settlement – 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.

August 4, 2016August 4, 2016 by Duane Morris

Insurer’s Duty to Initiate Settlement Discussion

By Thomas R. Newman

The covenant of good faith and fair dealing that is implied by law in every liability insurance policy requires the insurer to concern itself with the interests and welfare of the insured as well as its own interests and welfare, and in so doing “the insurer at the very least must itself consider and determine whether or not a settlement offer is in the best interest of the insured.” Garner v. American Mut. Liability Ins. Co., 31 Cal. App. 3d 843, 847-848, 107 Cal. Rptr. 604, 607 (3d Dist 1973). If it is, as where liability is clear and the injuries or damages are likely to result in a judgment in excess of the policy limits, some courts have held that the insurer has an affirmative duty to initiate settlement negotiations. Goheagan v. American Vehicle Ins. Co., 107 So. 3d 433, 438 (Fla. Dist. Ct. App. 1012); Noonan v. Vermont Mut. Ins. Co., 761 F. Supp. 2d 1330 (M.D. Fla. 2010)(Florida law); SRM, Inc. v. Great Am. Ins. Co., 798 F.3d 1322, 1323 (10^th Cir. 2015)(Oklahoma law)(“a primary insurer owes its insured a duty to initiate settlement negotiations with a third-party claimant if the insured’s liability to the claimant is clear and the insured likely will be held liable for more than its insurance will cover”).

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October 2, 2015 by Max H. Stern

Protections Against Defended Policyholder Manufacturing Bad Faith Case Via Stipulated Judgment Confirmed By California Court

The California Court of Appeal for the Fourth District, Division Two, in 21st Century Ins. Co. v. Superior Court (Tapia), ___ Cal.App.4th ___ (No. E062244, September 10, 2015), recently confirmed some of the important protections for defending insurers against stipulated judgments that were established in the Hamilton and Safeco decisions and limited the application of other decisions that have been relied on by claimants and policyholders seeking to get around the Hamilton rule against bad faith actions premised on such stipulated judgments. Continue reading “Protections Against Defended Policyholder Manufacturing Bad Faith Case Via Stipulated Judgment Confirmed By California Court”

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.

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