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If you are injured by the negligence of another person, their insurance company is usually responsible to pay for your injuries.

However, sometimes an insurance company refuses to settle for a reasonable amount, even when their liability is clear. If this happens to you, an experienced personal injury attorney can help you pursue a third-party bad faith claim against the insurance company.

What Is a Stowers Demand?

Many third-party bad faith claims are governed by the Stowers doctrine in Texas. The Stowers doctrine applies when you suffer damages that exceed the defendant’s insurance policy limits.

Stowers Demand Letter

To comply with the Stowers doctrine in Texas, your attorney would start by sending a Stowers demand letter to the insurance company. The letter must:

  • Include a demand for compensation within the policy limits;
  • State clear terms for accepting the demand;
  • Provide a reasonable amount of time for the insurance company to respond; 
  • Demonstrate that any subrogation claims and hospital liens have either been settled or will be resolved with the proceeds from the settlement; and
  • Offer to fully release the defendant from further liability.

If the insurance company rejects your Stowers demand, your next step is to go to court.

Pursuing a Bad Faith Claim

If you win a jury verdict for greater than the policy limit, then you may be able to make the insurance company pay the extra damages by bringing a third-party bad faith claim.

The defendant is the one who would usually be on the hook for damages in excess of the policy limit. So technically, the defendant is the one who would have a bad-faith claim against their insurance company. But you can get a court to issue a turn-over order. This requires the defendant to give you their cause of action so you can actively collect against the insurer. 

To succeed on a bad faith claim, you must demonstrate that:

  • Your Stowers demand letter complied with the requirements above;
  • Liability for the amount of the policy limit or more was reasonably clear; and
  • You actually won a verdict in court for more than the policy limit.

The most difficult element to prove is that liability was reasonably clear. If there was a fair dispute about whether the defendant was negligent, whether your negligence contributed to the accident, or the amount of damages, then it is not bad faith for the insurer to reject a Stowers demand, even if you later win.

Why Would I Want to Settle for the Policy Limit If My Damages Are Greater?

Even if your damages are significantly greater than the policy limits, it often makes sense to accept a settlement for the amount of the policy limit.

The reality is that nothing requires an insurance company to indemnify a defendant for any more than the policy limits. And most defendants simply don’t have the assets to pay off large verdicts. This means that even if you go to court and get a verdict for an amount above the policy limits, you could struggle for years to ever recover that money.

The defendant also has a motivation to settle within the policy limits. Doing so helps them avoid the risk of having a personal judgment against them. Such a judgment can lead to wage garnishment and liens on their assets that can follow them for years. This is why an insurer must accept a Stowers demand where liability is reasonably clear.

With a Stowers demand, you can reach a settlement with the insurance company that gets you your money right away. You won’t have to spend years of uncertainty waiting for a jury verdict while struggling to pay your bills.

How Do I Know If I Can Pursue a Third-Party Bad Faith Claim?

If you suffered injury in an accident caused by someone else, contact our personal injury attorneys at the Johns Law Firm. We can help you determine whether a Stowers demand might be the way to go and handle every aspect of your personal injury claim.

Our decades of experience working both for and against big insurance companies put us in a strong position to negotiate on your behalf. Call or contact us today to learn how we can help you get the compensation you deserve.

Author Photo

Jeremiah Johns

Jeremiah N. Johns is a trial attorney who represents clients in insurance, maritime, personal injury, and litigation matters. Raised on a family farm in Southeast Georgia, at an early age he gained an appreciation for hard work and ingenuity. These values form the bedrock of his practice.​ Jeremiah holds an LL.M. in Admiralty from Tulane Law School and a J.D. from Syracuse University, where he graduated with honors. He also graduated magna cum laude with bachelor degrees in political science and economics from Georgia State University.