Montoya v. State Farm Mutual Automobile Insurance Company, 5:16-cv-00005

2007 car accident: Andrew Acosta (insured by State Farm) collided with the Montoyas' car; Acosta and a passenger (Kristopher Ramirez) died.
State Farm paid policy limits to some claimants but offered the Montoyas $14,925 (within $25,000 per person limit); Montoyas refused and later obtained a $542,933.67 judgment against Acosta's estate.
Montoyas entered a covenant not to execute and received an assignment from the Acosta estate of contractual and extra‑contractual claims against State Farm arising from claim handling.
Montoyas sued State Farm (and originally the estate’s lawyer, Jeff Frey) for breach of contract, breach of duty of good faith and fair dealing (Stowers theory), violations of the Texas Insurance Code, and violations of the DTPA.
Court previously dismissed Frey as improperly joined and held that DTPA and Insurance Code claims are not assignable to third parties.
State Farm moved for judgment on the pleadings to dismiss: (1) the good faith/Stowers‑type claim for failure to allege a demand within policy limits, and (2) the DTPA and Insurance Code claims as unassignable; the Court granted the motion and dismissed those three claims, leaving breach of contract intact.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether plaintiffs pleaded a viable common‑law breach of duty of good faith and fair dealing (Stowers claim)	Montoyas contend State Farm unreasonably settled with other claimants (e.g., Ramirez), depleting policy proceeds and exposing Acosta to excess judgment; this supports Stowers liability without an express demand within limits	State Farm: Texas law recognizes only the Stowers duty (not a separate third‑party bad faith claim) and a Stowers duty requires a settlement demand within policy limits; no such demand was made here	Court: dismissed the good faith claim. Plaintiffs failed to allege the requisite demand within policy limits; Stowers duty not triggered.
Whether DTPA claims arising from insurer–insured relationship are assignable	Montoyas assert assigned claims on behalf of Acosta’s estate under the covenant not to execute	State Farm: DTPA claims (and related personal/punitive claims) are not assignable under Texas law; plaintiff lacks standing	Court: DTPA claim dismissed for lack of standing because such claims are unassignable under Texas law.
Whether Texas Insurance Code claims are assignable	Montoyas rely on the assignment from the estate to pursue statutory claims	State Farm: Insurance Code claims are not assignable; Montoyas lack standing	Court: Insurance Code claims dismissed as unassignable and plaintiff lacks standing.

Mid-Continent Ins. Co. v. Liberty Mut. Ins. Co., 236 S.W.3d 765 (Tex. 2007) (describing Stowers duty elements and holding that only a Stowers duty, not a broad common‑law bad faith duty, protects insureds in this context)
Md. Ins. Co. v. Head Indus. Coatings & Servs., Inc., 938 S.W.2d 27 (Tex. 1996) (rejecting a separate common‑law tort for insurer handling of third‑party claims and explaining insured protections are contractual and via Stowers)
Tex. Farmers Ins. Co. v. Soriano, 881 S.W.2d 312 (Tex. 1994) (explaining Stowers liability may be shown by unreasonable settlements that deplete policy limits, but reaffirming limits on third‑party bad faith claims)
Am. Physicians Ins. Exch. v. Garcia, 876 S.W.2d 842 (Tex. 1994) (distinguishing Stowers claims from bad faith claims)
PPG Indus., Inc. v. JMB/Houston Ctrs. P'ship, 146 S.W.3d 79 (Tex. 2004) (controls assignability principles cited by the court for nonassignability of certain claims)