Stowers Demand Letters
A Stowers demand is a time-limited offer to settle a personal injury claim made on behalf of an injured party to the insurance company of an at-fault party to an accident, to make them choose between settling the case for an amount within the insurance policy limits or facing potential liability for the full amount of any judgment awarded by a jury at trial, even if it exceeds the policy limits. A Stowers demand is typically made in writing to document the timing and reasonableness of the settlement opportunity. The letter then forms the basis for future action against the insurance company when its insured has an adverse judgment entered against it.
Stowers Demand Use
Personal injury lawyers and car accident lawyers most commonly use them when representing the injured party in a wreck, but they can also be used in claims against homeowners insurance policies, commercial liability insurance policies, and other policies that pay claims based on the insured’s liability for negligent actions that injure another.
Where Does the Name “Stowers Demand Letter” Come From?
The origin of the Stowers demand letter dates back to an opinion handed down in 1929 in the G.A. Stowers Furniture Co. v. American Indemnity, Co., 15 S.W.2d 544 (Tex.). In that case, a vehicle collided with a horse-drawn carriage. The non-negligent party sent the Stowers Defendants a letter allowing them to settle within their policy limits. The letter gave a set time period for acceptance and offered proof of the excessive damages. Their insurance company, American Indemnity Co., refused to settle and went to trial to try to save money. They lost. As a result, the insured (GA Stowers) sued the company, alleging they had an obligation to settle and protect the insured in that situation.
The Texas Supreme Court held that an insurance adjuster and his company are “held to that degree of care and diligence which a man of ordinary care and diligence would exercise in the management of his own business.” This created a new cause of action under which insurers could be held liable for negligently failing to settle their insured’s claim when a reasonable adjuster would do so in managing his own affairs.
What is Required For a Stowers Demand to Be Valid?
While no specific form has been laid out, several Texas Court opinions explain what it takes for a Stowers demand letter to trigger that duty. Liability must be clear. Further, the demand must include clear terms under which it can be accepted and reasonable time limitations for evaluating the claim. Lastly, you must offer to release the insured from liability fully. Once the Stowers Demand is done properly, then you must go down, try the case, and win an excess verdict. Only then can you attempt to enforce the excess judgment against the insurance company.
The Clear Liability Requirement
For a Stowers demand to be valid, liability for an amount equal to their policy limit in the case needs to be “reasonably clear.” If there is significant room for argument about who is at fault or whether the defendant was “negligent,” your car accident lawyer will have a hard time making a Stowers demand stick. Ultimately, the standard by which the adjuster’s actions will be judged is “Would a reasonable adjuster have paid the policy limits under the circumstances?” The less clear the liability is, the harder it is to jump this hurdle.
Conversely, the higher the damages are, the less important this is. For example, if the damages are likely to warrant a verdict of $40,000 but the policy is only $30,000 and liability is uncertain—meaning the damages could be reduced by a percentage of negligence of the plaintiff—your Stowers demand letter is far less likely to hold up than if your damages are clearly in the millions and there is only a $30,000 policy with a chance of a split negligence finding. Remember, the question is whether a reasonable adjuster would have accepted an offer to settle the claim if his own money were at risk.
The Must Be an Offer of a Full and Final Release
The offer to release the insured from liability in a Stowers demand letter must be a full and final release. Trinity Universal Ins. Co. v. Bleeker, 966 S.W.2d 489 (Tex.1998). This means the letter must clarify that all hospital liens and insurance subrogation claims are being resolved out of the policy limits. Otherwise, you have not truly released the defendant of liability.
Clear Settlement Acceptance Terms and a Reasonable Period to Evaluate
If the terms of accepting the settlement are unclear, the demand may not be valid. So, the letter should specify exactly how much will be paid and the deadline to pay. Furthermore, it should state that all hospital liens and subrogation claims have been settled (with proof) or provide clear evidence that they will be resolved from the proceeds.
Amount Must Be Within the Policy Limits
If you demand more than the available policy limits, this will not trigger a Stowers duty for the adjuster. While this may seem simple enough, you can run into issues when multiple claimants have the same policy, and the insurance company settles with one before receiving your Stowers demand letter. It may also be a problem when you are dealing with a wasting insurance policy where the amount available is constantly changing.
Additional Reading:
- First Party vs Third Party Insurance.
- What is a Wasting Limits Insurance Policy?
- What is Covered by a Texas Auto Policy?
Disclaimer: The information on this page is provided for educational purposes only and does not constitute legal advice or create any attorney-client relationship. Always talk to an attorney about your specific fact situation, especially if you are the one receiving the Stowers demand letter. Every case has its own nuances that may affect a Stowers demand letter and its validity.
FAQ's
What is a Stowers demand?
A Stowers demand is a time-limited offer to settle a personal injury claim made on behalf of an injured party to the insurance company of an at-fault party to an accident, to make them choose between settling the case for an amount within the insurance policy limits or facing potential liability for the full amount of any judgment awarded by a jury at trial, even if it exceeds the policy limits.
How Do You Collect An Excess Verdict on a Blown Stowers Demand Deadline?
To have a legal right to collect the excess verdict against the insurer, you must first obtain an excess judgment against their insured. After the verdict is taken, you must seek a turnover order against the defendant. This is essentially a judgment-collection proceeding in which the Court orders the defendant to turn over his cause of action against his own insurance company so the plaintiff can pursue his claim against the insurance company for negligently failing to settle the claim when given the opportunity.
Once the insurer’s rights are turned over to the plaintiff, then the plaintiff stands in the defendant’s shoes. He or she may now sue the insurance company for negligence and insurance code violations, including treble damages.
What Happens When the Insurer Accepts the Stowers Demand?
Once the insurance company accepts the demand, the claim is settled for the amount stated in the Stowers demand letter, and no further action may be taken against the insured or the insurance company regarding the personal injury claim.
Can I Make A Stowers Demand Against My Own Insurance Company?
No. A Stowers demand only works in a third-party insurance situation. When you threaten (by your Stowers demand) to take a judgment against their insured, you put the insurance company in a position where it must choose between saving money and risking an excess verdict. In a First-party insurance situation (i.e., uninsured/underinsured motorist coverage), you are the insured. You cannot threaten to take an excess verdict against yourself if they refuse to pay the claim. The money is their money to risk, so they may choose to do so without violating any duty to you.
In fact, the Texas Supreme Court has further insulated UIM/UM insurers by holding that they effectively have no duty to negotiate or pay you a dime until you present a claim by taking judgment and having a jury determine exactly how much they owe. As a result, UIM/UM carriers are under no real obligation to treat you fairly.
Can Multiple Parties Do a Single or Joint Stowers Demand?
A Stowers demand letter that tries to settle multiple parties in an all-or-nothing type settlement will not trigger the Stowers duty. Many Stowers demand mistakes happen in situations with multiple claimants. For example, five people are seriously injured in a car accident, and the at-fault driver only has a minimum limits insurance policy. Can the five of them jointly demand the policy limits of 60,000.00 and have a valid Stowers Demand? The answer is no. To trigger a Stowers duty, the offer to settle one person’s claim cannot be contingent upon settling other claims. The adjuster has not only a right but a duty to evaluate claims on their own merit and not the merit of another claim. The adjuster must be allowed to settle each claim individually for a specific amount within the policy limits. This can put an attorney representing multiple seriously injured parties from the same accident in a bad situation. It can cause a conflict of interest if he demands the full policy limit for one to the detriment of another.
What Happens if Multiple Parties Make Individual Stowers Demands?
When multiple parties are involved, it often becomes a foot race to send your Stowers demand letter first. When multiple parties have damages exceeding the policy limits, the adjuster must evaluate each demand on its own merits as he receives it. In a standard auto insurance policy with limits of $30,000 per person, up to a maximum of $60,000, the first two to send a valid Stowers demand letter may get all the money while the rest are left out in the cold. If they all send demands, the adjuster can choose to pay whichever he wants and still avoid any Stowers liability under the Supreme Court decision Texas Farmers Ins. Co. v. Soriano, 881 S.W.2d 312, 315 (Tex.1994). This is why it is dangerous to delay hiring an attorney and getting a Stowers demand letter done quickly in a multi-party serious injury case.
What Should I Do If I Receive a Stowers Demand Letter?
Normally, Stowers demand letters are sent directly to your insurance carrier. If you receive a Stowers demand letter directly from another party or their attorney, contact your liability insurance company and provide a copy of the letter. As an insured, you have a duty to cooperate with your insurance company. Because Stowers demands are time-sensitive, failing to promptly turn it over to your insurance company could prejudice your case and result in coverage being withdrawn.
What Happens If Your Insurance Company Fails to Respond to a Stowers Demand Letter?
Failure to respond to a properly drafted Stowers demand letter in a timely manner exposes the insurance company to liability for any judgment taken at trial that exceeds the maximum limit of the applicable insurance policy. The purpose of a Stowers demand letter is to put the insurance company to a decision. They must choose between protecting their insured by paying the full coverage amount under the policy or trying to save money by taking the case to trial and convincing the jury to award less. If they make the latter choice, they act in their own best interest, not the client’s. This can open them up to liability to their client for negligence.
What Should I Do If My Insurance Company Tells Me They Received a Stowers Demand Letter?
When your insurance company receives a Stowers demand letter on someone’s behalf, they must disclose it to their insured and let them know they have the right to speak with an independent lawyer of the insured’s choosing. The most important thing the person can do to protect themselves is to send a letter expressing a desire for the other party to accept the settlement offer. It is wise to hire an attorney to draft this letter, at a minimum, to ensure it is done right.
Why Is My Defense Attorney Telling Me To Talk to Another Lawyer About a Stowers Demand Letter?
It is a conflict of interest for the lawyer provided by an insurance company to advise the insured about a Stowers demand letter. Because the insurance company is paying the insured’s defense attorney, that lawyer owes duties to both the insurer and the insured. A lawyer cannot advise one client to take legal actions that are to the detriment of another client. Thus, the lawyer cannot tell their client who was sued over a car accident that the insurance company is placing its interests above the client’s interests by denying the settlement demand, nor that there are steps the client can take to help shift the liability to the insurance company when their decision turns out to be wrong.
If I Talk to Another Lawyer, Do I No Longer Have a Defense Lawyer?
No. Both the insured and the insurance company win if the case goes to trial and the verdict comes out in the insured’s favor. Thus, the insured’s and the insurance company’s interests align at trial, and the same lawyer can represent both. However, if a Stowers demand is ignored, those interests will no longer align after trial if an excess judgment (judgment above the policy limits) is taken. Again, it is wise to consult your own personal injury lawyer to determine what steps to take.
What Happens If I Lose at Trial After Receiving a Stowers Demand?
A loss at trial means that the jury awarded the other side damages over and above the insured’s policy limits. If the other side sent a Stowers demand, the insured will now need to take the position that the insurance adjuster was negligent in not paying the claim and, therefore, should be liable. If they pay the full claim now, the case is settled. If they choose not to pay the full amount now, the insured can hire a lawyer to either sue the insurance company for negligent claims handling or assign the insured’s rights to the plaintiff so that the plaintiff can sue the insurance company directly on behalf of the insured.
If you do not take one of the two above actions, the plaintiff can take steps to file for a turnover order to ask the court to assign your interests to them, or they can pursue collections against you directly.
