The Stowers doctrine is a time-sensitive demand that is sent to third-party insurance agencies with the intention of putting pressure on the insurance company to either pay the policy limits, settle a claim, or risk being liable for a verdict that is in excess of the policy limit. This doctrine only applies to cases in Texas.
What is the History of Stowers Demand?
The Stowers demand can be traced back to a 1929 case involving G.A. Stowers Furniture Co v. American Indemnity, Co. In this case, a horse-drawn carriage and a vehicle collided, and the non-negligent party sent the Stowers defendants a letter that presented them with an opportunity to settle the case within their insurance policy limits. In this letter, a set time period was established in which the defendants could accept and bring proof of the damages incurred. Stowers’ insurance company – American Indemnity, Co. – did not want to settle and instead took the case to trial in an effort to save money.
Unfortunately for them, they lost the case, and GA Stowers sued the company, stating they had an obligation to settle and protect the insured party. The case went to the Texas Supreme Court, where it was upheld that an insurance adjuster is “held to that degree of care and diligence which a man of ordinary care and diligence would exercise in the management of his own business.” This verdict then created a cause of action, which made insurers liable for any failure to settle an insured party’s claim.
What Are the Requirements of Preparing a Valid Stowers Demand?
In Texas, a Stowers demand is only valid if liability is “reasonably clear” for a sum equal to the policy limit in the case. In the event there is some question as to who is at fault or whether the defendant was negligent, a Stowers demand may not require an insurer to pay the policy limit. Before a Stowers demand letter can be sent, the following conditions must be met:
- It must be clear that the insured (negligent party with insurance) is liable
- The amount of money that is being sought must be less than or equal to the amount of the policy limits available in the policy
- It must be very clear that any reasonable insurance company would accept the amount requested
- There must not be any additional conditions/requirements within the demand
- The demand must be clear in its agreement to give the insurance company a full release and pay any outstanding claims
In most cases, the insurance company will have 14-21 days to respond to the demand. However, they may have more time if it is reasonable to offer the insurance company more time.
What Are the Benefits of Sending One?
Some of the benefits of sending a Stowers demand are that it will protect the injured person from a negligent person who does not have enough money to cover a judgment against them. This means that if the negligent party does not have assets, and a verdict is in excess of the policy limit, the insurance company is on the hook for the entire verdict if they failed to tender the policy limits during the period of time allotted in the Stowers demand.
In most cases, individuals do not have the assets or income necessary to pay damages that exceed their insurance policy – but an insurance company does. Because of this, if you send a proper Stowers demand that gets rejected/denied by the insurance company, you may be able to take your claim to trial without being concerned about how the judgment will be paid if you win.
One of the main questions we field in relation to Stowers demand is how the demand places risk on the insurance company to pay the policy limits. The reason for this is that if the insurance company does not pay and they go to trial and get a verdict in excess of the policy limit, the insurance company (not the insured party) is on the hook for the verdict.
There are numerous situations in which a Stowers demand may be an excellent route to go. If you have specific questions about this or would like to learn more, please do not hesitate to contact Shamieh Law today.