Stowers Doctrine (Texas Third-Party Bad Faith)

Category: legal

A specialized Texas legal framework that penalizes insurance companies for failing to settle a third-party claim within policy limits when liability is clear.

Originating from a landmark Texas case, the Stowers Doctrine creates a powerful tool for plaintiff attorneys. It dictates that if a settlement demand is made within the driver's policy limits, the liability is reasonably clear, and an ordinarily prudent insurer would accept it, a refusal by the carrier triggers full exposure. If the subsequent jury verdict breaks the policy cap, the insurer must swallow the entire financial judgment.

Common Examples

• The law firm issued a formal Stowers demand to the commercial insurer, giving them fourteen days to tender the policy limits before opening up full exposure.
• Failing to properly identify and log an incoming Stowers notification will expose an insurance desk to massive extra-contractual liabilities in Texas.