Two insurance companies who let years elapse when a corporate policyholder requested legal defense learned an expensive lesson about the Texas Prompt Payment Act: A $7 million claim became a $20.2 million judgment.

Now the plaintiff lawyer behind the winning outcome is discussing his litigation strategy, and offering a suggestion to general counsels and risk managers juggling similar litigation.

Houston attorney Justin K. Ratley of Munsch Hardt, lead trial counsel for Zenith Energy U.S. L.P, said the judgment against the insurance companies was straightforward math.

"If they had just paid it out, it would have been $7 million total," Ratley said. "Instead, they're paying more than three times that amount."

A Harris County district court entered final judgment March 20 against Travelers Property Casualty Company of America and The Charter Oak Fire Insurance Co., totaling $20.2 million. The insurers allegedly failed to respond to defense demands from Zenith Energy, following a 2019 industrial accident at one of its terminals.

Under the Texas Prompt Payment Act, insurers that fail to timely respond to covered claims face an 18% annual interest penalty, Ratley said.

This meant statutory interest against Charter Oak began accruing in March 2021 and against Travelers in September 2021, producing judgments that dwarfed both companies' original policy limits, he said.

Travelers, which carried a $5 million policy, faced a total judgment of $11.86 million. Charter Oak, with a $2 million policy limit, owed $7.79 million.

Ratley said the statutory penalty exists to prevent insurers from profiting off delay.

"The longer an insurance company sits and holds the money, they use that, they invest it," he said. "They're making money off of not paying the claim. The only way the equities are balanced out is that there's a penalty for using the claim money for revenue instead of paying it."

Attorneys Greg C. Wilkins of Mehaffy Weber in Beaumont and Charles T. Frazier Jr. of Alexander Dubose & Jefferson in Dallas represented the defendants. They did not respond immediately to a request for comment Friday.

The case arose from a 2019 industrial accident at a Zenith Energy terminal in Mobile, Alabama, when blowback from hot asphalt injured a worker who was loading it unto a truck, burning his face and body.

The personal injury lawsuit filed by worker William Dees against Zenith Energy Terminal was settled, with Zenith shouldering its own defense and indemnity costs after its insurers declined to get involved.

Zenith's claim against the insurers rested on additional-insured provisions in contracts with companies that used its terminals.

Those contracts required vendors to name Zenith as an additional insured under their liability policies.

But plaintiffs said that despite putting the insurers on notice of the underlying litigation and asking them repeatedly to participate in settlement discussions, the insurers declined to act.

Ratley said the insurers' response to years of demand letters amounted to silence.

"I think they just thought that if they ignored Zenith long enough, they would go away," he said. "We had to start this lawsuit really just to try to get their attention: 'Hey, you owe a defense. Please pick it up.'"

The case, filed in September 2022, took nearly four years to resolve and generated more than 300 court filings.

The insurers initially removed the case to federal court, but the court remanded it back to Harris County, Ratley said.

The turning point in the dispute came in May 2025, when Harris County District Judge Kyle Carter granted summary judgment rulings establishing coverage under both the Charter Oak and Travelers policies, he said.

The bench trial that followed, limited to the issue of attorney fees, lasted just a few hours.

Ratley said the legal framework for establishing the duty to defend under Texas law is the eight-corners rule, which requires courts to compare the allegations in the underlying petition to the four corners of the insurance policy.

"If there's at least one potentially covered claim in that petition, the carrier is supposed to pick up the defense," he said. "If you ultimately prove the underlying case is within coverage, that triggers the duty to indemnify," which is what secured the judgment against both Travelers and Charter Oak.

The case also addressed the interpretation of follow-form excess policies, which traditionally provide the same coverage as the underlying primary policy, except for limits.

Ratley said a recent Texas Supreme Court opinion shifted the analytical approach, requiring courts to start with the excess policy itself before incorporating the underlying policy's terms.

"Policyholders and people trying to pursue that coverage need to be a little more mindful that they need to read the excess policy," he said.

On the defense side, he claimed the insurers offered no single dispositive argument, instead throwing what he called a kitchen sink of policy exclusions and coverage defenses at the court—each of which had to be briefed and rebutted individually, contributing to the case's more than 300 filings.

Ratley said the case offers a clear lesson for companies that rely on additional insured arrangements, and most large commercial enterprises do.

Rather than accepting a certificate of insurance as proof of coverage, he said companies should request and review the actual policy documents before a claim arises.

In the Zenith case, one of the earliest delays was identifying the insurers. "Ask for copies of the policies and review them," he said. "That way, you already know where to start."

He also urged general counsels and risk managers not to treat a denial letter or reservation of rights as the final word.

"Just because they say, 'That's what your policy says,' or just because that's the position the insurance company takes, doesn't mean they're right," he said. "You've got the ability to have that reviewed and challenged."

Munsch Hardt's trial team also included attorneys Ryan Newman, Frank Patsouras, and Mitch McFarland.

The court awarded $620,509.73 in attorney fees, nearly the full amount requested, with the only reduction stemming from a dispute over paralegal billing rates.

Ratley claimed the fee award, combined with the statutory interest judgment, sent an unmistakable message to insurers that delay is not a viable strategy.

His advice to litigators handling similar coverage disputes: "Stay the course. Keep after it. That's the only mantra."

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