appeal – Duane Morris Insurance Law

Finding that the Stowers doctrine was not “activated,” the United States District Court for the Southern District of Texas entered summary judgment in favor of an insurer on its declaratory relief claim. After an underlying judgment was entered against its insured, the insurer sought declaratory relief establishing that it owed only its remaining policy limits for an excess verdict. The trial court agreed with the insurer, entered summary judgment, and the matter is now on appeal to the United States Court of Appeals for the Fifth Circuit.

The coverage dispute arose out of an underlying personal injury suit filed in Texas state court. In the underlying suit, the claimants sued the insured for injuries sustained while at the insured’s business. The claimants’ counsel sent a written settlement offer to the insured, requesting “payment of all policy limits of any and all insurance contract,” which was subsequently rejected. The claimants eventually prevailed at trial against the insured, obtaining a verdict totaling $3.2 million. The insurer tendered its remaining limits, but the claimants asserted that the insurer was obligated to pay the entire judgment because the claimants’ pre-trial settlement demand was a proper Stowers demand.

The trial court provided background on the so-called Stowers doctrine and demands:

“Under G.A. Stowers Furniture Co. v. American Indem. Co., 02 S.W.2d 544 (Tex. Comm’n. App. 1929, holding approved), Texas law imposes a ‘basic tort duty,’ known as the Stowers doctrine, under which insurers, ‘when faced with a settlement offer within policy limits, must accept the offer … when an ordinarily prudent insurer would do so in light of the reasonably apparent likelihood and degree of that insured’s potential exposure to a valid judgment in the suit in excess of policy limits.’” Law Office of Rogelio Solis PLLC v. Curtis, 83 F.4th 409, 411 n.1 (5th Cir. 2023) (quoting Travelers Indem. Co. v. Citgo Petroleum Corp., 166 F.3d 761, 761 (5th. Cir. 1999)). “When . . . the insurer’s negligent failure to settle results in an excess judgment against the insured, the insurer is liable under the Stowers doctrine for the entire amount of the judgment, including the part exceeding the insured’s policy limits.” G.A. Stowers Furniture Co., 15 S.W.2d at 548.

February 13, 2020 by Duane Morris

California Court of Appeal: Third Party, Additional Insured Bound by Policy’s Arbitration Clause

By Daniel B. Heidtke

In an opinion filed on the last day of 2019, the California Court of Appeal, Third District, reversed a trial court’s holding that an additional insured was not bound by an arbitration agreement in an insurance policy. In Philadelphia Indemnity Insurance Company v. SMG Holdings, Inc., Case No. C082841 (certified for publication on January 28, 2020), the court held that an arbitration agreement in a commercial general liability policy (“CGL”) issued by Philadelphia Indemnity Insurance Company (“Philadelphia”) bound SMG Holdings, Inc. (“SMG”), a “third party beneficiary” under the policy that was also “equitably estopped” from avoiding the arbitration clause. The court reversed the trial court, vacated its order denying Philadelphia’s petition to compel arbitration, and directed the trial court to order arbitration of the coverage dispute. Continue reading “California Court of Appeal: Third Party, Additional Insured Bound by Policy’s Arbitration Clause”

January 28, 2015 by Max H. Stern

California Guidance on Complex Duty to Defend Disputes over Additional Insured Status

In McMillin Companies, LLC v. American Safety Indemnity Co. (4th Dist. Div. 1, No. D063586, January 22, 2015 (published in relevant part)), the California Court of Appeal for the Fourth District has provided some meaningful guidance on how a trial court should handle issues that regularly come up in cases where an alleged additional insured claims breach of the duty to defend by multiple insurers, including explaining the significance of an insurer’s unsuccessful attempt to obtain summary judgment on the duty to defend, the significance of other insurer settlements on claims against the remaining insurer, and the procedure for applying an offset to the policyholder’s claim for such settlements.

Continue reading “California Guidance on Complex Duty to Defend Disputes over Additional Insured Status”