The Stowers Doctrine imposes an extracontractual duty on insurance companies when considering a settlement demand that is within the limits of the insurance policy. If an insurer rejects a reasonable settlement offer and an excess verdict is obtained above the policy limits, the Stowers Doctrine provides that the insurance company may be liable for acting in bad faith in handling the claim.
The Stowers Doctrine, which is named after the case that established it (G.A. Stowers Furniture Co. v. American Indemnity Co., 15 S.W.2d 544, 547 (Tex. 1929)), is intended to promote good faith insurance practices when it comes to settling liability claims.
How Stowers Liability Works
The Stowers Doctrine can apply to Texas personal injury cases in which:
- The insurer has refused to settle a liability claim within policy limits.
- The liability for the accident/claim is reasonably clear.
- A reasonable insurer would have settled the claim.
With no settlement, the personal injury claim will proceed to trial. If the jury awards the plaintiff an amount greater than the original policy limits, the Stowers Doctrine holds that the insurance company can be liable for the full jury award (including any compensation that exceeded the original policy limits) in a post-judgment bad faith lawsuit.
Here’s a helpful example that clarifies the Stowers Doctrine. Let’s say that you were hurt in a car accident in Houston and that:
- Your medical bills, lost wages and other damages total $25,000.
- The at-fault party has the minimum coverage of $30,000 (as set by Texas law).
- Your lawyer attempts to work out a pretrial settlement of $25,000 (i.e., a settlement that falls within the policy limits).
- The insurer either refuses to settle altogether or makes a grossly low offer (like offering to settle for $10,000).
If you refuse the low offer (which is in your best interests), then:
- The case will go to trial.
- If the jury finds in your favor and awards you more than $30,000 (let’s say $38,000), under the Stowers Doctrine, the insurer would be responsible for paying the entire sum of $38,000 (i.e., the full policy limits + the additional $8,000 awarded by the jury).
Making a Stowers Demand
When pretrial settlement negotiations fail, sending the insurance company a Stowers demand can be a powerful strategy for plaintiffs (before proceeding to trial).
A Stowers demand is a specifically phrased letter that is sent to the insurance company. The purpose of this demand letter is to:
- Attempt to resolve the claim for a reasonable sum within policy limits like a reasonably prudent insurer would do
- Clearly point out the evidence of liability and damages
- Offer to release any and all claims arising from or relating to the personal injury claim (e.g., medical bills, liens, and the personal injury claims).
Whether a Stowers demand is appropriate for your case will depend on the details and nature of your claim. An experienced attorney can explain your best options for financial recovery after going over the specifics of your case.
Get More Answers Now: Contact a Houston Personal Injury Lawyer at the Amaro Law Firm
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