O'Neill Dissent in
Phillips MD v. Bramlett,
No. 07-0522 (Tex. Mar. 6, 2009)(Majority Opinion by Medina)
insurance law, Stowers doctrine, liability cap)

To the extent the Court’s interpretation of section 11.02(c) exposes insurers to liability in
excess of that which Stowers would permit, I respectfully dissent.

County; 7th district (
07-05-00456-CV, 258 SW3d 158, 03-19-07)   
The Court reverses the court of appeals' judgment and remands the case to the trial court.
Justice Medina delivered the opinion of the Court, in which Justice Wainwright, Justice Brister, Justice Johnson,
and Justice Willett joined.  
Justice O'Neill delivered a dissenting opinion, in which Chief Justice Jefferson, Justice Hecht, and Justice Green


O'Neill Dissent in Phillips M.D. v. Bramlett (Tex. 2009)(Dissent by Justice O'Neill


Argued April 22, 2008

Justice O’Neill, joined by Chief Justice Jefferson, Justice Hecht, and Justice Green, dissenting.

I agree with the Court that section 11.02(a) of the Medical Liability Act plainly caps the physician’s
liability in this case, and that section 11.02(c), in denying insurers the Act’s liability limitations in a
Stowers action, does not operate to abolish that protection. See Act of June 16, 1977, 65th Leg., R.S.,
ch. 817, §§ 11.02(a), (c), 11.04, 1977 Tex. Gen. Laws 2039, 2052, repealed by Act of June 11, 2003,
78th Leg., R.S., ch. 204, § 10.09, 2003 Tex. Gen. Laws 847, 884 [hereinafter Tex. Rev. Civ. Stat. art.
4590i]. To this extent, I join the Court’s opinion. The Court’s analysis, however, ventures further and
extends Stowers well beyond its common law mooring. The Stowers doctrine was crafted to afford the
insured a safe harbor should its insurer unreasonably refuse to settle a claim within policy limits and
the insured thereafter suffer an excess judgment. By extending Stowers protection beyond the actual
peril to which the insured is exposed, the Court ventures into uncharted waters with no footing in the
statutory text or the common law. In my view, section 11.02(c) merely clarifies that section 11.02(a)
does not cap the amount an insured may recover from its insurer in a future Stowers action; it does not
pin that potential recovery on a hypothetical judgment for which the insured is not liable. It may be true,
although not in this case, that nonsettling insurers whose policy limits reach or exceed the statutory cap
face minimal Stowers exposure when a jury awards damages exceeding the cap. But there is nothing
to indicate the Legislature intended section 11.02(c) to afford insureds a windfall beyond the damages
actually suffered. The Court avoids such an untenable result by construing the statute to grant the
plaintiff in the underlying malpractice suit a claim for equitable subrogation against the insurer who is
negligent in refusing to settle. But the plaintiff cannot be equitably subrogated to a cause of action that
does not exist, and what exists is a Stowers claim for the amount by which the judgment exceeds
policy limits. Because the Court’s interpretation subjects insurers to liability beyond that which Stowers
would allow, I respectfully dissent. Rather than remand the case for further proceedings, I would render
judgment for the plaintiff pursuant to the statute.

In construing a statute, our goal is to give effect to the Legislature’s intent. Tex. Gov’t Code § 312.005;
Kroger Co. v. Keng, 23 S.W.3d 347, 349 (Tex. 2000). To discern that intent, we look first to the statute’
s plain language. Cont’l Cas. Co. v. Downs, 81 S.W.3d 803, 805 (Tex. 2002). We must consider the
statute as a whole, and not its provisions in isolation. Id. Section 11.02(a) limits physicians’ liability for
noneconomic damages to $500,000, as adjusted by the Consumer Price Index. Tex. Rev. Civ. Stat.
art. 4590i, §§ 11.02(a), 11.04. Section 11.02(c) provides that the statute’s limitation of liability does
not extend to an insurer when facts exist that would support a Stowers claim. Id. at § 11.02(c). In
crafting subsection (c), the Legislature clearly indicated it did not intend the subsection (a) damage
cap for physicians to limit the liability of an insurer who negligently rejects a reasonable settlement
demand within policy limits. But that does not mean the Legislature intended to extend insurers’
potential liability beyond the limits of the Stowers doctrine itself. See G.A. Stowers Furniture Co. v.
Am. Indem. Co., 15 S.W.2d 544 (Tex. Comm’n App. 1929, holding approved). To the contrary,
subsection (c) only applies “where facts exist that would enable a party to invoke the common law
theory of recovery commonly known in Texas as the ‘Stowers Doctrine.’” Tex. Rev. Civ. Stat. art.
4590i, § 11.02(c). We must begin, then, with the parameters of the Stowers doctrine and the recovery
it affords, for subsection (c) lifts the statutory cap only to the extent that damages would be available
under Stowers.

Stowers liability is designed to compensate the insured for damages suffered as a result of its insurer’
s unreasonable refusal to settle. See Hernandez v. Great Am. Ins. Co. of N.Y., 464 S.W.2d 91, 94
(Tex. 1971) (“[T]he Stowers action lies to repair the harm to the insured. The tort of the insurer in
mismanaging the defense of the insured in the first case is harmful to the insured alone.”). For the
Stowers duty to arise, there must be policy coverage for the claim, a settlement demand within policy
limits, and the demand must be reasonable “such that an ordinarily prudent insurer would accept it,
considering the likelihood and degree of the insured’s potential exposure to an excess judgment.” Am.
Physicians Ins. Exch. v. Garcia, 876 S.W.2d 842, 849 (Tex. 1994) (emphasis added). When the
Stowers duty is breached, the insured is afforded “the Stowers remedy of shifting the risk of an excess
judgment onto the insurer.” Id. (emphasis added). Accordingly, a judgment against the insured that
exceeds policy limits is the sine qua non of a Stowers claim.

The Court goes astray in presuming, incorrectly, that the section 11.02(a) damage cap “prevents one
critical element of Stowers, excess liability, from arising in whole or in part,” and from that premise
concludes the Legislature must have intended to tie Stowers liability against physicians’ insurers to the
jury’s verdict rather than the court’s judgment. The Court’s premise is flawed in a number of respects.
First, the Court presupposes that nearly all physicians will insure themselves to the full extent of the
statutory cap, which would substantially diminish the potential for excess liability. However, one need
look no further than this case to see the fallacy of the Court’s supposition. Taking into account the
statutory adjustment for fluctuations in the Consumer Price Index, and excluding economic damages
which are not subject to the cap, section 11.02(a) operated in this case to reduce the jury’s
$9,196,364.50 award against Dr. Phillips to $1,585,365.85. 258 S.W.3d 158, 176–77; Tex. Rev. Civ.
Stat. art. 4590i, §§ 11.02(a), (b), 11.04. Dr. Phillips, however, was insured under his professional
liability insurance policy for only $200,000. Accordingly, Dr. Phillips faces nearly $1.4 million in
personal exposure on the capped judgment in excess of his policy limits, for which he may pursue a
Stowers claim against his insurer. It is simply not true, as the Court posits, that the statutory cap
eliminates the possibility of liability in excess of $500,000 against insurers who unreasonably refuse to

Second, the Court concludes that my view, which comports with that of the court’s in Welch v. McLean,
191 S.W.3d 147, 166–71 (Tex. App.—Fort Worth 2005, no pet.), deprives section 11.02(c) of any
meaning because it extends the cap to insurers when Stowers would not. However, it is not the
statutory cap that operates to limit an insurer’s excess liability but the Stowers doctrine itself, which
ties that liability to the judgment against the insured. The Court apparently believes the damage cap’s
potential to cabin insurers’ Stowers exposure is undesirable, as reasonable and timely settlements will
thereby be discouraged. But the Court’s approach of pinning Stowers liability under section 11.02(c)
to a hypothetical judgment based on the jury’s verdict exposes insurers to liability far exceeding that
which Stowers would allow and, more importantly, undermines the Medical Liability Act’s overarching
purpose to reduce the cost of insurance in order to alleviate what the Legislature determined to be a
health care liability crisis in Texas. See Tex. Rev. Civ. Stat. art. 4590i, § 1.02(a)(4). Finally, even if it
were true, as the Court presumes, that nearly all physicians are fully insured in every case up to the
statutory cap (which is not as easy as it sounds considering the cap’s variability), insurers remain
subject to liability for special and consequential damages that their negligent failure to settle caused
their insureds, which section 11.02(c) makes clear is not subject to the section 11.02(a) damage cap.
See Ranger County Mut. Ins. Co. v. Guin, 723 S.W.2d 656, 660 (Tex. 1987) (noting that in a Stowers
action, the insurer is alleged to have breached its agency relationship, so tort damages will be
available). And even if the Court’s fears are true that the statutory cap makes insurers more likely to
unreasonably refuse settlement offers because little is at risk in a subsequent Stowers action (which I
consider unlikely considering the costs involved in protracted litigation), this is a function of the cap
itself and not of the insurer-insured relationship, as physicians who might be uninsured would
presumably have the same predilection. Removing the cap only when an insurer refuses to settle for
more creates a kind of reverse-Stowers problem whereby insurers are encouraged to settle for more
than an uninsured physician would. In my view, the Legislature’s intent in enacting 11.02(c) was likely
much less complicated than what the Court imagines.

To the extent the Court’s interpretation of section 11.02(c) exposes insurers to liability in excess of that
which Stowers would permit, I respectfully dissent. I would render judgment based on what the parties
seem to agree the cap allows: $1,585,365.85 in favor of the plaintiff.


                                                           Harriet O’Neill