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Understanding the Texas Stowers Demand Doctrine

If you suffer an injury in any kind of accident, you may have to navigate a complex insurance claim. The person that caused your injuries may not have the assets to cover your damages, but his or her insurance company will. As a claimant, it is unfortunately common to encounter issues that delay your claim, such as the insurance company offering less than your claim is worth or denying your claim outright. In these situations, your lawyer may utilize the Texas Stowers Demand doctrine to pressure insurance companies to reach a resolution.

What Is the Stowers Doctrine?

The Stowers Demand doctrine in Texas encourages insurance companies to accept reasonable settlement demands by claimants. Should the insurer choose not to accept the claimant’s reasonable demand, the case may go to trial. The insurance company will then take financial responsibility for the costs of the trial, regardless of what the judge or jury decides.

The Stowers Demand doctrine holds that if a claimant asked for a reasonable amount but the case goes to trial, the insurance company must pay the amount the jury decides. This could be substantially more than the reasonable offer the claimant originally made. If the claimant did not submit a reasonable offer, however, the insurance company will only owe an amount up to the policy’s limits, even if a trial awards a greater amount to the claimant.

The most common use of the Texas Stowers Demand doctrine is during insurance settlement negotiations using an attorney. A lawyer will make a reasonable settlement demand within the insurance policy’s limits after accurately evaluating the case. He or she may help the claimant prove the value of the case. Then, the lawyer will take the case to trial if the insurance company refuses to accept the reasonable offer.

History of the Doctrine

The Stowers Demand doctrine came about after a Texas Supreme Court decision in 1929: G.A. Stowers Furniture Co. v. American Indemnity Co. This case involved a G.A. Stowers Furniture truck accident. When the furniture company filed a claim for $5,000 with its insurer, American Indemnity Co., the insurance company refused to pay the full amount to settle the claim despite it being within the policy’s limits. The case went to trial and the insurance company ended up paying $12,207 instead.

Following the judgment, G.A. Stowers Furniture Co. filed an additional lawsuit against American Indemnity Co. for negligently failing to settle the original claim within a reasonable amount of time. This case went all the way to the Supreme Court, where the judge ruled in favor of the plaintiff. From then on, Texas lawmakers established a standard of care by which all insurance companies must abide when dealing with claims, known as the Stowers Demand doctrine.

An Insurance Company’s Duty of Care

According to the Stowers Demand doctrine, if a reasonable and prudent insurance company would have accepted a claimant’s settlement demand, the insurance company may be liable for additional damages. Filing a Stowers Demand Letter sets this doctrine into motion. When a plaintiff’s attorney files a demand letter requesting a reasonable settlement within the policy’s limits, it triggers the insurance company’s duty to respond promptly.

The insurance company may evaluate the claim and either offer a settlement or deny the claim. Should the insurance company deny the reasonable settlement demand, it may end up paying for much more in damages during a civil lawsuit. To prove a claim based on this doctrine, a plaintiff’s attorney must establish that the original demand was within the scope of the policy and coverage limits and that the demand was one an ordinary insurance company would have accepted based on the facts of the case. A Houston personal injury lawyer can help a plaintiff with this burden of proof.