What does “Stowers” mean to someone in Grand Prairie, Arlington, Fort Worth, Dallas, Weatherford, or anywhere else in Texas? This is something very important to understand.
A Stowers claim is a claim that an insurance company has handled in an improper manner. Most incorrect claims handling by an insurance company can be called “bad faith”, and the Stowers claim is just a different and unique version of bad faith. This Stowers doctrine was first articulated in the case, Stowers Furniture Co. v. American Indemnity Co. This is an old case, decided in 1929, but is still good law. This case was decided by what is today, the Texas Supreme Court. In 1929, it was called the Texas Commission of Appeals. When an insurance company violates their duty under the Stowers doctrine, the insurance company can become liable for much more money than the insurance policy provides for in the insurance contract.
A Stowers action arises when the liability carrier fails to make a reasonable settlement within the policy limits, and subsequently, exposes their insured policyholder to a judgment in excess of the policy limits. This Stowers claim belongs to the insured policyholder, not the person sueing the policyholder. What usually happens when the Stowers duty is violated, is that the policyholder assigns the Stowers claim to whoever is sueing the policyholder.
The Stowers duty to an insured policyholder is triggered when the claimant makes a claim against the insurance company that is within the policy limits. There is no responsibility on the insurance company to make the offer of settlement.
The Texas Supreme Court case, Texas Farmers Insurance Co. v. Soriano, states that the Stowers doctrine creates liability only if the insurance carrier negligently rejects a demand from a claimant that is within the policy limits, or the settlement entered into is unreasonable.This Texas Farmers Insurance Co. case, involved multiple claimants with severe damages. The policyholder however, had only a minimum policy to be divided between the seriously injured and multiple claimants.
A person wanting to make a Stowers claim would need the assistance of an experienced Insurance Law Attorney. The reason is, there are legal requirements necessary to be satisfied in order to properly invoke the Stowers liability against the insurance company. One of these requirements is that the settlement offer must offer a full release of all claims in exchange for the payment of the policy limits. This is a requirement per the case, Trinity Universal Insurance Co. v. Bleeker. This is another Texas Supreme Court case, decided in 1998. Here, a release had been offered to Trinity Universal Insurance Co. but a hospital lien had attached to the claim, per Texas Property Code, Section 55.007, thus making the release insufficient to satisfy Stowers.
Another requirement is that the Stowers doctrine only applies to covered claims. An example where this requirement was not satisfied was the case, St. Paul Fire & Marine Insurance Co. v. Convalescent Services, Inc., decided in 1999, by the 5th Federal Circuit Court of Appeals. Here, the Stowers demand made against St. Paul Fire & Marine included a claim for punitive damages. Punitive damages were not covered by the insurance policy, thus Stowers was not properly invoked.
Yet another requirement is that the release being offered in the Stowers demand, be a release of the proper parties. In Home State County Mutual Insurance Co. v. Horn, decided in 2008, the release properly named the insured but not the actual driver of the insured vehicle.
These are just a few examples of where a proper Stowers demand was not made. There are other requirements that must be satisfied. When these requirements are properly satisfied, the claim can be very much larger than what it originally was, due to the insurance company’s violation of the Stowers doctrine.
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