In re Farmers Texas County Mutual Insurance Company

Summary

The Texas Supreme Court conditionally granted mandamus relief in a dispute arising from an insurer’s solicitation of a contribution from its insured toward a settlement within policy limits. The Court held that the insured could not pursue a Stowers negligent-failure-to-settle claim because her liability did not exceed the policy limits, but could pursue a contractual indemnity claim based on the insurer’s alleged failure to reimburse her settlement contribution. The Court also held that the insured’s claim based on defense counsel’s failure to timely designate experts had no basis in law on the pleaded facts.

Holdings

1. Texas law does not recognize a Stowers claim for negligent failure to settle when the insured has no liability in excess of the policy limits. Because Longoria's settlement was within policy limits and no excess judgment or excess settlement imposed liability on her, her Stowers claim had no basis in law under Rule 91a.
2. Longoria stated a viable claim for breach of Farmers' contractual obligation to indemnify her. A settlement can establish that an insured is legally responsible for damages under a policy requiring the insurer to pay damages for which the insured becomes legally responsible; a prior judgment is not required as a matter of law.
3. Longoria's pleaded claim that Farmers breached its obligation to defend by failing to timely designate expert witnesses had no basis in law because a liability insurer ordinarily is not vicariously liable for the conduct of an independent attorney it selects to defend the insured, and Longoria pleaded no facts bringing the claim within an exception.
4. Stowers does not preclude a breach-of-contract claim seeking damages within policy limits for violation of the insurer's contractual indemnity obligation. Stowers supplies a tort remedy for excess liability; the insurance contract independently requires payment of covered damages within the policy limits.

Questions Presented

1. Whether an insured may bring a Stowers claim for negligent failure to settle when there has been no judgment or settlement imposing liability in excess of policy limits.
2. Whether an insured may pursue a breach-of-contract claim for indemnity after the insurer participates in a within-limits settlement but requires the insured to contribute personal funds toward the settlement.
3. Whether the pleaded facts stated a viable breach-of-contract claim based on the insurer's alleged failure to defend through timely expert designation.
4. Whether Stowers principles preclude a contractual indemnity claim for damages within the policy limits.

Disposition

writ_granted