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Trinity Universal Ins. Co. v. Bleeker - 966 S.W.2d 489 (Tex. 1998)

Rule:

An insured can sue his insurer for negligently failing to settle a third party's claim against the insured. As a threshold matter, a settlement demand must propose to release the insured fully in exchange for a stated sum of money.

Facts:

On July 14, 1990, Ronnie Dale Bleeker, was driving while drunk along the interstate when he struck a pickup truck. One person was killed and several others suffered serious or life-threatening injuries. Bleeker carried Southern County insurance for the minimum legal amount of $40,000 per accident. Trinity reinsured and handled claims for Southern County. In March 1991, the victims’ lawyer wrote to Trinity, demanding that Trinity pay the $40,000 policy limit; however, Trinity refused to pay without a full release for Bleeker. Thereafter, the lawyer obtained a trial court judgment of approximately $11.5 million. Bleeker then assigned any claim that he might have against Trinity to the claimants, and the claimants brought this action in Bleeker’s name.

Following a jury trial, the trial court rendered judgment against Trinity for breach of a common-law duty of good faith and fair dealing, and for negligently failing to settle under the Stowers doctrine. The trial court awarded actual damages of approximately $13 million, trebled under the Deceptive Trade Practices Act (DTPA), Tex. Bus. & Com. Code Ann., § 17.50(a)(3), to approximately $ 38.5 million, plus attorneys' fees of approximately $38.5 million. The court of appeals reversed and rendered judgment for Trinity on all claims except the $13 million Stowers award, which it affirmed, and one other claim which it found to be unconscionable. Trinity sought a review of the appellate court’s decision, arguing that the appellate court erred because it did not render judgment for Trinity on the Stowers claim.

Issue:

Was the reinsurer Trinity liable for the $13 million Stowers claim?

Answer:

No.

Conclusion:

The Court noted that under the doctrine established in G.A. Stowers Furniture Co. v. American Indemnity Co., an insured can sue his insurer for negligently failing to settle a third party’s claim against the insured. However, as a threshold matter, a settlement demand must propose to release the insured fully in exchange for a stated sum of money. In the case at bar, the Court held that the claimants’ lawyer did not offer a full release of his clients’ claims; thus, Trinity never had a Stowers duty to settle. Accordingly, the Court held that Trinity was not liable for the $13 million Stowers claim.

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