Tamara Bruno Comments on 2020 Rulings and Cases in Law360

The court sided with Montrose and applied a "vertical exhaustion" method, which will allow the company to select any triggered excess policy to cover its losses.

"Horizontal exhaustion leads to what seems to be absurd results," Bruno said. "If horizontal exhaustion is applied, you can wind up with a situation where the policyholder has to pay a retention every year for 40 years before being able to access any coverage, for example.”

“In that situation, the insurers are essentially saying it would have been better for the policyholder to buy one year of coverage so it could go straight up the tower,” she added.

In an additional article from Law360, Bruno comments on In re Farmers Texas County Mutual Insurance Co., pointing out that the case highlights the logistical challenges of the Stowers doctrine. To benefit from the doctrine, policyholders have to open themselves up to a potential excess judgment, she noted.

Bruno continued, stating that it is possible the Texas justices will extend the rationale for the doctrine to other cases.

"The idea behind Stowers is that if an insurer could have and should have protected its insured from liability in excess of limits, and its failure to do so exposed the policyholder to an excess judgment, it should be responsible for those damages,” she said. “That type of logic would also seem to apply here.”

"The policyholder is saying the insurer could have, and should have, protected her from liability in excess of limits, and because she took action to protect herself, the insurer should now be responsible for that," she concluded.