The Fifth Circuit’s February 6, 2013 decision in Pride Transportation v. Continental Casualty Co. clarifiesthe application of the Stowers doctrine to multiple defendant/multiple insured scenarios. The court, siting in diversity, confirmed that Texas recognizes no cause of action against an insurer for wrongfully accepting an offer to settle a plaintiff’s claims against some but not all defendants within policy limits.
In Pride, the defendant trucking company was sued along with its driver as a result of a collision involving evident liability and substantial injuries and damages. The plaintiff offered to settle all his claims against the driver only in exchange for Pride’s policy limits, expressly leaving pending the claims against Pride, whose policies of insurance covered both Pride and its driver. The plaintiff refused to agree to a settlement including both the driver and Pride. The insurance carriers accepted and paid the policy limits demand to settle for the driver only, perhaps fearing Stowers liability if they failed to do so. Because Pride’s policy limits had been exhausted by this partial settlement, this left Pride in the underlying auto collision case with no remaining insurance protection, and under the policies, the exhaustion of the policy limits also allowed the carriers to withdraw from any further defense obligations. Before the underlying collision case was tried, separate litigation ensued between Pride and its insurers.
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