Thursday, August 27, 2015

The perils of making a counter-offer when time is running out

If you keep negotiating and don't settle with the insurance company of the motorist who caused the accident in which you were hurt, you may yet face more grief, as a case recently decided by the First Court of Appeals illustrates. Kamisha Davis v. Texas Farm Bureau Insurance, No. 01-14-00686-CV (Tex.App.- Houston, July 2, 2015)(Opinion by Justice Higley). 

Following an automobile accident, offers and counteroffers went back and forth between the claimant and the insurer of the other driver, until the statute of limitations had run, with no lawsuit on file. The claimant then wanted to accept the last settlement offer made by the insurer, but had made a Stowers demand for policy limits after receiving the offer from the insurer, which was for less. 

The claimant eventually sued the insurer for refusing to settle and denying the claim in its entirety. The court of appeals held that the Stowers demand for policy limits constituted a counter-offer, and as such, also constituted a rejection of the insurer's then outstanding offer. Since the insurer's offer had been rejected, the claimant could no longer accept it, and the insurer was under no obligation to renew it. Nor was the insurer obligated to accept the counteroffer. Therefore, no contract was formed, and the claimant couldn't pursue a viable cause of action for breach against the insurance company. And since the two-year limitations period had expired, it was too late to file a lawsuit on the original personal injury claim.

In ruling for the insurer, the court of appeals rejected the plaintiff's alternative theory of promissory estoppel, holding that it was not reasonable for a claimant to rely on the insurer's representations in the adversarial context of claim settlement, and that the other elements for a viable promissory estoppel claim were not satisfied either.  
The opinion, written by Justice Higley, is worth reading in its entirety because it suggests, though implicitly, how the problem could be avoided (leaving aside the obvious solution of timely filing a lawsuit if a mutually satisfactory settlement of the claim is not promptly reached). 


No. 01-14-00686-CV.

Court of Appeals of Texas, First District, Houston.

Opinion issued July 2, 2015.

Panel consists of Chief Justice Radack and Justices Higley and Massengale.



Kamisha Davis sued Texas Farm Bureau Insurance, asserting several causes of action. The trial court granted summary judgment against Davis in favor Texas Farm Bureau. On appeal, Davis raises two issues in which she asserts that the trial court erred in granting summary judgment on her breach of contract and promissory estoppel claims.

We affirm.


On August 26, 2009, Kamisha Davis was involved in a motor vehicle accident with Texas Farm Bureau's insured. Davis hired attorney Corey Gomel to pursue a personal injury claim arising out of the accident. On April 19, 2011, Gomel sent Texas Farm Bureau a letter, stating that Davis would be willing to settle her personal-injury claims against Texas Farm Bureau's insured for $37,500. Texas Farm Bureau, through its claims adjuster, Jody Roe, made a counter-offer of $10,000 on May 2, 2011.
Gomel, on behalf of Davis, sent a second settlement offer of $22,500 to Texas Farm Bureau on June 9, 2011. On June 10, 2011, Texas Farm Bureau responded that, "[a]fter careful review and evaluation of the information you have submitted, we believe this claim has a value of $12,000.00." Gomel made a counteroffer of $18,000.00 on June 21, 2011. In response, Texas Farm Bureau sent a letter to Gomel on June 30, 2011, again stating that it valued her claim at $12,000.00.

On July 28, 2011, Davis's attorney faxed Texas Farm Bureau a Stowers demand.[1] The fax cover sheet stated, "We are withdrawing past [June 21] demand. Please see attached."
The Stowers demand informed Texas Farm Bureau that Davis would settle her claims only if Texas Farm Bureau paid her "the limits of your insured's policy." It further stated, "This will be the only correspondence that you will receive prior to us filing suit." The demand also informed Texas Farm Bureau that the offer to settle for the policy limits expired on August 29, 2011.
Davis never filed a personal injury suit against Texas Farm Bureau or the insured. At some point, Davis retained new counsel. On April 12, 2012, Davis's new counsel sent a letter to Texas Farm Bureau, which stated, "We have been retained by Corey Gomel to assist . . . in the prosecution of this matter for Ms. Davis. Please be advised our client, Ms. Kamisha Davis, has given us authorization to accept your final offer of $12,000.00. Please forward settlement documents to the address above."
On April 20, 2012, claims adjuster Roe responded, denying Davis's claim. Roe informed Davis, "Our offer expired on the two year anniversary from the date of accident 8-26-2009; therefore, we are respectfully declining your client's claim."

Davis filed suit against Texas Farm Bureau on April 16, 2013. She alleged as follows:
In an attempt to settle the matter, [Texas Farm Bureau] offered [Davis] $12,000.00 to settle [Davis's] claims on June 10, 2011.[2] This offer of settlement had neither a designated time period in which [Davis] had to accept the offer, nor did the offer state that it expired on any date or upon any action or inaction of [Davis] or that the offer would otherwise be revoked. [Texas Farm Bureau] never revoked the offer. Furthermore, [Davis] never rejected the offer. . . . On April 13, 2012, [Davis] accepted the offer to settle the case and sent the acceptance letter via fax. On April 20, 2012, [Texas Farm Bureau] denied the offer, stating that the offer expired on the expiration of limitations of the underlying incident. . . . [Davis] relied on the representations made by [Texas Farm Bureau], that being that there was an open ended offer to settle her case for $12,000.00. [Texas Farm Bureau] never revoked the offer to [Davis] until after [Davis] had accepted the offer. . . . [Texas Farm Bureau has] failed to make the offer of settlement good. [Davis] relied on [Texas Farm Bureau's] promise to [Davis's] detriment.
Based on these allegations, Davis asserted claims for breach of contract, promissory estoppel, fraud, and quantum meruit against Texas Farm Bureau.

Texas Farm Bureau moved for traditional summary judgment on Davis's breach-of-contract claim, asserting that Davis's Stowers demand was a rejection of its last $12,000 offer. Texas Farm Bureau argued that, because it offered to settle the dispute for full policy limits, a sum greater than the $12,000 offer, the Stowers demand was a counteroffer. Texas Farm Bureau cited authority for the proposition that a settlement offer does not remain open after a counteroffer has been made. Thus, according to Texas Farm Bureau, Davis could no longer accept the $12,000 offer after she made theStowers demand. It asserted that, without a valid acceptance, no contract had been formed between Texas Farm Bureau and Davis as a matter of law.