Texas Federal Court docket Finds Settlement Demand Missing “Sum Sure” Inadequate to Set off Stowers Obligations
Final week, in Golden Bear Insurance coverage Firm v. thirty fourth S&S, LLC, a Texas federal courtroom held that an insurer had no responsibility to cowl a private harm judgment in extra of the $1 million coverage restrict. The holding reminds events in Texas to fastidiously take into account essentially the most primary—and typically very explicit—necessities surrounding Stowers calls for.
The protection dispute arose from an underlying private harm go well with through which patrons of a bar sued the bar and its proprietor for accidents sustained after bouncers on the bar allegedly assaulted the patrons. The patrons’ counsel despatched a written settlement demand, which the insurer rejected. At trial, the jury returned a $3.2 million verdict in opposition to the bar and its proprietor, and the insurer tendered the steadiness of its coverage limits, which didn’t totally fulfill the ultimate judgment. The patrons argued that they made a correct Stowers demand in opposition to the bar and thus the bar was entitled to indemnification by the insurer for the total quantity of the ultimate judgment in extra of the coverage’s $1 million restrict.
On abstract judgment, america District Court docket for the Southern District of Texas thought of whether or not a correct Stowers demand was ever made in opposition to the bar. Beneath the Stowers doctrine, a tortious responsibility to settle is activated the place (i) the declare in opposition to the insured is throughout the scope of protection, (ii) a settlement demand throughout the coverage limits is made, and (iii) the phrases of the demand are such that an ordinarily prudent insurer would settle for the demand contemplating the chance and diploma of the insured’s potential publicity to an extra judgment.
Upon consideration of those three Stowers elements, the district courtroom held that the settlement demand at challenge didn’t set off the insurer’s responsibility to settle as a result of the demand didn’t state a sum specific amount to settle the claims. As a substitute, the demand included a proposal to settle all claims “in change for the fee of all coverage limits of any and all insurance coverage contracts.” The district courtroom defined that this assertion lacked any specificity concerning the insurer’s coverage or the precise quantity remaining throughout the coverage. Counting on Fifth Circuit and Texas Supreme Court docket precedent, the courtroom said that “settlement gives should be unambiguous and demonstrative of a transparent intent of a sum sure.” As a result of the district courtroom discovered that the insurer by no means obtained a settlement demand with an unambiguous and sure sum, the courtroom concluded that no Stowers obligation was triggered.
The Golden Bear holding supplies perception into how Texas federal courts might interpret the requirement {that a} settlement demand throughout the coverage limits be made. Events ought to fastidiously take into account the sum sure requirement when making and responding to settlement calls for purporting to set off the responsibility to settle underneath Stowers.