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AFTCO Enterprises, Inc. v. Acceptance Indemnity Insurance Co.

The Stowers doctrine shifts the risk of an excess judgment from the insured to the insurer by subjecting an insurer to liability for the wrongful refusal to settle a claim against the insured within policy limits. A settlement demand triggers an insurer's Stowers duty to respond if: the claim against the insured is within the scope of coverage; the demand is within policy limits; and 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. The trial court correctly granted summary judgment on the ground that the plaintiffs' settlement demands never triggered their Stowers duties. Houston Court of Appeals, No. 01-09-00280-CV, 05-14-2010

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OPINION

AFTCO Enterprises, Inc. (AFTCO) and ETSI, Inc. brought Stowers actions against their insurers, Acceptance Indemnity Insurance Company (Acceptance) and Southern County Mutual Insurance Company (Southern), complaining that Acceptance and Southern each failed to timely tender its policy limits in response to a $2.6 million global offer to settle four personal injury lawsuits then pending in Louisiana state court that arose out of a highway accident. See G.A. Stowers Furniture Co. v. Am. Indem. Co., 15 S.W.2d 544, 547 (Tex. Comm’n App. 1929, holding approved). Though their carriers ultimately tendered their respective policy limits to satisfy the underlying liability claims, AFTCO and ETSI seek unspecified attorney’s fees and compensation for damage to their business reputations for the carriers’ delay in settling the case. AFTCO and ETSI appeal the trial court’s grant of the insurers’ summary judgment motions. They contend that the trial court erred in concluding the settlement offer, as a matter of law, did not trigger a Stowers duty for either insurer. Finding no error, we affirm.

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