Opinion ID: 22194
Heading Depth: 2
Heading Rank: 3

Heading: analysis

Text: 10 The present dispute is not this court's first occasion to address the issue of negligence actions available under Texas law in third party insurance cases. In Saint Paul Fire & Marine Ins. Co. v. Convalescent Servs., Inc., 193 F.3d 340 (5th Cir. 1999), the insured, Convalescent Services, Inc. (CSI), alleged that its insurer, Saint Paul Fire and Marine Insurance (Saint Paul), had a duty to handle claims against CSI in a non-negligent manner. 2 Like Ford, CSI based its allegations on the sweeping language of Ranger. 11 Upon reviewing the facts of Ranger and subsequent Texas Supreme Court cases, this court discerned the fallacy of CSI's reliance. While Ranger does contain language that seems to expand the Stowers duty, the case itself contained 'no contention that [the insurer] was negligent in investigation or trial of the . . . lawsuit.' Saint Paul, 193 F.3d at 344 (quotingRanger, 723 S.W.2d at 659). Because the expansive language was not dispositive of an issue at bar in Ranger, this court reasoned that it was not the case's holding. See Saint Paul, 193 F.3d at 344. 12 Furthermore, this court recognized that the Texas Supreme Court had treated the dubious Ranger language even more narrowly, specifically referring to it as dictum. Id. (citing Garcia, 876 S.W.2d at 849); see also State Farm Mut. Auto. Ins. Co. v. Traver, 980 S.W.2d 625, 628 (Tex. 1998) (stating that the language in Ranger about the scope of the insurer's responsibilities was dict[um]). The court explained that [i]n the context of a Stowers lawsuit, evidence concerning claims investigation, trial defense, and conduct during settlement negotiations is necessarily subsidiary to the ultimate issue of whether the claimant's demand was reasonable under the circumstances, such that an ordinarily prudent insurer would accept it. Garcia, 876 S.W.2d at 849. 13 CSI premised its arguments against the aforementioned reading of Ranger on the Garcia dissent, which impugns the majority for its retroactive reformation of the Ranger holding 'into mere dictum.' Saint Paul, 193 F.3d at 344 (quoting Garcia, 876 S.W.2d at 863 n.7). Nonetheless, this court clearly concluded that the Texas Supreme Court drastically curtailed the broad language of Ranger. Saint Paul, 193 F.3d at 344. Thus in making its Erie 3 prediction of how the Texas Supreme Court would hold in CSI's case, we respected the constraints of the court's more recent precedent and held that St. Paul did not breach any tort duty to CSI. See id. at 345. 14 We are a strict stare decisis court. [Thus], . . . one panel of this court cannot disregard, much less overrule, the decision of a prior panel. F.D.I.C. v. Abraham, 137 F.3d 264, 268 (5th Cir. 1998). This rule remains immutable even when the prior panel's decision involved the interpretation of state law because, [s]uch interpretations are no less binding on subsequent panels than are prior interpretations of federal law. Id. (citing Broussard v. Southern Pac. Transp. Co., 665 F.2d 1387, 1389 (5th Cir. 1982) (en banc)). Therefore, a prior panel's interpretation of state law has binding precedential effect on other panels of this court absent a subsequent state court decision or amendment rendering our prior decision clearly wrong. See Abraham, 137 F.3d at 269. 15 No Texas Supreme Court decision nor amendment has so subsequently rendered this court's decision in Saint Paul clearly wrong. Accordingly, Saint Paul binds us regarding the Ford and Cimarron dispute. While Ford makes a persuasive argument for requiring insurance companies to handle, investigate, and settle claims using the ordinary care of a reasonable and prudent person in the insured's position, the Stowers duty is the only common law tort duty Texas currently recognizes in third party insurance claims. 4 Thus in handling Novatech's claim against Ford, Cimarron can only be held liable in tort for not accepting a settlement offer that any reasonable person in Ford's position would have accepted. Cimarron fulfilled this duty, however, when it settled Novatech's claim against Ford. As such, we hold that Cimarron breached no tort duty to Ford.