In Golden Bear Ins. Co. v. 34th S&S, LLC, 2024 WL 3321508 (S.D. Tex. 2024), Judge Hittner held that an insurance carrier was not liable for a judgment in excess of policy limits because the Stowers demand did not meet one of the requirements to be an effective demand.
A duty under the Stowers doctrine is not invoked unless the settlement demand involves (1) a claim within the scope of coverage, (2) the demand is within policy limits, and (3) the terms of the demand are such that an ordinarily prudent insurer would accept it, considering the likelihood and degree of the insured’s potential exposure to an excess judgment. American Guarantee & Liab. Ins. Co., 990 F.3d 842, 847 (5th Cir. 2021); Texas Farmers Ins. Co. v. Soriano, 881 S.W.2d 312, 314 (Tex. 1994). The settlement terms must be clear and undisputed and must clearly state a sum certain. Rocor Int’l, Inc. v. National Union Fire Ins. Co., 77 S.W.3d 253, 262-63 (Tex. 2002). The Texas Supreme Court has recognized that in place of a stated sum, the demand can be for policy limits. Id.
In the Golden Bear cases, the carrier issued a commercial general liability policy to the insureds with a policy limit of $1 million. The insureds were sued for injuries sustained during the plaintiffs’ patronage of their establishment. Counsel for the plaintiffs sent a settlement demand requesting “payment of all policy limits of any and all insurance contracts.” The demand was rejected by the carrier and when the case went to trial, the jury returned a verdict totaling $3.2 million against the insureds.
The carrier then filed suit in federal court seeking a declaration that the demand did not invoke liability under the Stowers doctrine. The court had no problem rejecting the contention that the carrier was not entitled to bring an action for declaratory judgment regarding its duties under the Stowers doctrine.
The court then turned to the issue of whether the settlement demand met the requirements of a valid Stowers demand such that the carrier was exposed to the full amount of the judgment, as opposed to policy limits. The court concluded that an offer to settle all claims “in exchange for the payment of all policy limits of any and all insurance contracts” lacked the clear intent of a sum certain necessary to invoke Stowers. The court went on to note that the carrier never received an offer containing a demand of an unambiguous and certain sum, and thus, received no demand triggering a Stowers obligation.
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