The Texas Stowers Doctrine & CPRC Chapter 541: Uncapping Liability Policy Limits for Bad-Faith Refusal to Settle
Summary of the Texas Rule (G.A. Stowers Furniture Co. v. American Indemnity Co., 15 S.W.2d 544 (Tex. Comm'n App. 1929))
Landmark Texas doctrine holding that a liability insurer that negligently refuses a reasonable, unconditional settlement demand within policy limits is liable for the ENTIRE excess jury verdict—even millions of dollars above the policy limits.
Statutory Text Summary & Legal Mechanics
Under G.A. Stowers Furniture Co. v. American Indemnity Co., 15 S.W.2d 544 (Tex. Comm'n App. 1929, holding approved) and American Physicians Insurance Exchange v. Garcia, 876 S.W.2d 842 (Tex. 1994), an insurer's Stowers duty is triggered when three prerequisites are met: (1) the claim against the insured is within the scope of coverage; (2) the plaintiff makes an unconditional demand within the policy limits offering a full release of the insured; and (3) the terms of the demand are such that an ordinarily prudent insurer would accept it, considering the likelihood and degree of the insured's potential exposure to an excess judgment.
Practical Impact on Texas Personal Injury Claims & Jury Trials
In Texas practice, a valid 'Stowers Demand' must also explicitly offer to satisfy or release all known statutory hospital liens (Tex. Prop. Code Ch. 55), Medicare conditional payments, and workers' compensation subrogation liens out of the settlement funds so the insured faces zero lingering liability exposure.
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