Texas Stowers Demands Explained - Milano Legal Group

The Texas Stowers Demand: Holding Insurance Companies Accountable

In Texas, after an accident caused by someone else’s negligence, you often deal with the at-fault party’s insurer, whose main goal is to minimize payouts.

However, Texas law provides a tool known as the “Stowers Demand” that can hold insurance companies accountable for failing to settle a claim in good faith. Understanding how a Stowers Demand works can be critical to ensuring you receive the compensation you deserve for your injuries.

What is a Stowers Demand?

A Stowers Demand originates from the landmark Texas case G. A. Stowers Furniture Co. v. American Indemnity Co. In this case, a legal doctrine was established that imposes a common-law (judge-made) duty on liability insurers to settle third-party claims against their insureds when it is reasonably prudent to do so.

This duty arises under specific conditions:

Proposes to unconditionally release the insured full in exchange for a stated sum of money.
The third party’s claim against the insured must be within the scope of coverage. In other words, it must be a loss that the insurance policy covers.
The settlement demand must be within the policy limits.
The terms of the demand must be such that an ordinarily prudent insurer would accept it, considering the likelihood and severity of the insured’s potential exposure to an excess judgment.

When these conditions are met, and the insurer negligently fails to settle—resulting in an excess judgment against the insured—the insurer becomes liable for the full judgment amount, including any portion exceeding the policy limits. This principle is based on the idea that once an insurer takes control of the defense and settlement of claims, it must exercise the same level of care and diligence that a reasonably prudent person would use in managing their own affairs.

Importantly, the Stowers doctrine does not require insurers to initiate or solicit settlement offers. However, it mandates that they respond prudently to reasonable settlement demands within policy limits. If they fail to do so and the insured suffers an excess judgment, the insurer may be held responsible for the additional financial burden.

This doctrine, consistently upheld and refined by Texas courts, serves as a powerful tool for those harmed by another’s negligence—particularly when an insurance company acts in bad faith or refuses to offer a fair settlement. A Stowers Demand effectively pressures insurers to evaluate the risks of not settling and compels them to act reasonably in response to valid claims.

How Does a Stowers Demand Work?

A Stowers Demand letter serves as the foundation for future legal action against the insurance company if an adverse judgment is entered against their insured.

Here’s the general process:

Assessment of Liability and Damages: The first step is to evaluate the merits of the case. The claimant’s attorney must have a strong belief that the at-fault party is likely to be found liable for the accident and that the claimant’s damages (medical bills, lost wages, pain and suffering, etc.) exceed the insurance policy limits.
Demand for Settlement: The claimant’s attorney will make a formal, time-limit demand to the insurance company to settle the case within the policy limits. This demand should detail the damages suffered, the liability of the at-fault party, and why the insurance company should settle the claim for the policy limits to avoid further legal action.
Evaluation of Insurance Offer: The insurance company then evaluates the demand. If the company agrees to settle within the policy limits, the claim will be resolved. If the insurer unreasonably rejects the offer, it can become liable for any judgment above the policy limits at trial.
Trial and Excess Judgment: If the case goes to trial and the court awards a judgment that exceeds the insurance policy limits, the insurance company may be held liable for the excess amount. This rule pressures insurers to act fairly so injured individuals aren’t left with heavy costs from a refused settlement.

Why Is a Stowers Demand Important?

The Stowers Demand serves several important functions:

Encouraging Fair Settlements: It ensures that insurance companies take their duty to settle seriously. If they fail to act in good faith, they risk paying more than the policy limits, which incentivizes them to settle cases reasonably.
Protecting the Rights of Injured Victims: It offers injured parties a chance to hold insurance companies accountable for their refusal to settle claims in a timely and fair manner.
Ensuring Accountability for Insurers: The Stowers Demand provides a legal pathway to ensure that insurers don’t take advantage of claimants by dragging out settlement negotiations or offering unreasonably low settlements.
Deterring Bad Faith Practices: If insurers know they may be held liable for amounts exceeding the policy limits due to their refusal to settle, they are less likely to engage in bad faith practices that harm claimants.

What Happens if the Insurance Company Doesn’t Settle?

If an insurer rejects a reasonable settlement and the case goes to trial, it may be liable for any judgment that exceeds the policy limits. Instead of the at-fault party bearing that burden, the insurer can be held responsible for refusing to settle.

When an insurer rejects a fair settlement, it risks an adverse judgment and may expose its insured to personal financial consequences.

How Can Milano Legal Group Help?

At Milano Legal Group, we help injury victims navigate tough insurance battles. Our attorneys know the Texas Stowers process and use it to pressure insurers for the compensation you deserve.

We’ll assess your case, explain your rights, and craft a Stowers Demand that pushes the insurer to act in good faith. If the insurance company refuses to settle, we won’t hesitate to take the case to trial and fight for you.