Understanding the Texas Stowers Demand Doctrine

A Stowers Demand is a tool often used by Plaintiff's lawyers in Texas to put pressure on insurance companies to either pay their policy limits to settle a claim or risk exposing their insureds and themselves to liability for a verdict in excess of the coverage amount.

Stowers Demand Letters, as they are known in Texas, have been used since the 1920s as a way to force insurance carriers to pay more than the applicable policy limits on a claim. They originated with a simple case wherein an insurance company decided not to pay the full limits it clearly owed and has involved into a tricky and somewhat complex area of law.

The G.A. Stowers Furniture Co. Decision and the Origin of the Doctrine

In 1929 the Texas Supreme Court decided the case of G.A. Stowers Furhiture Co. v. American Indemnity Co., 15 S.W.2d 544. In that case, American Indemnity Company issued an auto liability policy to the G.A. Stower’s Furniture Company in the amount of $5,000.00. When one of their
trucks was in a wreck, American Indemnity refused to pay the full $5,000.00 to settle the claim. The Plaintiff made an unconditional offer to settle the case within those limits but the Defendant refused. At trial, the Plaintiff took a verdict for $12,207 plus costs.

After the judgment, G.A. Stowers Furniture Co. sued the American Indemnity Company for negligent failure to settle the claim when they had the opportunity. The Trial Court held there was no cause of action for this and the Appellate Court affirmed. The Texas Supreme Court, however, disagreed. In so holding they established a standard of care that adjusters must follow in evaluating claims:

if an ordinarily prudent person, in the exercise of ordinary care, as viewed from the standpoint of the assured, would have settled the case, and [the defendant] failed or refused to do so, then the agent, which in this case is the indemnity company, should respond in damages.

This case formed the basis for a new cause of action that is set up by a Plaintiff’s lawyer sending a letter that triggers the duty to timely evaluate and respond to a settlement offer within the limits of the applicable insurance policy. Once the duty is triggered, the insurance adjuster must exercise ordinary care in evaluating the claim. Ordinary care was further defined by the G.A. Stowers Furniture Co. Case as: “that degree of care and diligence which an ordinarily prudent person would exercise in the management of his own business.”

Subsequent Ruling Affecting the Stowers Doctrine

Subsequently, the letter used to trigger the duty to act timely and reasonably on the part of the insurance carrier became known as the Stowers Demand Letter. Over time, the Doctrine was challenged but it managed to withstand the test of time. In 1994, the Texas Supreme Court reaffirmed the Stowers Doctrine and clarified the exact requirements in the case of Am. Physicians Ins. Exch. v. Garcia, 876 S.W.2d 842 (Tex.1994). In that case the Court opined:

“To prove a Stowers claim, the insured must establish that (1) the claim is within the scope of coverage; (2) a demand was made that was within policy limits; and (3) the demand was such that an ordinary, prudent insurer would have accepted it, considering the likelihood and degree of the insured’s potential exposure to an excess judgment.”

American Physicians Ins. Exch. at. 849.

The Multiple Claimants Rule

During the same year that the Supreme Court heard American Physicians Ins. Exch., they also handed down another opinion affecting the Stowers Doctrine. Tex. Farmers Ins., Co. v. Soriano, 881 S.W.2d 312 (Tex.1994) addressed what constitutes reasonable conduct when an insurer is faced with multiple claimants under the same policy. In such circumstances, the adjuster must evaluate each demand independently and can settle one to the detriment of another. “When faced with a settlement demand arising out of multiple claims and inadequate proceeds, an insurer may enter into a reasonable settlement with one of the several claimants even though such settlement exhausts or diminishes the proceeds available to satisfy other claims.” Id.

Full and Final Release

Since the inception of the Stowers Doctrine, an offer to settle within the policy limits has been a part of the requirement. However, the real meaning and importance of this was clarified in the case of Trinity Universal Ins. Co.v. Bleeker, 966 S.W.2d 489 (Tex.1998). In that case, there were hospital liens on file that exceeded the policy limits before the Stowers Demand was made. In this situation, the Texas Supreme Court held:

When a hospital lien exists, a release is not valid unless:

(1) the hospital's charges were paid in full before the execution and delivery of the release;
(2) the hospital's charges were paid before the execution and delivery of the release to the extent of any full and true consideration paid to the injured individual by or on behalf of the other parties to the release; or
(3) the hospital is a party to the release.

Trinity v. Bleeker, at 491. In practice, one must either resolve the liens or agree to resolve the liens out of the proceeds and allow the insurance company to pay them direct from the proceeds once proof of acceptance of some amount less than the policy limits is acquired by the Plaintiff and provided.

Also, important to note here is that, in the spirit of providing a full and final release, one must be certain that all of the potential heirs of a deceased Plaintiff are included in the offer to release. Otherwise, it is not a full and final release and will not really protect the insured.

Turn Over Of The Cause of Action

Generally, the goal of the Plaintiff’s lawyer in sending a Stowers excess verdict is to force the insurance company to either pay early or be set up to have to pay an excess verdict on behalf of their insured. The way the latter works is that a judgment is taken. That judgment against the insured now gives the right to the insured to sue his own insurance company for not protecting him when they could have settled. The Plaintiff’s lawyer would then seek by way of a Motion, to force the insured to assign over that right against his insurance company as an asset that Plaintiff can collect the judgment against. The plaintiff then gets to sue the insurance company direct standing in the shoes of their insured.

Plaintiff’s lawyers should be aware that not all situations allow for a turnover order. While some courts have ruled that this is allowed (See e.g. Goggans v. Ford, Not reported in S.W.3d, 2016 WL 2765033), other Texas courts have held, that a Stowers claim is not subject to turnover if the insured has indicated he was satisfied with his insurer’s decision not to settle or he has released his potential claims against the insurance company. See Charles v. Tamez, 878 S.W.2d 201, 208 (Tex.App.–Corpus Christi 1994, writ denied); Nationwide Mut. Ins. Co. v. Haffley, 78 Fed. Appx. 348 (5th Cir. 2003). Seeing how this kind of conduct leaves the defendant personally liable for the excess, one should explore whether his counsel was negligent in not advising him to demand the insurance company pay the claim within the limits.


In summary, the Stowers Demand is a letter used by Plaintiff’s Lawyers to make insurance companies promptly pay a claim or risk themselves and/or their clients having to pay more than the policy limits in a judgment. A Plaintiff’s attorney must be sure that they make an unconditional offer to settle that releases all potential liens and all liability of the Defendant to trigger the necessary duty on the part of the carrier. If done correctly, it can be an effective tool to pursue a recovery over and above the policy limits.

ABOUT THE AUTHOR: Robert S. Simmons and Sharon Simmons-Cantrell
Robert S. Simmons has been practicing personal injury law since 1966. He is a Founding Shareholder at Simmons and Fletcher, P.C.

Sharon Simmons-Cantrell (Robert's niece) has been practicing law with Simmons and Fletcher, P.C. since obtaining her Texas Bar License in 1991. She is also a Shareholder at Simmons and Fletcher, P.C.

Copyright Simmons and Fletcher, P.C., Injury & Accident Lawyers

Disclaimer: Every effort has been made to ensure the accuracy of this publication at the time it was written. It is not intended to provide legal advice or suggest a guaranteed outcome as individual situations will differ and the law may have changed since publication. Readers considering legal action should consult with an experienced lawyer to understand current laws and.how they may affect a case. For specific technical or legal advice on the information provided and related topics, please contact the author.

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