301.006(a) (“an insurer may not deliver or issue for

delivery in this state a form for use in writing insurance described by Section 2301.003 unless the

form has been filed with and approved by the commissioner”), 2301.003(b) (listing types of

insurance covered).

         In short, for over a century, the system worked. This Court’s adherence to the contract

language and reluctance to rewrite contracts with the benefit of hindsight are hallmarks of our



         15
           As noted above, the Legislature created the original predecessor to TDI in the late 1800s. The Legislature
has tasked TDI with, among other things, “regulat[ing] the business of insurance in this state,” “protect[ing] and
ensur[ing] fair treatment of consumers,” and “ensur[ing] fair competition in the insurance industry in order to foster a
competitive market.” TEX. INS. CODE § 31.002.
         16
           See Acts of June 7, 1951, 52nd Leg., R.S., ch. 491, arts. 5.06, 1951 Tex. Gen. Laws 868, 925–26; see also
TEX. INS. CODE § 5.06 (automobile insurance).
         17
            See State Bd. of Ins., Revisions of Texas Standard Provisions for General Liability Policies-–Amendatory
Endorsement—Notice, Order No. 23080 (March 13, 1973). The endorsement stated: “As respects bodily injury
liability coverage and property damage liability coverage, unless the company is prejudiced by the insured’s failure
to comply with the requirement, any provision of this policy requiring the insured to give notice of action, occurrence
or loss, or requiring the insured to forward demands, notices, summons, or other legal process shall not bar liability
under the policy.” Id.

                                                               7
contract jurisprudence, but these principles are inviolable in the context of insurance contracts,

where the policy language and forms are adopted or approved by an executive body created for

that purpose. That is why, for over 100 years, our mantra was that “[w]e are bound to interpret the

statutes and Board-approved policy provisions as written.” Kemp, 512 S.W.2d at 690.

                                             III.
                         Decisions Imposing a Prejudice Requirement

       Thirty years ago, the Court altered course in Puckett, in which it decided to judicially

impose a prejudice requirement on public policy grounds. 678 S.W.2d at 938. After an airplane

crash caused by pilot error, the plane’s owner sought insurance coverage under a policy that

excluded coverage if the plane did not have a current airworthiness certificate. Id. at 937. The

Court acknowledged that the plane did not have a current airworthiness certificate and was not

covered under the express terms of the policy. Id. Nevertheless, the Court held that the policy

covered the loss, concluding that “allowing an insurance company to avoid liability when the

breach of contract in no way contributes to the loss is unconscionable and ought not be permitted.

. . . It would be against public policy to allow the insurance company in that situation to avoid

liability by way of a breach that amounts to nothing more than a technicality.” Id. at 938.

       Chief Justice Pope, joined by Justice McGee, dissented in Puckett. 678 S.W.2d at 939–40

(Pope, C.J., dissenting). He observed that the Court had “written a new clause into the policy,” by

“add[ing] to the contract the requirement that the insurance company must prove that the breach

was the cause of the accident.” Id. at 940. He stated that the Court’s holding was, by its own

acknowledgement, “contrary to the reasoning of most courts” and had “been uniformly rejected

by our prior Texas decisions as it has been by the majority of jurisdictions.” Id. (citing Bowie, 574




                                                     8
S.W.2d at 543).18 And he warned that “[t]oday’s decision means that insurance policies—life,

casualty, fire—though agreed upon by insured and insurer, though authorized by the Board of

Insurance, though clear and unambiguous, are burdened with uncertain terms that this court may

from time to time determine should have been included in the parties’ contract.” Id.

         As it turned out, the Court never expanded Puckett’s policy-based ruling beyond the

context of aviation insurance cases. Instead, in 1994, it adopted a new basis for imposing a

prejudice requirement: the material-breach rule. Hernandez, 875 S.W.2d at 694. Since then, a

divided Court has applied the material-breach rule in three additional coverage cases. See Lennar,

413 S.W.3d at 755; Prodigy, 288 S.W.3d at 375–78; PAJ, 243 S.W.3d at 631.

A.       Hernandez

         In 1994, only a year after the Court enforced a settlement-without-consent clause in Kline,

845 S.W.2d at 811, the Court reached the opposite result under very similar facts in Hernandez,

875 S.W.2d at 694. As in Kline, the claimant in Hernandez was injured in a car accident, entered

into a settlement with the driver who caused the accident without the insurer’s consent, and then

sought to recover losses in excess of the settlement under his underinsured motorist coverage.

Hernandez, 875 S.W.2d at 692. As in Kline, the policy excluded coverage if the insured settled a

claim without obtaining the insurer’s consent. See id. But unlike Kline, in which the Court applied

the settlement-without-consent provision as written, the Hernandez Court superimposed a




         18
            Puckett represented a significant shift in the law, at least with respect to aviation insurance policies. As
one Justice of the Court has observed, “Puckett’s judicial rewriting of the parties’ contract clashes head-on with our
‘modest, text-based approach’ to interpreting contract language” and “is starkly at odds with our insurance decisions
generally, and with most American jurisdictions’ aviation-insurance decisions specifically.” AIG Aviation (Tex.), Inc.
v. Holt Helicopters, Inc., 248 S.W.3d 169, 170 (Tex. 2008) (Willett, J., dissenting). “In short, Puckett granted an
unbargained-for expansion of coverage in the face of a bargained-for exclusion from coverage.” Id.



                                                               9
prejudice requirement onto the provision. The Court reasoned that the insureds’ failure to obtain

consent for the settlement was a breach of the insurance policy, and a breach would excuse the

insurer’s obligation to perform only if the breach was material. Because the breach did not

prejudice the insurer, it was not material and therefore did not excuse the insurer’s performance

under the policy. Id. at 692–93.

       Justice Enoch dissented in Hernandez. In his view, the material-breach rule was

inapplicable because the issue was not whether the settlement without consent excused the insurer

from its coverage obligation but whether the insurer had a coverage obligation in the first place.

See id. at 694 (Enoch, J., dissenting) (“[T]his case is not about a breach of contract. This case is

about coverage.”) Because the insurance policy expressly “d[id] not apply” if the insured settled a

claim without the insurer’s consent, the insurer had no coverage duty regardless of whether the

Hernandezes breached the contract, materially or otherwise. See id.; see also Solar Applications

Eng’g, Inc. v. T.A. Operating Corp., 327 S.W.3d 104, 108 (Tex. 2010) (discussing the difference

between breach of contract and failure to fulfill a condition). Justice Enoch observed that the

Court’s disposition was inconsistent with its disposition in Kline, which involved essentially

identical facts, and its reasoning was inconsistent with its reasoning in Cutaia, in which the Court

declined to judicially impose a prejudice requirement on a notice-of-claim provision. Hernandez,

875 S.W.2d at 694. He also noted that the jurisdictions that had adopted a prejudice requirement

for settlement-without-consent provisions had done so based primarily on public policy grounds,

not on a faulty application of the material-breach rule. Id.

B.     PAJ

       Fourteen years after Hernandez, the conflict between Hernandez and our prior precedent

(Cutaia, in particular) was squarely before us in PAJ, Inc. v. Hanover Insurance Co., which

                                                     10
involved an insured’s non-prejudicial failure to give its insurer prompt notice of a claim. 243

S.W.3d 630, 631 (Tex. 2008). In a five-four split, the Court’s majority chose to follow Hernandez,

rather than Cutaia, and judicially imposed a prejudice requirement. Id. at 635–36. PAJ involved a

CGL policy, and thus included the TDI-mandated endorsement providing that a lack of timely

notice would not defeat coverage of bodily injury or property damage claims unless the insurer

was prejudiced by the delay. Id. at 632. But the claim at issue in the case was for an advertising

injury, rather than for bodily injury or property damage, and thus the endorsement did not apply.

See id. The policy required the insured to give the insurer notice of a claim “as soon as practicable,”

and the insured’s right to coverage was conditioned on compliance with all of the policy’s terms.

See id. at 638 (quoting policy language). Nevertheless, the Court held that the insured’s

“immaterial breach” of the notice provision “does not deprive the insurer of the benefit of the

bargain and thus cannot relieve the insurer of the contractual coverage obligation.” Id. at 631.

       The PAJ majority did not overrule Cutaia, distinguish it, or even explain why it did not

govern. Id. at 632–33. Instead, the Court relied primarily on the fact that TDI had mandated the

prejudice-requirement endorsement for bodily injury and property damages under CGL policies in

the wake of Cutaia. Id. at 632. Noting that CGL policies did not cover advertising injuries when

TDI passed the endorsement and the endorsement had since been expanded to cover advertising

injuries, the Court implied that TDI’s failure to extend the prejudice requirement to advertising

injuries sooner was merely an oversight that the Court was free to judicially correct. Id. at 632–33.

       The four dissenting justices would have followed Cutaia and the Court’s extensive

precedent in notice-of-claim disputes before Hernandez. PAJ, 243 S.W.3d at 637–39 (Willett, J.,

joined by Hecht, Wainwright, and Johnson, JJ., dissenting). Rather than proposing to overrule

Hernandez, they offered a logical basis for reconciling and distinguishing Cutaia and Hernandez:

                                                      11
the notice-of-claim requirement we enforced without regard to prejudice in Cutaia was expressly

a “condition precedent” that had to be satisfied to trigger the insurer’s coverage obligation,19 while

the Hernandez Court had “viewed”20 the consent-to-settle requirement in Hernandez as a

“covenant” that the insured had breached, which would relieve the insurer of its coverage

obligation only if the breach was material. PAJ, 243 S.W.3d at 639 (Willett, J., joined by Hecht,

Wainwright, and Johnson, JJ., dissenting). The PAJ majority, however, rejected this distinction

between “conditions precedent” and “covenants,” noting that the Court had made no such

distinction in Hernandez. Id. at 635. But Hernandez had no reason to address this distinction

because it involved an exclusion, not a condition precedent.21 See Hernandez, 875 S.W.2d at 692.

         The dissenting justices also pointed out that Cutaia’s argument for deference to state

regulators was even stronger in PAJ than it had been in Cutaia because, after Cutaia, TDI had

elected to “surgically” insert a prejudice requirement into some notice-of-claim provisions but not

others. PAJ , 243 S.W.3d at 641. In post-submission briefing, the insurer pointed out that, since

2000, TDI had approved a designated endorsement that included a prejudice requirement for

personal and advertising injury claims similar to that for bodily injury and property damage claims.




         19
            The policy in Cutaia, like the policy in PAJ, made the insured’s compliance with “all the terms of this
policy” a condition precedent to coverage. Cutaia, 476 S.W.2d at 278.
         20
            The dissent stated: “Rather than treat the [consent-to-settle] exclusion as a condition precedent, the
[Hernandez] Court viewed it as a covenant, an ordinary contractual obligation, the performance of which was excused
only if the breach were material.” PAJ, 243 S.W.3d at 638 (citing Hernandez, 875 S.W.2d at 692–93). While this is
an accurate description of the reasoning in Hernandez, it glosses over whether the reasoning in Hernandez was correct.
I would argue that it was not, for the same reasons the Court holds that there was no “breach” or “violation” in the
present case: the policy did not obligate the insured to obtain the insurer’s consent before settling a claim, it simply
did not “did not apply” if the insurer settled without consent.
       21
          Additionally, the Hernandez Court made no effort to distinguish Cutaia, failing to even mention it. See
Hernandez, 875 S.W.2d at 691–93.

                                                               12
Id. at 642. In the dissent’s view, TDI’s adoption of the endorsement in 2000 underscored the

absence of any such prejudice requirement in the pre-2000 policy at issue in PAJ. See id.

C.     Prodigy

       A year after we decided PAJ, the Court extended PAJ’s prejudice requirement to notice-

of-claim provisions in claims-made policies. Prodigy, 288 S.W.3d at 375. The policy at issue in

Prodigy covered “claims first made” against an insured during the policy term. Id. at 376. As “a

condition precedent to [the insureds’] rights under this Policy,” the policy required the insured to

give the insurer written notice of a claim “as soon as practicable . . . but in no event later than

ninety (90) days after the expiration” of the policy term. Id. A week after the policy expired, the

insured notified the insurer of a claim that the insured had known about for over a year. Id. The

insurer conceded that it was not prejudiced by the delay. Id. at 375. Following PAJ, the Prodigy

Court held that, although the insured did not give the insurer notice of the claim “as soon as

practicable,” the insurer was obligated to cover the claim because it was not prejudiced by the

delay. Id. at 382–83. Even though the policy’s notice-of-claim requirement was a “condition

precedent” to coverage, the Court again rejected the distinction between a condition precedent to

coverage and a contractual covenant to perform. Id. at 378.

       The insurer argued that Prodigy was distinguishable from PAJ because Prodigy involved

a claims-made policy rather than an occurrence-based policy. Id. The PAJ Court had recognized a

“critical distinction” between occurrence-based and claims-made policies in adopting the “benefit

of the bargain” approach to determining materiality of a breach, indicating that notice requirements

were “subsidiary to the event that triggers coverage” in occurrence-based policies but not in

claims-made policies. PAJ, 243 S.W.3d at 631, 636 (quoting Matador Petroleum Corp. v. St. Paul

Surplus Lines Ins. Co., 174 F.3d 653, 658 (5th Cir. 1999)) (citations omitted). In Prodigy, the

                                                    13
Court reasoned that the policy’s 90-day notice deadline was essential to the benefit of the bargain

for a claims-made policy (often more accurately called a claims-made-and-reported policy) but the

“as soon as practicable” limit was common in both claims-made and occurrence-based policies

and was not essential to the benefit of the bargain for either. Id. at 378–81. The Court observed

that these different limitations on notice served different purposes—the “as soon as practicable”

notice requirement “serves to ‘maximiz[e] the insurer’s opportunity to investigate, set reserves,

and control or participate in negotiations with the third party asserting the claim against the

insured,’” while the requirement for notice within the policy period or within a certain number of

days thereafter “is directed to the temporal boundaries of the policy’s basic coverage terms” and

“defines the limits of the insurer’s obligation.” Id. at 380 (quoting 13 COUCH ON INSURANCE 3D §

186:13).

       Three of the four justices who dissented in PAJ also dissented in Prodigy, and the fourth

concurred because, although he disagreed with the result in Prodigy, he agreed that the majority

holding in PAJ dictated that result. Prodigy, 288 S.W.3d at 384–85 (Johnson, J., joined by Hecht

and Willett, JJ., dissenting); id. at 383 (Wainwright, J., concurring). The dissent observed that,

“when courts rewrite existing policy provisions as the Court does in this case, insurers’ actuarial

predictions of losses and expenses, and the process of setting premium rates to cover projected

losses and expenses are disrupted.” Id. at 387. In their view, “[p]olicy language and its effects on

the insurer’s business are matters better addressed through the legislative and regulatory processes

than through the judicial process,” because the legislative and regulatory processes allow

prospective, rather than retrospective, implementation of changes to policy terms, such that

premiums can be accurately assessed based on the risk actually assumed in the policy at the time

the policy is issued. Id. at 387–88 (citing Cutaia in support of deference to legislative and

                                                    14
regulatory governance of insurance policy terms). Additionally, the dissent explained that the

Legislature and TDI have “the time, staff, resources and expertise to investigate and bring all

relevant information to bear on such issues.” Id. at 389.

D.     Lennar

       Finally, the Court relied on the material-breach rule to impose the prejudice requirement

again last year. In Lennar, a homebuilder determined that homes it had built using an exterior

insulation and finish system (EIFS) were subject to serious water damage that worsened over time.

413 S.W.3d at 751. The builder decided to remove the EIFS from its homes and replace it with

conventional stucco, regardless of whether the home had yet suffered from water damage, and it

sought reimbursement of its costs from its insurers. Id. at 752. Condition E of the insurance policy

provided that “no insured, except at their own cost, may voluntarily make any payment, assume

any obligation, or incur any expense . . . without [the insurer’s] consent.” Id. at 753. The insurer

had refused to consent to the insured’s removal and replacement program because it removed and

replaced all EIFS in all homes, without regard to the existence or extent of water damage to each

home. Id. The court of appeals had held in an earlier appeal that the insurer could not deny coverage

on the basis of the insured’s failure to comply with Condition E unless the insurer was prejudiced

by the breach, and neither of the parties asked this Court to review that holding. See id. (“Neither

Lennar nor Markel sought review of the court of appeals’ decision. Both have accepted that court’s

holdings as governing the case.”). Because the insurer had not proven prejudice, the insurer could

not deny coverage based on Condition E. Id. at 756.

       But Condition E was not the only consent-to-settlement provision in the policy. The insured

sought coverage for its “ultimate net loss,” which the policy defined as “the total amount of

[property] damages for which [the insured] is legally liable” as determined “by adjudication,

                                                     15
arbitration, or a compromise settlement to which [the insurer] previously agreed in writing.” Id.

The insurer argued, and the Court assumed, that these were the three exclusive means of

establishing the insured’s liability for an “ultimate net lost.” Id. On this basis, the insurer argued

that it did not have to prove that the insured’s failure to get consent prejudiced it because the

consent requirement was “essential to coverage” under the policy. Id.

       The Court disagreed, reasoning that the consent requirement in the policy’s coverage

provisions served “exactly the same” purpose as the consent requirement in Condition E, and thus

was “no more central to the policy that Condition E.” Id. The Court held that the prejudice

requirement “operate[d] identically” with respect to the language in both provisions, and the

insurer was therefore obligated to cover the insured’s costs, regardless of whether the insured was

legally liable for them, unless the insurer could show prejudice. Id. at 756–57.

       Concurring in the Court’s judgment, I explained that I would have reached a different result

if we were “writing on a blank slate,” but I acknowledged that Hernandez, PAJ, and Prodigy

compelled the Court’s result. Id. at 759–66 (Boyd, J., concurring). I recognized that “our

precedents may be difficult to understand and reconcile,” but concluded that they were now the

basis on which insurers, insureds, TDI, and the Legislature reasonably relied in drafting and

entering into insurance policies. Id. at 765–66. However, I urged the Court, “for the sake of clarity,

consistency, and predictability,” to abandon its flawed material-breach approach and instead

recognize that the prejudice requirement was the product of the Court’s policy preferences rather

than the principles of contract construction. Id.

                                             IV.
                      Distinguishing the Material-Breach Coverage Cases

       Today, the Court declines to apply the material-breach analysis on which it relied in

Hernandez, PAJ, Prodigy, and Lennar. The Court asserts that this case is distinguishable from
                                              16
those cases for two reasons: first, those cases involved “breaches” while this case does not, and

second, the “breached” provision in those cases were immaterial while the vacancy provision in

this case is material.22 The Court is correct that there is no breach here and the provision at issue

is material, and these are legally sound bases for the Court’s holding, which is also correct. But

these are not legally sound bases for distinguishing Hernandez, PAJ, Prodigy, or Lennar. The

reasoning that leads the Court to hold that there was no breach here would lead to the same holding

in Hernandez, PAJ, Prodigy, and Lennar; and the analysis that the Court used to hold the

provisions in Hernandez, PAJ, Prodigy, and Lennar were not material would lead to the same

holding today. In short, either the Court is right today or it was right in Hernandez, PAJ, Prodigy,

and Lennar. Both cannot be true.

A.       The “No Breach” Argument

         The Court observes that Farmers is not relying on a breach to excuse itself from a coverage

obligation, but instead is relying on a provision that defines the scope of the policy’s coverage.

The Court explains that Greene “did not breach her obligations under the policy by moving out of

her home”; instead “the parties simply agreed on the effect of Green’s vacating her house.” Ante

at ___. Because there was no breach, “the question of materiality of a breach and its subsidiary

issue of prejudice are not raised.” Id. at ___. Thus, the Court rejects Greene’s reliance on

Hernandez and PAJ because our holdings in those cases are “rooted . . . in contract law, focusing

on the principle that a party is excused from its obligations to perform under a contract only if the

other party commits a material breach.” Id. at __.



         22
            The Court sometimes uses the phrase “failure to comply” instead of “breach.” If there is a difference
between failing to comply with a contractual obligation and breaching a contractual obligation, this Court has never
recognized it. To the contrary, the Texas Pattern Jury Charge and countless Texas breach of contract cases have treated
a finding that a party has failed to comply with the contract as the equivalent of a breach of the contract.

                                                              17
        I agree. Greene’s policy does not obligate her to reside in the residence, and Farmers does

not contend that she breached the policy by moving out of it. Instead, the policy limits the coverage

to the period of time when the home is occupied and for sixty days thereafter, and Greene’s act of

moving out for sixty days simply placed the home outside the scope of the coverage she had

purchased. The Court correctly concludes that the material-breach analysis does not apply here

because the question is not whether Farmers is excused from paying on a covered claim due to a

prior material breach of the policy, but rather, whether the policy covers Greene’s home in light of

the vacancy. The Court correctly concludes that it does not. See id. at __. But the same thing was

true in Hernandez, PAJ, Prodigy, and Lennar.

        The Court asserts that “[a]ll of these cases involved an insured’s failing to do something it

agreed to do or doing something it agreed not to do.” Id. at __. This is simply incorrect. In

Hernandez, the policy excluded underinsured motorist coverage if the insured settled with the

underinsured motorist “without written consent of the company.” Hernandez, 875 S.W. at 694

(Enoch, J., dissenting) (noting that the policy stated it “does not apply” under such circumstances).

As in this case, Hernandez did not agree to obtain the insurer’s consent to any settlement and thus

“did not breach [his] obligations under the policy” by settling a claim without first getting his

insurer’s consent. Instead, “the parties simply agreed on the effect of” those actions: no coverage.

Compare id., with ante at ___.

        Nor was there a breach in Lennar. That policy expressly defined the scope of coverage to

include only those settlements to which the insurer had consented.23 See Lennar, 413 S.W.3d at

755–56; see also id. at 764 (Boyd, J., concurring) (noting that the Court’s opinion imposed a


         23
            Again, this is according to Lennar’s construction of the coverage definitions, which we assumed to be
correct for purposes of the opinion.

                                                           18
prejudice requirement based on the prior-material-breach rule, even though “no one (not even the

Court) asserts that Lennar ‘breached’ the policy . . . ”). As in Hernandez and in the case here,

Lennar did not agree to obtain the insurer’s consent to any settlement, and its settlement without

the insurer’s consent “did not breach [its] obligations under the policy”; instead, “the parties simply

agreed on the effect of” those actions: no coverage.24 Compare id. (“Lennar’s failure to obtain

Markel’s prior written consent could not give rise to a cause of action for breach of the Insuring

Agreement Definition. Instead, it simply prevented the settlements from falling within the types

of liabilities that Lennar paid Markel to cover.”), with ante at ___.

         And even if the insureds agreed to give prompt notice of a claim in the policies at issue in

PAJ and Prodigy, those policies expressly conditioned the insurance coverage on the giving of

such notice. Thus, like Farmers in this case, the insurers in those cases did not argue that they were

“excused from performing” under the policies because “the other party commit[ted] a material

breach.” See ante at ___. Instead, the insurers argued that their policies only covered claims of

which they received timely notice. Prodigy, 288 S.W.3d at 376 (conditioning coverage on notice

“as soon as practicable” and “in no event later than ninety (90) days”); PAJ, 243 S.W.3d at 631

(conditioning coverage on compliance with certain terms, including notice “as soon as

practicable”).25 In other words, in those cases, as in this one, “the parties simply agreed on the


         24
            The settlement-related language in Lennar’s policy appeared in two places: Condition E and the definition
of the “legal liability” that the policy covered. Lennar did not agree in either section to obtain the insurer’s consent
before settling a claim. Instead, both provisions merely indicated that the policy would not cover settlements to which
the insurer had not consented—Condition E provided that unapproved settlements would be at Lennar’s own expense,
and the definition of “legal liability” required that the loss be established by adjudication or arbitration or in a
settlement approved in writing. See 413 S.W.3d at 755.
         25
           Prodigy and PAJ both involved notice requirements that were conditions precedent to coverage. This Court
has explained the difference between a breach of contract and the failure to fulfill a condition precedent on numerous
occasions, and the Prodigy and PAJ dissents did so as well. See, e.g., Solar Applications Eng’g, Inc. v. T.A. Operating
Corp., 327 S.W.3d 104, 108 (Tex. 2010) (citing Centex Corp. v. Dalton, 840 S.W.2d 952, 956 (Tex. 1992)) (citations


                                                               19
effect of” the insureds’ actions: no coverage. Compare ante at __, with Lennar, 413 S.W.3d at

755–56; Prodigy, 288 S.W.3d at 376; PAJ, 243 S.W.3d at 631. “[T]he question of materiality of a

breach and its subsidiary issue of prejudice,” thus, “[we]re not raised.” See ante at ___.

B.       The “Materiality” Argument

         The Court also attempts to distinguish Hernandez, PAJ, Prodigy, and Lennar on the ground

that the “breaches” in those cases were immaterial while the breach in this case is material. This

effort fails for two reasons. First, the “materiality” of the breach is only relevant if (1) there is, in

fact, a breach and (2) the non-breaching party relies on the breach to avoid performance under the

contract. But neither is true here, and nor were they true in Hernandez, PAJ, Prodigy, or Lennar.

In all of these cases, the issue was not whether the insured’s conduct excused the insurer from

fulfilling its coverage obligations under the contract; it was whether the insurer had a coverage

obligation under the contract at all. In most of these cases, including this one, the insurer did not

even allege that the insured had breached the contract. Instead, in each of these cases, the insurer

argued that the policy simply did not cover the loss.

         Second, even if there were a breach here, the “materiality” of the breach (or lack thereof)

is indistinguishable from the materiality of the “breaches” in Hernandez, PAJ, Prodigy, and

Lennar. As the Court points out, in all four cases, we determined whether the insured’s “breach”

was “material” by examining whether the “breach” deprived the insurer of the benefit that it could

have reasonably anticipated from full performance—i.e., the benefit of the bargain. See Lennar,



omitted); see also Prodigy, 288 S.W.3d at 384–88 (Johnson, J., joined by Hecht and Willett, JJ., dissenting); PAJ, 243
S.W.3d at 637–39 (Willett, J., joined by Hecht, Wainwright, and Johnson, JJ., dissenting). In short, when a party fails
to fulfill a condition precedent to another party’s obligation, the other party has no duty under the contract to perform
that obligation, regardless of whether the contract has been breached. See Solar Applications, 327 S.W.3d at 108;
RESTATEMENT (SECOND) OF CONTRACTS § 225(1), (2). The majorities’ use of the material-breach analysis in PAJ and
Prodigy confused failure to fulfill a contractual condition precedent with a mere breach of a contractual covenant.

                                                               20
413 S.W.3d at 755 (“Generally, one party’s breach does not excuse the other's performance unless

the breach is material. One factor in determining materiality is ‘the extent to which the

nonbreaching party will be deprived of the benefit that it could have reasonably anticipated from

full performance.’”); Prodigy, 288 S.W.3d at 377 (“an immaterial breach does not deprive the

insurer of the benefit of the bargain and thus cannot relieve the insurer of the contractual coverage

obligation.”) (quoting PAJ, 243 S.W.3d at 631, citing Hernandez, 875 S.W.2d at 692); PAJ, 243

S.W.3d at 631 (same); Hernandez, 875 S.W.2d at 692 (“A fundamental principle of contract law

is that when one party to a contract commits a material breach of that contract, the other party is

discharged or excused from any obligation to perform.”).

       In each of those cases, we held that the “breach” was not “material” because it did not

deprive the insurer of the benefit of the bargain, since the insurer was not prejudiced by the

insured’s conduct. See Lennar, 413 S.W.3d at 755 (holding that insurer was not deprived of the

benefit of full performance because the insurer was not harmed by the insured’s unapproved

settlement); Prodigy, 288 S.W.3d at 382 (holding that insurer was not deprived of the benefit of

full performance because the insurer was not harmed by the untimely notice); PAJ, 243 S.W.3d at

636–37 (holding that insurer was not deprived of the benefit of full performance because the

insurer was not harmed by the untimely notice); Hernandez, 875 S.W.2d at 692 (holding that

insurer was not deprived of the benefit of full performance because the insurer was not harmed by

the insured’s unapproved settlement). In short, we equated materiality with prejudice. See Lennar,

413 S.W.3d at 755; Prodigy, 288 S.W.3d at 382; PAJ, 243 S.W.3d at 633–34, 636–37; Hernandez,

875 S.W.2d at 692.

       Under that test, the vacancy clause at issue in this case is equally immaterial because the

insured’s failure to reside in the house did not prejudice the insurer. Farmers, in fact, has expressly

                                                      21
conceded this point. Because the vacancy of the house did not contribute to cause the fire damage,

the interest that the vacancy clause was designed to protect (minimizing the fire risks for a vacant

dwelling) was not injured here. But for the same reasons, the interest that the prompt-notice

provisions in PAJ and Prodigy were designed to protect (ensuring adequate time to gather

information and prepare a defense) was not injured, and the interest that the consent provision in

Hernandez and Lennar were designed to protect (the insurer’s subrogation rights) was not injured.

In sum, if the “materiality” test the Court announced in Hernandez, PAJ, Prodigy, and Lennar is

correct, the Court’s holding today cannot be. If the Court’s holding today is correct, and I agree

that it is, the “materiality” test articulated in those four cases cannot be.

         As the court states, “[a]t bottom this case is not about breach, it is about what coverage

Greene purchased and Farmers agreed to provide. Greene seeks to have us re-write the insurance

policy under the guise of ‘construing’ it so Farmers provides coverage it did not agree to provide,

and Greene receives coverage she did not contract for.” Ante at __. I agree, but this was equally

true in Hernandez, PAJ, Prodigy, and Lennar.26

C.       Conclusion on the Material-Breach Analysis

         The Court correctly identifies the heart of this matter: “At bottom this case is not about

breach, it is about . . . coverage[.]” Ante at __. Justice Enoch correctly made the same observation

his Hernandez dissent: “[T]his case is not about a breach of contract. This case is about coverage.”

875 S.W.2d at 694. They are both right, and the same statement would be accurate about PAJ,



         26
           In Hernandez, we “constru[ed]” the policy to cover a loss to which the policy expressly “d[id] not apply.”
See Hernandez, 875 S.W.2d at 694. In PAJ and Prodigy, we “constru[ed]” the policies to cover losses of which the
insured did not provide timely notice even though the policies expressly conditioned coverage on timely notice. See
Prodigy, 288 S.W.3d at 382; PAJ, 243 S.W.3d at 636. In Lennar, the policy expressly covered “ultimate net loss[es],”
but we “constru[ed]” it to cover a loss that fell outside the definition of an “ultimate net loss.” See Lennar, 413 S.W.3d
at 756.

                                                                22
Prodigy, and Lennar. Despite the Court’s efforts, there is no valid basis for distinguishing this case

from Hernandez, PAJ, Prodigy, and Lennar. Because those decisions rest on an inapplicable legal

principle, they cannot logically be distinguished: How can a court distinguish the breach (or

absence of a breach) in one case from the breach in an earlier case when there was no breach in

the earlier case? If an insurer must show prejudice to enforce an “immaterial” provision, and

provisions are “immaterial” if the insurer has suffered no prejudice, when is an insurer ever not

required to show prejudice? If Texans are to have any certainty about how the courts will construe

and apply their insurance contracts in future cases, we must disapprove of the reasoning on which

we based our decisions in those cases.

                                                    V.
                                         The Struggle for Certainty

         Ultimately, I cannot join the Court’s opinion in this case because it provides no clear basis

on which courts or parties can decide whether the material-breach rule applies in future cases.

Because we cannot distinguish this case from Hernandez, PAJ, Prodigy, and Lennar, we must

follow those cases, overrule them, or expressly limit their application on some basis.27 If we

followed Hernandez and its progeny in this case, the rule of law would be flawed but consistent:

policy provisions conditioning coverage on some conduct by the insured (like providing timely

notice, obtaining consent to settle, or occupying the premises) could not be enforced absent a




         27
            See Lennar, 413 S.W.3d at 759 (Boyd, J., concurring) (“[I]f we are going to continue imposing the
prejudice requirement, as I agree our precedent compels us to do, we should admit we are doing so on public policy
grounds, rather than continue our well-intended but ultimately inadequate efforts to justify our holdings on the basis
of contract principles.”).



                                                              23
showing of prejudice. And parties would have some certainty about when an insurer must show

prejudice to enforce conditions of coverage: almost always.28

         On the other hand, if we overruled those cases and returned to our 100-plus years of

precedent before Hernandez, continuity would suffer but Texas’s insurance case law would be

back on the right track: policy provisions conditioning coverage on the existence or occurrence of

some fact or event would be enforced as written and as approved by TDI, absent a statute that

requires a different result. And parties would have certainty about when an insurer must show

prejudice to enforce conditions of coverage: when the contract or a statute so requires.

         But if we expressly limited our prior decisions to the kinds of notice and consent provisions

at issue in those cases, as I recommend here, we would retain the greatest degree of continuity and

certainty available under our existing precedent. An insurer would have to show prejudice to deny

coverage based on an insured’s failure to give prompt notice or to obtain consent to settle under

provisions like those in Hernandez and its progeny,29 but would not have to show prejudice to

enforce other terms of coverage unless the contract so provided. To achieve this, we would have

to abandon the material-breach analysis we adopted in Hernandez and propagated in PAJ, Prodigy,

and Lennar. As today’s decision confirms, that analysis is legally incorrect and, more importantly,

practically unworkable. The principle of stare decisis can justify turning a blind eye to the first




         28
           I say “some certainty” and “almost always” because the line would have to be drawn somewhere.
Presumably, an insured who failed to pay her premiums could not, after a fire or flood, simply pay-up before reporting
the claim and be entitled to coverage because the insured was not prejudiced by the lack of timely payments.
Otherwise, no insurer would pay premiums unless or until a claim arose.
         29
           I say “like those in Hernandez and its progeny” because the holding in those cases do not apply to all notice
and consent provisions. Specifically, the Prodigy Court indicated that while the “as soon as practicable” notice
requirement was not enforceable absent prejudice, the 90-day notice requirement in the same provision would have
been enforceable absent prejudice. 288 S.W.3d at 382.

                                                               24
shortcoming but not the second. Because the outcome in Hernandez depended on the “materiality”

of a breach when there was, in fact, no breach, it cannot be logically distinguished or cabined.

       Because Hernandez and its progeny have been our precedent for the last twenty years, I

conclude that we should leave their holdings in place. But because their material-breach rationale

lacks the sound logical basis that is the foundation of judicial predictability, we should abandon it

in favor of a public policy rationale. See Lennar, 413 S.W.3d at 759 (Boyd, J., concurring) (“[I]f

we are going to continue imposing the prejudice requirement, as I agree our precedent compels us

to do, we should admit we are doing so on public policy grounds, rather than continue our well-

intended but ultimately inadequate efforts to justify our holdings on the basis of contract

principles.”). Having recognized that it is public policy, and not the operation of general contract

law, that makes notice-of-claim and consent-to-settlement requirements like those in Hernandez

et alia unenforceable absent prejudice, we should decline to extend that policy beyond those cases

and Puckett, deferring instead to the TDI and the Legislature to dictate insurance policy terms, as

the Court correctly does in this case.

                                               VI.
                                            Conclusion

       I concur in the Court’s judgment in this case, but do not agree with all of its reasoning,

particularly its effort to distinguish this case from Hernandez and its progeny. I would

acknowledge the flawed logic in that line of cases and expressly decline to extend it to any other

insurance policy provisions that place the insured outside the circumstances for which there is

coverage under the policy. This would permit consumers, TDI, the Legislature, insurers, and courts

to reliably predict when such provisions operate according to general contract law and when the

special prejudice requirement of Hernandez applies instead. Having restricted the judicially-

imposed prejudice requirement to policy provisions that require prompt notice of claims and
                                                25
consent to any settlements, I would defer to the Legislature and to the Texas Department of

Insurance to decide whether to impose the prejudice requirement on any other policy provisions.



                                                       _____________________
                                                       Jeffrey S. Boyd
                                                       Justice


Opinion delivered: August 29, 2014




                                                  26
