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by Megan Zeller

For this holiday season, we’re looking at a recent case out of Texas that operates as a small gift for insurers, which provides a relatively bright-line rule for future Stowers analyses. As we have previously written, while plaintiff’s counsel may make Stowers demands during third-party liability claims, these demands are directed to the insurers, who are required to exercise ordinary care in the settlement of covered claims to protect insureds from excess judgments under the Stowers doctrine. See G.A. Stowers Furniture Co. v. American Indemnity Co., 15 S.W.2d 544, 547 (Tex. Comm’n App. 1929, holding approved). Insurers consider three prerequisites when determining if a Stowers duty has been triggered:

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.

See Am. Physicians Ins. Exch. v. Garcia, 876 S.W.2d 842, 848–49 (Tex. 1994).

In Golden Bear Insurance Co. v. 34th S&S, an insured recently argued that a plaintiff failed to make a proper Stowers demand because (1) the Stowers demand was not within policy limits, and (2) the Stowers demand was not one that an ordinarily prudent insurer would accept. See Golden Bear Insurance Co. v. 34th S&S, 2024 WL 3321508 (S.D. Tex. June 26, 2024). Here, a plaintiff’s demand letter offered to settle all claims “in exchange for the payment of all policy limits of any and all insurance contracts.” The insurer argued that this vague and ambiguous demand failed to specify either the amount requested under the policy or the policy limits of a specific policy, and therefore did not meet the Stowers demand requirements. The Court agreed, finding that the demand “lacked the necessary specificity to invoke an obligation under Stowers.” As a result, the Court determined that no additional analysis regarding the reasonableness of the demand was necessary, because the demand automatically failed under one of the three necessary Stowers prerequisites.

While the majority of Stowers cases tend to operate as examples of what insurers should not do while assessing a plaintiff’s demand, Golden Bear Insurance is a rare gift for insurers. Here, the Court agreed with key prior cases, all of which require some degree of specificity for policy limits demands. While it is perfectly adequate for a plaintiff to merely request “policy limits,” the demand must specify which policy it is addressing. Vague requests for “all insurance contracts” or “any applicable policy” will automatically fail under this standard. For once, courts in Texas continue to appear to embrace a bright-line rule with a Stowers prerequisite, giving insurance carriers some degree of certainty with at least one aspect of a Stowers analysis.