Stowers Doctrine Requirements (Texas)
The Stowers doctrine shifts the risk of an excess judgment from the insured to the insurer by subjecting an insurer to liability for the wrongful refusal to settle a claim against the insured within policy limits. G.A. Stowers Furniture Co. v. Am. Indem. Co., 15 S.W.2d 544 (Tex. Comm'n App. 1929)
A settlement demand triggers an insurer's Stowers duty to respond if:
(1) the claim against the insured is within the scope of coverage;
(2) the demand is within policy limits;
(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.
In Westchester Fire Ins. Co. v. Am. Contractors Ins. Co. Risk Retention Group, 1 S.W.3d 872, 874 (Tex. App.-- Houston [1st Dist.] 1999, no pet.) the Court considered whether an excess insurer is entitled to equitable subrogation against a primary insurer for breach of its Stowers duty when the initial settlement demand exceeded the limits of the primary policy. 1 S.W.3d at 873.
The Court declined to find the Stowers duty triggered under those circumstances because the plaintiffs never made a demand within American's policy limits. Id. at 874; see also West Oaks Hosp., Inc. v. Jones, No. 01-98-00879-CV, 2001 WL 83528 (Tex. App.--Houston [1st Dist.] Feb. 1, 2001, pet. denied) (not designated for publication) (concluding that hospital insurers did not violate their Stowers duty where lowest settlement demand was $ 725,000, while primary insurance coverage was $ 500,000, and declining to expand Stowers doctrine by recognizing duty where settlement demand fell within aggregate amount of coverage provided by available layers of coverage).
Yorkshire Insurance Co. v. Seger, 279 S.W.3d 755 (Tex. App.--Amarillo 2007, pet. denied), involved a different kind of insurance arrangement than the one in this case: there, the corporate personal injury defendant held a single "Lloyd's-of London-type" comprehensive general liability (CGL) policy with a single policy limit, issued by a group of underwriters. See id. at 760.
Stowers looks to whether the plaintiffs have made a demand within the limits of a single policy, not on a single insurer.