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American Western Home Insurance Co. v. Tristar Convenience Stores, Inc.

United States District Court, S.D. Texas, Houston Division

June 2, 2011




         Pending is Plaintiff American Western Home Insurance Company's Motion for Summary Judgment (Document No. 11) . After carefully considering the motion, response, and the applicable law, the Court concludes as follows.

         I. Background

         In this insurance dispute governed by Texas law, Plaintiff American Western Home Insurance Company ("American Western") seeks a declaratory judgment that it has no further duty to defend nor to indemnify Defendant Tristar Convenience Stores, Inc. ("Tristar") in a pending state court action. The relevant facts are undisputed. Tristar is the sole remaining defendant in Sinue and Sandra Miranda, Individually and As Next Friend of Jesse Miranda v. Bhanu LLC, et al. No. 2008-00151, in the 129th Judicial District Court of Harris County, Texas (the "Underlying Suit"), wherein the plaintiffs seek recovery for the shooting of Sinue Miranda by an unknown assailant while Miranda was working at a Houston area convenience store.[1] Tristar is an additional named insured on a Commercial General Liability policy (the "Policy") issued by American Western to Bhanu, LLC ("Bhanu").[2] The Policy limit for coverage is $1 million, and American Western's "right and duty to defend when we have used up the applicable limit of insurance in the payment of judgments or settlements."[3] Plaintiffs in the Underlying Suit also named as defendants Bhanu, Gulshan Enterprises, Inc. ("Gulshan"), Motiva Enterprises ("Motiva"), and Shell Oil Co. ("Shell").

         Subject to reservation of rights letters, American Western provided a defense to Bhanu and Tristar under the Policy, and also to Gulshan and Motiva pursuant to a marketing contract between Bhanu and Tristar.[4] In March 2009, plaintiffs in the Underlying Suit made a demand of settlement in the amount of the Policy's limits of $1 million, which would have released all defendants in the suit.[5] American Western rejected the offer, asserting that the Policy did not cover the claims alleged in the plaintiffs' suit.[6]

         The underlying plaintiffs made a second demand for $4 million, this time upon the insurers of Tristar and Gulshan, for the aggregate of their policy limits.[7] Tristar's insurer asserted that its policy was excess to American Western's insurance obligations, thereby making American Western responsible for responding to the offer.[8] Both Tristar and Gulshan, through counsel, demanded that American Western tender the Policy's limits as a counter-offer of settlement to the underlying plaintiffs.[9] American Western obtained an extension of the settlement deadline from the underlying plaintiffs, [10] then offered its $1 million policy limits in exchange for a full release of all defendants.[11]

         The underlying plaintiffs rejected that offer, instead responding with an offer to release only Bhanu in exchange for $1 million from American Western, [12] which offer Bhanu's counsel demanded that American Western accept.[13] American Western convinced the underlying plaintiffs to include Motiva in the release, and thereafter settled the claims against Bhanu and Motiva in exchange for $1 million paid from American Western pursuant to the Policy.[14]Gulshan and its insurance carrier settled the case, as well, leaving only Tristar in the Underlying Suit.[15]

         American Western continues to provide a defense to Tristar, but brought this suit seeking a declaratory judgment that it owes no further duty to defend or indemnify Tristar.[16] Tristar has counterclaimed, asserting that American Western is subject to both common-law and statutory liability due to its unreasonable refusal to settle with respect to all parties upon the underlying plaintiffs' initial offer.[17] American Western has moved for summary judgment on its declaratory judgment action.

         II. Legal Standard

         A. Summary Judgment

         Rule 56(c) provides that summary judgment "should be rendered if the pleadings, discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c) .[18] The movant must "demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 106 S.Ct. 2548, 2553 (1986).

         Once the movant carries this burden, the burden shifts to the nonmovant to show that summary judgment should not be granted. Morris v. Covan World Wide Moving, Inc., 144 F.3d 377, 380 (5th Cir. 1998). A party opposing a properly supported motion for summary judgment may not rest upon mere allegations or denials in a pleading, and unsubstantiated assertions that a fact issue exists will not suffice. Id. " [T] he nonmoving party must set forth specific facts showing the existence of a 'genuine' issue concerning every essential component of its case." Id.

         In considering a motion for summary judgment, the district court must view the evidence "through the prism of the substantive evidentiary burden." Anderson v. Liberty Lobby, Inc., 106 S.Ct. 2505, 2513 (1986) . All justifiable inferences to be drawn from the underlying facts must be viewed in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 106 S.Ct. 1348, 1356 (1986). "If the record, viewed in this light, could not lead a rational trier of fact to find" for the nonmovant, then summary judgment is proper. Kelley v. Price-Macemon, Inc., 992 F.2d 1408, 1413 (5th Cir. 1993). On the other hand, if "the factfinder could reasonably find in [the nonmovant's] favor, then summary judgment is improper." Id. Even if the standards of Rule 56 are met, a court has discretion to deny a motion for summary judgment if it believes that "the better course would be to proceed to a full trial." Anderson, 106 S.Ct. at 2513.

         B. Stowers Duty

         In Texas, an insurer whose policy does not permit its insured to settle claims without its consent[19] owes to its insured a common law "tort duty." Ford v. Cimarron Ins. Co., Inc., 230 F.3d 828, 831 (5th Cir. 2000) (citing G.A. Stowers Furniture Co. v. Am. Indem. Co., 15 S.W.2d 544 (Tex. Comm'n App. 192 9, holding approved)); see also Rocor Int'l v. Nat'l Union Fire Ins. Co. of Pittburgh, PA, 77 S.W.3d 253, 263 (Tex. 2002) (noting the Stowers decision's basis in part "upon the insurer's control over settlement"). The insurer must accept an offer of settlement from a third party to whom the insured may be liable "when it appears that an ordinary prudent person in the insured's situation would have settled." Ford, 230 F.3d at 831. However, a settlement demand only triggers a Stowers duty when: "(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 ...

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