Next year will see the 100th anniversary of the accident that led to the Stowers doctrine and was litigated in G.A. Stowers Furniture Co. v. American Indem. Co., 15 S.W.2d 544 (Tex. Comm'n App. 1929, holding approved). This landmark case centered on a downtown Houston crash between a delivery truck owned by G.A. Stowers Furniture Co. and Mamie Bichon, who suffered severe injuries when her Ford coupe was overturned in the accident. She sued Stowers for $20,000.

American Indemnity, Stowers' auto insurance carrier, provided $5,000 in coverage. Bichon offered to settle for $4,000, but American Indemnity refused. At trial, Bichon won $14,107.14 in damages.

Stowers claimed that Bichon's offer to settle at $4,000 had been reasonable and American Indemnity should be responsible for the entire verdict, including the $9,107.14 in excess of its policy limit.

The court agreed with Stowers, stating that an insurance company owed its insured the duty to handle its affairs just as it would handle its own.

The Stowers demand doctrine was born.

The Basic Ingredients of a Successful Stowers Demand

There are certain requirements for every Stowers demand.

• There must be coverage. Without an insurance policy to make a claim against, a Stowers demand does not work.
• The demand cannot exceed policy limits. Insurers often do not disclose the policy limits of its insureds. Because of this, attorneys will often submit demands for the “policy limit” as opposed to a number amount.
• The defendant's liability must be reasonably clear. There should be little question as to who is at fault in the accident and that the plaintiff was injured as a result of the defendant's actions.
• The offer must be reasonable. The demands of the plaintiff's attorney must be in line with the loss incurred and the injuries suffered.
• The demand must be unconditional and offer a full release. While the terms of a Stowers demand are very straightforward, this requirement can be the hardest for plaintiff's attorneys to get right.

Perfecting a Stowers demand is much easier in theory than it is in practice, and requires technical, not just substantial compliance. Each element of a Stowers demand must be satisfied. Insurers have no obligation to point out flaws or deficiencies and waive nothing by failing to object to a defective Stowers demand.

Here are a few things to remember when making your own Stowers demand.

Ambiguity Involving Multiple Insureds

A valid Stowers demand must be unambiguous and not subject to dispute. At least one Houston Court of Appeals case suggests that it also must include a release of all insureds, such as the driver and owner of the vehicle. Under Patterson v. Home State County Mut. Ins. Co., both insureds would need to be named or defined in order to have a valid Stowers demand.

A Minor Issue

As stated, a Stowers demand must be unconditional. But the very nature of a minor's status means that any settlement must have court and GAL approval. Consequently, a Stowers offer involving a minor could not occur. However, there are no cases on point addressing this issue.

Bundling of Claims

If a demand bundles three claims together—pairing a weak claim with a strong claim—it can disqualify the stronger claim from Stowers treatment. These types of offers are often treated as conditional offers, which, again, cannot satisfy Stowers.

No Reasonable Insurer Would Have Accepted It

A Stowers demand must have evidence that a reasonably prudent insurer would have accepted it, considering the likelihood and degree of the insured's potential exposure to an excess judgment. If coverage is not an issue, the demand must demonstrate, with accompanying documentation and surrounding circumstances, that a reasonably prudent insurer would accept it assuming there was a demand for policy limits.

Was the liability of the insured reasonably clear? Of course, “reasonably clear” is viewed from the perspective of the insurer. However, whether the insurer's liability was reasonably clear at the time of the demand is inherently fact-specific and presents a fact issue for the jury, not a question of law for the court. Simply because an excess verdict was rendered does not automatically mean liability was reasonably clear at the time the Stowers demand was made.

Give It Time

Assuming no disagreement on the terms of a Stowers demand, the time given to respond must be reasonable. In Trinity Universal Ins. Co. v. Bleeker, the appellate court stated that the carrier had to have a reasonable time to evaluate an offer. While, in that case, the court determined Trinity had time to evaluate the offer since the offer had no time limit, it did not say what would constitute a “reasonable” amount of time.

In Allstate Ins. Co. v. Kelly, it was decided that a 14-day limit was considered reasonable under the “facts and circumstances” of the case. Whether there has been a reasonable time to respond, “will generally present a quintessential, constituent fact issue that is subsumed within the jury's application of the reasonably prudent insurer standard.” Which means we will know it when we see it.

When making a Stowers demand, it is best to check your work. The entire point is to settle claims quickly and efficiently. Making sure you have met the Stowers standard is the best way to do that.

Meloney Perry is the founding partner of the Dallas office of Perry Law P.C. She is the immediate past chair of the State Bar of Texas Insurance Law Section. Her practice focuses on insurance coverage, bad faith and class action litigation in multiple jurisdictions including Texas, Colorado and New Mexico. For more information about the firm, visit www.mperrylaw.com.