Understanding the Stowers Doctrine Under Texas Law
In Texas, the Stowers Doctrine is used to ensure that liability insurers act appropriately to protect their insureds when a claim is made that could be settled within the policy limits. The Stowers Doctrine concerns an insurance company’s unreasonable refusal to settle a case, thereby putting its insured at risk. This article by Houston injury lawyer Greg Baumgartner addresses Stowers demand letters in Texas.
With an effective Stowers letter, the insurance company might be held liable for the entire judgment when an excess judgment is awarded above its limits.
The Stowers Doctrine is a powerful tool for protecting insureds in serious injury and wrongful death cases. The Stowers Doctrine requires insurance companies to consider their interests when responding to a proper demand.
A properly drafted Stowers Demand Letter is the method plaintiff’s attorneys use to focus the insurance company on its obligations to its insurer. The demand letter must be supported by evidence and properly drafted to establish this duty.
Stowers letters significantly impact negotiations and give injured parties more reason to proceed to trial if the insurance company is being unreasonable.
What a Stowers Demand Letter Accomplishes
A Stowers Demand Letter is a formal offer to settle all claims against the insurers within available policy limits. The letter gives the insurance company clear notice that liability is reasonably clear, damages exceed available insurance coverage, and any reasonable insurer would accept the demand to protect its insurer from personal liability exposure.
After the insurance company receives a demand letter, it must respond in a reasonable manner. Refusing to accept a stower’s demand may expose the insurance carrier to extracontractual liability that may far exceed the policy limits. An effective demand can increase settlement value quickly.
Prudent insurance companies treat a valid stower’s demand as a material event and subject it to careful internal review.
Legal Requirements for a Valid Stowers Demand
A Stowers demand must be appropriately drafted and comply with Texas legal standards. A technical defect in a stower’s demand can render it ineffective. Attorneys must exercise precision when drafting a Stowers demand, as courts will interpret such demands narrowly.
A valid demand must include a clear offer to settle all claims against the insured within policy limits, unconditional acceptance terms, and a reasonable deadline for acceptance.
The demand must be capable of being accepted by the insurer without negotiation or clarification. Ambiguity, contingencies, or demands exceeding policy limits, or liens not addressed, can invalidate a demand.
Precision in demand language is essential, as insurers will scrutinize every word for technical defenses.
Clear Liability as a Foundational Element
The insurance company’s exposure only happens when liability is reasonably clear. The settlement demand must be supported by clear and objective evidence. Proof can include crash reports, sworn testimony, eyewitness statements, video footage, admissions, or expert analysis demonstrating fault.
In motor vehicle accident cases, liability can be established by proving clear violations of traffic laws. When the defendant’s liability is not disputed or is overwhelmingly clear by the evidence, the first element of a Stowers demand is met. Experienced car accident lawyers know how to draft effective Stowers letters.
Demonstrating Damages That Exceed Policy Limits
The demand must also be clear that the damages exceed the available insurance coverage. A detailed documentation of the medical treatment, objective diagnostic findings, opinions from treating physicians, proof of lost earning capacity, and even life care planning documentation for future medical expenses.
The demand must be supported by credible records and expert opinions, rather than by conclusory statements.
The Importance of an Offer of a Full and Final Release
One element of a valid stower’s demand is an unconditional offer of settlement. The insurance company must be able to accept the offer as written without modification. Hospital liens or other liens must be included in the offer of settlement. Any requirement or condition that depends on future acts, third-party approvals, or ambiguous language can defeat the purpose of the demand.
A properly drafted letter specifies the settlement amount. It confirms that the offer falls within the policy limits and provides a complete release against the insured and the defendant, and include all hospital liens or other liens on a settlement, without other conditions.
Reasonable Time Limits for Acceptance
Texas law requires insurers to be afforded a reasonable opportunity to accept a Stowers demand. While there is no fixed period for the insurance company to accept the offer, the time allowed must be reasonable in light of the circumstances. Our car accident attorneys usually give the insurance adjuster at least 30 days to accept the offer.
When in doubt, give the insurance company extra time to consider and accept the offer.
While no fixed number of days applies in all cases, the deadline must be proportionate to the complexity of the claim and the information provided.
The insurance adjuster must be afforded a reasonable opportunity to evaluate the risk of exposure to the insured and to act reasonably.
Common Mistakes That Undermine Stowers Demands
The most common mistake in drafting a stower’s demand is failing to comply with the technical requirements necessary for it to be effective. Factors such as demanding amounts exceeding the policy limits, failing to address hospital liens, failing to offer a release of all claims and insureds, vague acceptance terms, and unrelated conditions may render the Stowers demand ineffective.
Other issues can include insufficient proof of liability, improperly documented damages, and unreasonably short deadlines. Insurance adjusters can use a defect to avoid the effects of this doctor, even in catastrophic injury cases.
Strategic Use of Stowers Demands in Litigation
A Stowers demand is a powerful settlement tool. The best personal injury attorneys use it as a litigation strategy to increase settlements against the insurer when the case is headed to trial. When properly drafted, the letter documents that the insurance company was given a reasonable opportunity to protect its insured but failed to do so.
This record becomes critical if an excess verdict occurs. The injured party may then pursue recovery directly against the insurer, shifting the financial burden from the defendant-insured to the carrier that mishandled the claim.
How Insurers Evaluate Stowers’ Exposure
In cases involving severe injury or death, insurance companies closely scrutinize the contents of the Stowers letter. If the insurance company believes the Stowers letter is effective, it will evaluate the claim’s trial risk in determining whether to accept the demand or enter into more serious settlement negotiations.
When demand is effective, and excess exposure is real, insurers recognize the risk of refusal, which often leads to prompt policy limit tenders or serious settlement negotiations.
Timing Considerations in Issuing a Stowers Demand
The best time to make a Stowers demand is once liability has been established as clear and the evidence and documentation of damages exceeding the policy limits are also reasonably clear.
The Role of Stowers Demands in Catastrophic Injury and Death Cases
Stowers demands are especially impactful in catastrophic injury and wrongful death cases where damages clearly exceed policy limits. In such cases, the insurer’s exposure can increase substantially if a demand is mishandled.
Proper use of the doctrine protects injured families by ensuring insurers cannot gamble with their insured’s financial future at the expense of clear liability and devastating harm.
Contact Baumgartner Law Firm for a free case consultation on injury claims
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