Chapter 9-10 Negligent Defense of Insured by Insurer

• Jurisdiction: United States

9-10 Negligent Defense of Insured by Insurer

9-10:1 Overview

An insurer owes a duty of good faith to effectuate claims made by the insured or the policy holder.⁵² When a third-party makes a demand for payment, however, the insurer's duties are greatly diminished.⁵³ In the third-party demand context, an insurer must only abide by the duties imposed by Stowers or by contract.

9-10:1.1 Related Causes of Action

Insurance Litigation: Stowers Claims, Declaratory Judgment on Policy: Duty to Defend, Declaratory Judgment on Policy: Coverage Claim

MUST READ CASE

Mid-Continent Ins. Co. v. Liberty Mut. Ins. Co., 236 S.W.3d 765 (Tex. 2007)

9-10:2 Expressly Rejected in Texas

The Supreme Court has expressly rejected a cause of action for negligent defense of a third-party claim against the insured by the insurer.⁵⁴ The exclusive remedies available to an insured are those offered under the Stowers doctrine and any contractual remedies.⁵⁵

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Notes:

^[52] Tex. Ins. Code Ann. § 542.003.

^[53] See Mid-Continent Ins. Co. v. Liberty Mut. Ins. Co., 236 S.W.3d 765, 776 (Tex. 2007).

^[54] Mid-Continent Ins. Co. v. Liberty Mut. Ins. Co., 236 S.W.3d 765, 776 (Tex. 2007).

^[55] Mid-Continent Ins. Co. v. Liberty Mut. Ins. Co., 236 S.W.3d 765, 776 (Tex. 2007).