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

Heading: Stowers Duty

Text: 8 Texas courts have recognized only one tort duty regarding third party insurance cases, that being the duty stated in Stowers Furniture Co. v. American Indem. Co., 15 S.W.2d 544 (Tex. Comm'n App. 1929, holding approved). See Maryland Ins. Co. v. Head Indus. Coatings & Serv., Inc., 938 S.W.2d 27, 28 (Tex. 1996). According to this duty, an insurer may be held liable in damages upon refusing an offer of settlement when it appears that an ordinary prudent person in the insured's situation would have settled. See Stowers, 15 S.W.2d at 547. However, a settlement demand triggers the Stowers duty only upon meeting three prerequisites: (1) the claim against the insured is within the scope of coverage; (2) the demand is within the 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 Physicians Ins. Exch. v. Garcia, 876 S.W.2d 842, 849 (Tex. 1994). 9 Although this precedent outlines the Texas Supreme Court's current view and treatment of the Stowers duty, Ford chose to base his third party insurance claim on an older case, Ranger County Mut. Ins. Co. v. Guin, 723 S.W.2d 656 (Tex. 1987), involving liability of an insurance company for negligence in the handling of a claim against its insured. 1 He particularly relied on the language [a]n insurer's duty to its insured is not limited to . . . narrow boundaries, . . . rather it extends to the full range of the agency relationship. . . . [T]hat includes investigation, preparation for defense of the lawsuit, trial of the case and reasonable attempts to settle. Id. at 658 (emphasis added). Under this expansive view of the Stowers duty, Ford alleges that as his agent, Cimarron had a duty to exercise ordinary and prudent care in handling the Novatech claim. As such, Ford further argues that he has met the threshold requirement of a negligence claim in Texas.