Imagine you are seriously injured in a car accident caused by another driver. You file a claim, and your lawyer determines that your damages—medical bills, lost wages, and pain and suffering—are worth $100,000. The at-fault driver has an insurance policy with a limit of $50,000. Your attorney offers to settle the case for the $50,000 policy limit, but the insurance company refuses, arguing they can win at trial.
The case goes to court, and the jury awards you the full $100,000. Does this mean the at-fault driver is personally responsible for the $50,000 that exceeds their insurance coverage?
Is this fair? The Texas Supreme Court answered this question nearly a century ago, establishing a vital legal protection known as the Stowers Doctrine. At Capital Personal Injury Lawyers, we expertly use this doctrine to hold insurance companies accountable and protect both the injured and the insured in Georgetown and across Texas.
The Stowers Doctrine Explained
The Stowers Doctrine comes from the 1929 case G.A. Stowers Furniture Co. v. American Indemnity Co. It establishes that an insurance company has a legal duty to act reasonably and in good faith when handling settlement negotiations on behalf of their policyholders.
Essentially, an insurer cannot unreasonably refuse a fair settlement offer that is within the policy limits. They are not allowed to gamble with their policyholder’s money in the hopes of getting a better result at trial. If they do, they can be held responsible for the consequences.
How a “Stowers Demand” Triggers the Duty
To activate the protections of the Stowers Doctrine, the injured party’s attorney must make a specific type of settlement offer, commonly called a “Stowers Demand.” This demand must meet three strict criteria:
Requirement & Description
1.Within Policy Limits The settlement demand must be for an amount that is within the at-fault party’s insurance policy coverage limits.
2.Unconditional Release The offer must agree to a full and final release of all claims against the policyholder in exchange for the settlement payment.
3.Reasonable Time to Accept The insurance company must be given a reasonable amount of time to investigate the claim and decide whether to accept the offer.
When an insurance company receives a valid Stowers Demand, it has a legal duty to its own client to evaluate the demand reasonably. If a reasonably prudent insurer would have accepted the offer to avoid the risk of a larger judgment at trial, then the company must accept it.
What Happens When an Insurer Violates the Stowers Doctrine?
If an insurer unreasonably rejects a valid Stowers Demand and the case proceeds to trial, the consequences can be severe for the insurance company.
If the jury returns a verdict that is greater than the policy limits, the insurer can be held liable for the entire judgment amount, including the portion that exceeds the policy.
Let’s revisit our initial example:
Because the insurer violated its Stowers duty, it would be responsible for paying the full $100,000, thereby protecting its policyholder from the $50,000 excess judgment.
Why the Stowers Doctrine Matters to You
The Stowers Doctrine is a powerful tool that benefits everyone except unreasonable insurance companies.
Expert Legal Guidance in Georgetown
The Stowers Doctrine is a complex but vital part of Texas personal injury law. Whether you are an injured victim seeking fair compensation or a policyholder worried about an excess judgment, understanding this doctrine is key.
As with most things, the devil is in the details. Our firm is built on utilizing the Stowers doctrine to its full potential. We do this by building a comprehensive damages model that is tailored to each individual case. Spending a little extra time on each demand can be the difference between a low-ball offer and a policy limits offer. This is where many of the billboard personal injury firms drop the ball.
Not Capital Personal Injury Lawyers. We have an established track record of using the Stowers Doctrine to its full potential. Our expertise allows us to put the insurance company in the hot seat. The result is higher settlements for our clients.
The attorneys at Capital Personal Injury Lawyers have extensive experience crafting Stowers Demands and litigating cases against insurance companies who refuse to act reasonably. If you are have been injured as a result of another’s negligence, contact us today for a free consultation. We are here to protect your rights and ensure justice is served. Call us at (512) 575-4262 to learn how we can help.
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