The Stowers doctrine, named for a 1929 Texas decision, imposes on liability insurers a duty to accept reasonable settlement demands within policy limits. If the insurer refuses and a judgment exceeds the limits, the insurer can be liable for the entire excess amount.
A demand generally must satisfy three conditions to trigger the duty: the claim must be within the scope of coverage, the demand must be within policy limits, and the terms must be such that an ordinarily prudent insurer would accept, including a full release of the insured.
Alternative Names:
Stowers Demand, Duty to Settle
Why it Matters?
Time-limited demands designed to trigger this duty are now a routine plaintiff tactic in serious injury cases. A carrier that mishandles the response, or a defense firm that fails to evaluate exposure and communicate it in time, can convert a policy-limits case into an unlimited one. This is among the highest-stakes deadlines in insurance defense practice.
Frequently Confused with
Related terms
Frequently asked questions
What makes a settlement demand a valid Stowers demand?
What is the exposure if a carrier rejects a valid demand?
