What is a Stowers Demand?

A Stowers demand is a tool that personal injury attorneys use to settle insurance claims. The term “Stowers demand†is named after the Texas Supreme Court case G.A. Stowers Furniture Co. v. American Indemnity Co. (15 S.W. 2d 544). A “Stowers Demand†is a tool unique to Texas law, but other states have similar doctrines.

Background Information on G.A. Stowers Furniture Co. v. American Indemnity Co.

Stowers Furniture Company had an auto insurance policy with American Indemnity Company. The policy was for $5,000. Stowers and American Indemnity Company had a contract that detailed the process that would occur if someone filed a claim against Stowers Furniture Company. Through this contract, Stowers gave full control of the settlement process to American Indemnity.

On January 23, 1920, one of Stowers’ employees was driving a truck in Houston. The truck became disabled. The employee left the truck on the road without turning on any lights to warn oncoming traffic. Miss Bichon collided with the truck and sued Stowers for $20,000.

Miss Bichon offered to settle her claim against Stowers for $4,000. American Indemnity refused to accept Miss Bichon’s offer. Ultimately, Miss Bichon was awarded $14,107.14 after a jury verdict. The verdict was in excess of the policy limits. Under the terms of the insurance policy, Stowers was responsible for a judgment in excess of the policy limits.

Stowers sued American Indemnity claiming that American Indemnity should have settled the case when Miss Bichon offered to settle for $4,000. It asked the court to rule that American Indemnity should be responsible for the amount of the verdict in excess of the policy limit in addition to the $5,000 it was contractually obligated to pay.

The court held that the insurance company owed a duty to its insured to exercise the same level of care and diligence that the insurer would exercise in the management of its own affairs. Ultimately, American Indemnity was required to pay the entire verdict.

“Stowers Liability†– What are the Requirements of a Stowers Demand?

A proper Stowers Demand has five requirements:

  1. The demand must be within the policy limits.
  2. Liability is reasonably clear.
  3. A reasonable insurer would accept the offer.
  4. The demand must be “unconditionalâ€
  5. The demand must offer a “full releaseâ€

Often times, the insurance company for the at fault party will not disclose the policy limits of its insured. Thus, in order to trigger “Stowers liability,†a plaintiff’s attorney will specifically demand the “policy limits†of the at fault party.

In order for liability to be reasonably clear, there must be evidence that the plaintiff was injured and that the defendant was at fault, a/k/a negligent.

To establish that a reasonable insurer would accept the offer, the offer must be reasonable given the injury the plaintiff suffered.

Lastly, the Stowers demand must not be conditioned upon anything and must offer to fully and finally release the at fault party.

How Does a Stowers Demand work?

The personal injury attorney that represents the claimant sends a demand letter to the insurance company. The settlement demand includes an offer to settle the claim for the policy limit. The demand also includes evidence that proves that the claimant’s injury exceeds the policy limits. This would include medical bills, a police report, pictures of the injuries, etc. In addition, the demand will ncludes a deadline. Under Texas law, a minimum of fifteen (15) days to respond is required.

If the insurance company refuses to pay the policy limits within the time period prescribed in the demand, and the jury verdict is for an amount that exceeds the policy limits, the insurance company is subject to Stowers liability and could ultimately have to pay for the entire verdict.

Why is the Stowers Demand an Effective Tool?

The Stowers demand puts pressure on the insurance company to settle cases for the policy limit because if the insurance company does not settle, it could be liable for a much higher amount

If you have been injured in an auto accident, you should discuss your case with an attorney. An experienced personal injury attorney can assist you in making sure that a Stowers demand is utilized when necessary.