Court Opinion

ID: 9665604
Source: CourtListenerOpinion
Date Created: 2023-08-24 00:52:33.345353+00
Date Added: 2024-06-11T18:15:16.918654
License: Public Domain

CORNYN, Justice, joined by HECHT, Justice,
concurring.
I concur in the court’s judgment, and join in its opinion except for Part II.B. Contrary to the court’s view, I would hold that the question of whether third-party insurers responding to settlement demands are subject to this duty has been preserved for our review. I would hold that Texas law recognizes only one tort duty in this context, 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). Cf. American Physicians Ins. Exch. v. Garcia, 876 S.W.2d 842, 847 & nn. 10-11, 849 & nn. 14, 17-18 (Tex.1994) (discussing tort duties other than the duty to settle).
The court writes: ‘‘Farmers does not challenge whether Soriano has a claim for breach of the duty of good faith and fair dealing in failing to settle a third-party claim,” 881 S.W.2d at 317, stating that, “Farmers only asserts that there is no evidence that it breached a duty of good faith and fair dealing.” 881 S.W.2d at 317. The court then proceeds to search the record for any evidence to support this nonexistent cause of action, and concludes that there is none.
Whether Farmers owed Soriano a duty of good faith and fair dealing is plainly preserved by Farmers’ first point of error: “The court of appeals erred as a matter of law in concluding that Farmers breached any legal duty in this case.” Application for Writ of Error at 7. Moreover, Farmers argues that its no evidence points, including its challenge to the jury finding of bad faith, must be sustained because “the court is barred by rules of law or of evidence from giving weight to the only evidence offered to prove a vital fact.” Id. at 41 (citing Robert W. Calvert, “No Evidence” and “Insufficient Evidence” Points of Error, 38 Tex.L.Rev. 359, 362-363 (April 1960)); see also Juliette Fowler Homes, Inc. v. Welch Assoc., Inc., 793 S.W.2d 660, 666 m 9 (Tex.1990) (quoting Chief Justice Calvert’s formulation with approval). Farmers argues that because Texas law does not recognize a duty of good faith under these facts, the court cannot give any weight to the evidence claimed to support this duty. Finally, Farmers cites authority for the proposition that the “interpret[ation] by some” that the negligence standard set forth in Stowers is in fact a duty of “good faith” has been rejected in Texas. Application for Writ of Error at 32 n. 5. On this basis, I would hold that the issue of whether a duty of good faith and fair dealing exists in the present context has been preserved for our review.
The court also states: “At the outset, we note that this court has never recognized a cause of action for breach of the duty of good faith and fair dealing where the insurer fails to settle third-party claims against its insured.” 881 S.W.2d at 317. I agree, but I would in this case hold that no such duty exists under Texas law. See Ranger County *319Mut Ins. Co. v. Guin, 704 S.W.2d 813, 818 (Tex.App.—Texarkana 1985), aff'd, 728 S.W.2d 656 (Tex.1987) (“Texas has rejected the good faith test of an insurer’s liability which is used in the majority of the states in a case of this nature, and instead adopted a negligence [Stowers doctrine] standard.”).1
The “no reasonable basis” standard applicable to the duty of good faith and fair dealing in the first-party context is the wrong test for third-party duty-to-settle claims. The “no reasonable basis” standard was developed to address the unique issues that accompany first-party claims. See Aranda v. Insurance Co. of N. Am., 748 S.W.2d 210, 213 (Tex.1988). Under the duty of good faith and fair dealing, “as long as the insurer has a reasonable basis to deny or delay payment of the claim, even if that basis is eventually determined by the factfinder to be erroneous, the insurer is not liable for the tort of bad faith.” Lyons v. Millers Cas. Ins. Co., 866 S.W.2d 597, 600 (Tex.1993). The “no reasonable basis” standard recognizes that “carriers will maintain the right to deny invalid or questionable claims,” and to test their validity in court. Aranda, 748 S.W.2d at 213. In the third-party setting, however, the claim is not that of the insured, but of the insured’s adversary. In such circumstances, every reasonable demand within policy limits should be accepted by the insurer, unless the insurer, by taking the case to trial, is willing to gamble with its own money. A “bad faith” version of the duty to settle, like that imposed by some other jurisdictions,2 would presumably supplant the negligence standard recognized in Stowers, and would result in the insured having to prove a higher level of culpability than would be required to prove negligence. Rather than increasing the insured’s burden by overruling Stowers and its progeny, I would hold that the Stowers doctrine is the exclusive common-law remedy available to an insured in this situation.

. Notably, in Arnold v. National County Mut. Ins. Co., 725 S.W.2d 165, 167 (Tex.1987), we recognized the existence of the Stowers duty, and could have imported the third-party negligence standard into the first-party context. The court did not do so, and the juxtaposition is striking:
[An] indemnity company is held to that degree of care and diligence which a man of ordinaiy care and prudence would exercise in the management of his own business. G.A. Stowers Furniture Company v. American Indemnity Company, 15 S.W.2d 544, 548 (Tex.Comm’n App.1929, holding approved).
A cause of action for breach of the duty of good faith and fair dealing is stated when it is alleged that there is no reasonable basis for denial of a claim or delay in payment or a failure on the part of the insurer to determine whether there is any reasonable basis for the denial or delay....
Arnold, 725 S.W.2d at 167.

. A recent survey counted 21 states that require "bad faith" by the insurer, 5 that apply a negligence standard, and 17 that apply some combination of these standards. See Steven S. Ashley, Bad Faith Liability: A State-by-State Review 89-134 (1987); Kent D. Syverud, The Duty To Settle, 76 Va.L.Rev. 1113, 1122 n. 20 (1990) (counting the states in Ashley’s survey).