Summary
The Fifth Circuit held that a primary insurer violated its *Stowers* duty to settle by rejecting a $2 million policy-limits demand made on behalf of both adult and minor plaintiffs, even though the lump-sum offer did not specify allocation among the claimants. The court found no inherent conflict of interest between the minor children and their next friend (the mother) that would make the offer conditional, because any post-settlement court scrutiny of apportionment did not create an unacceptable risk of further liability. The court also affirmed that a second offer seeking “$1.9MM to $2.0MM with costs” was ambiguous and did not trigger the *Stowers* duty, and that the insurer negligently failed to reevaluate the settlement value in light of adverse trial rulings. The case clarifies Texas *Stowers* law regarding lump-sum settlement offers involving minors and the necessity of clear, unconditional demands within policy limits.
Holdings
- The third settlement offer, which was for a lump sum of $2 million and was unconditional, generated a Stowers duty because it proposed to release the insured fully and was not conditional.
- ACE violated its Stowers duty by rejecting the third offer because an ordinarily prudent insurer would have accepted it given the adverse trial developments.
Questions Presented
- Whether the district court erred in holding that all three settlement offers triggered the Stowers duty.
- Whether the district court erred in concluding that ACE violated its Stowers duty by rejecting the third settlement offer.
Disposition
affirmed
Cases Cited (28)
- G.A. Stowers Furniture Co. v. Am. Indem. Co., 15 S.W.2d 544 (Tex. Comm'n App. 1929)(followed)
- Petzold v. Rostollan, 946 F.3d 242 (5th Cir. 2019)(followed)
- Colonial Penn Ins. v. Mkt. Planners Ins. Agency Inc., 157 F.3d 1032 (5th Cir. 1998)(followed)
- Wisznia Co. v. Gen. Star Indem. Co., 759 F.3d 446 (5th Cir. 2014)(followed)
- Cinel v. Connick, 15 F.3d 1338 (5th Cir. 1994)(followed)
- Am. Physicians Ins. Exch. v. Garcia, 876 S.W.2d 842 (Tex. 1994)(followed)
- State Farm Lloyds Ins. Co. v. Maldonado, 963 S.W.2d 38 (Tex. 1998)(followed)
- Tex. Farmers Ins. Co. v. Soriano, 881 S.W.2d 312 (Tex. 1994)(followed)
- Rocor Int'l, Inc. v. Nat'l Union Fire Ins. Co. of Pittsburg, 77 S.W.3d 253 (Tex. 2002)(followed)
- Danner v. Iowa Mut. Ins. Co., 340 F.2d 427 (5th Cir. 1964)(followed)
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