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The importance of the Stowers doctrine on personal injury claims

As an insured in Texas, you have a contract with your insurance company. In exchange for your premiums; your insurance company owes you a duty to handle your claim in good faith. The Texas Insurance Code also requires the company to pay your claim in a timely manner.

There is a coverage amount of your insurance policy. This is the maximum amount that your insurance company is legally obligated to cover you up to.. In the event of an accident you cause, you may be financially responsible for any liability amount ABOVE your policy limit. For example:

Let's say your auto policy has a $30,000 coverage and you hit another driver.   The damages you cause total$100,000.   The other driver does not accept the $30,000 your policy provides and decides to go to court. If the driver gets a verdict of $100,000, you will then be responsible for the remaining $70,000.

There is an exception to the at-fault driver, versus the at-fault driver's insurance company, being personally responsible for the damages amount above the insurance policy limit.  This exception is called The Stowers Doctrine.

The Stowers Doctrine, a powerful tool to attempt to settle your claim

In many personal injury accident claims, the "Stowers Doctrine" is an effective and powerful tool to attempt to settle your claim with the negligent party's insurance carrier.

Stowers keeps the insurance company honest, and more likely to settle with the injured party for a reasonable amount. If the insurance company doesn't accept a reasonable settlement offer and the case goes to trial, the insurance company is financially responsible for whatever amount the jury decides, even if the verdict amount is above policy limits, if the opposing party placed the insurance company on notice of a potential liability above policy limits.

The doctrine is based on a court decision that goes way back to 1929. In Stowers Furniture Co. v. American Indem. Co., 15 S.W.2d 544 (Tex. Comm'n App. 1929), the court considered an automobile liability coverage case where the insurance company rejected a settlement offer of what amounted to 80 percent of the limit of liability.

The insurance company took the position that it had little to lose by going to trial because its liability was limited by the terms of the policy. Since the automobile insurance policyholder was held to be liable for nearly 300 percent of the policy limits, then she brought the coverage action against the insurance company.

The court held that the insurer was liable for the policy limits and further duties consistent with exercising the "degree of care and diligence which a man of ordinary care and prudence would exercise in the management of his own business."

The Stowers Doctrine works as follows:  

1.The attorney for a personal injury claimant sends a settlement demand within policy limits, with supporting evidence to prove that liability is reasonably clear and that the injury claimant's damages exceed the policy limits.  Additionally, the attorney demands that the insurance carrier pay the full policy limit amount within a reasonable time limit.  

2.If the insurance company refuses to settle the claim within the deadline, the attorney and his client can proceed to a jury trial.  If the jury awards an amount that exceeds the policy limits, the personal injury claimant can claim that the insurance carrier and insured are jointly and severally liable for the full amount of the jury award (as opposed to the insurance carrier's liability being limited to the amount of the policy limits on the insured's policy of insurance).

Under Stowers, you, the plaintiff, have legal recourse to hold the insurance company responsible for the whole amount of damages, should the insurance company be unwilling to settle for the policy limit amount.

The requirements of a Stowers demand create pitfalls that require careful review and only a qualified attorney can provide you with a careful evaluation of your case to determine if the Stowers Doctrine can work in your favor.

As personal injury lawyers, if a case warrants it, we use the Stowers doctrine to keep insurance companies honest. Victims need attorneys that will carefully evaluate their case, and if appropriate push insurance companies to trial to try and get a verdict that is above policy limit.  Such a verdict, in the correct situation, will then be used against the insurance company to force the insurance company to pay the whole verdict amount regardless of the policy limit.

The attorneys at P&M Law have years of experience fighting against insurance companies and have helped victims obtain compensation in accident cases that include issues of breach of contract, obligations of good faith and fair treatment, and violations of the Texas Insurance Code. The dedication, experience, and tenacity of our attorneys in and out of court have convinced even large insurance companies to do the right thing.

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