Is It Possible to Get More Than Insurance Policy Limits for a Personal Injury Claim in Texas?

For someone making a personal injury claim in Texas, one of the most important issues that often comes up is the total dollar amount of liability insurance coverage available to pay for any court judgment or agreed settlement. The total amount of liability insurance coverage available under any specific insurance policy is frequently referred to as the “policy limit.”

The majority of the time, the potential recovery on a personal injury claim will be limited to the policy limits of the liability insurance for the party who caused the injury. However, there is an exception recognized by Texas law which allows a personal injury claimant to recover more than the insurance policy limits in specific situations. This exception is generally known as the Stowers doctrine, named after the case of G. A. Stowers Furniture Co. v. American Indemnity Co., 15 S.W.2d 544 (Tex. Civ. App. 1929).

For a real-life example of the Stowers doctrine in action, read more about how our attorneys obtained compensation above the insurance policy limits for a Houston car accident client here.

How Are Insurance Policy Limits Determined?

When an insurance company issues any new insurance policy, it sets the total price for which it will sell the policy (the “insurance premium”) based on:

1. what it thinks the chances are that it will need to pay any money for a claim made on the policy, and
2. the largest amount it may need to pay for a claim made on the policy, i.e., the “maximum exposure” of the insurance company.

The minimum amount of required insurance is often set by law. For example, an individual in Texas who purchases personal auto insurance must buy at least $30,000 per person/$60,000 per accident in liability insurance coverage for personal injury. (Commercial policies have different minimums.) You can choose to buy more insurance coverage for a higher premium, but you cannot purchase less than state law requires.

An insurance company will always calculate the cost of the policy based on the idea that the most it will ever have to pay for a claim under that policy is the policy limits. Generally speaking, with all other things being equal, when a new insurance policy is issued, the larger the amount of coverage being purchased, the more the insurance policy will cost because of the possibility of the insurance company having to pay more money for a claim made under the policy.

Insurance Companies Owe Legal Duties to Their Insureds Which Relate to the Handling of Personal Injury Claims.

According to Texas law, after receiving notice of a claim or lawsuit insurance companies generally owe their insured a duty to defend against any lawsuit for a claim covered by the insurance policy, and the duty to indemnify the insured for any judgment or settlement of a claim made under the policy. This means if a lawsuit is filed against the insured for something covered by the policy, upon proper notice the insurance company must provide the insured with an attorney to defend the lawsuit and must also pay for any judgment or settlement of the lawsuit.

As part of any settlement of a claim, the insurance company will also require the claimant to agree to dismiss the claims in exchange for payment to fulfill its legal obligations to defend and indemnify the insured. An insurance policy is a contract between the insured and the insurer, and since the contract specifies the maximum policy limits, the insurance company’s obligations to the insured to defend and indemnify do not extend past the amount of the insurance policy limits.

In addition, liability insurers in Texas owe other duties to their insured which are recognized by Texas law, including the duty of good faith and fair dealing, and the duty to act as a reasonably prudent person would under similar circumstances, i.e. to not be negligent. These duties exist in large part because Texas law recognizes the uneven power relationship between an insurance company and its insured, and the need to protect the insured in situations when their interests and the interests of the insurance company don’t align.

It is this type of situation which directly led to the creation of the Stowers doctrine in Texas law.

How the Stowers Doctrine Allows Personal Injury Claimants to Recover More Than the Insurance Policy Limits in Texas

The Stowers doctrine is a well-established cornerstone of Texas insurance law.

On the evening of January 23, 1920, a delivery truck from G.A. Stowers Furniture Co. was driving along a street in Houston, Texas when it crashed into a wagon parked on the side of the street. Both the delivery truck and the wagon were badly damaged in the collision. The store’s employee left the crashed delivery truck on the street at the crash site “without a light and without any one to watch it.” Not long after, a drug store employee named Mamie Bichon left work for the day and was being driven home in a car along the same street. The car in which Ms. Bichon was being driven crashed into the wrecked furniture delivery truck, which was still parked in the dark street without lights or any other warnings to alert approaching vehicles. The vehicle transporting Ms. Bichon flipped from the impact of crashing into the furniture truck, and Ms. Bichon filed a lawsuit against G.A. Stowers Furniture, bringing a personal injury claim for causing the crash and Ms. Bichon’s resulting damages.

Previously, G. A. Stowers Furniture Co. had purchased a liability insurance policy from American Indemnity Company which covered Ms. Bichon’s personal injury claim. There was a policy limit of $5,000, which would be the equivalent of just under $73,000 in current dollars.

American Indemnity Company agreed that the insurance policy covered the claim, and it provided G.A. Stowers Furniture a defense of the lawsuit as it was required to do. In negotiations before trial, Ms. Binchon offered to accept $4,000.00 (just over $58,000 in current dollars) to settle her claim. In turn, American Insurance Company refused to pay Ms. Binchon any more than $2500 (just over $36,000 in current dollars) to settle her claim. The case went to trial, and a jury found in favor of Ms. Binchon – awarding her $14,107.15 in damages, court costs and interest (just over $205,000 in current dollars).

American Indemnity Company refused to pay more than $5,000 of the judgment, the insurance policy limit. G. A. Stowers Furniture Co. sued American Indemnity Company, arguing that American Indemnity should have to pay the entire amount of the judgment since it refused to accept a settlement offer which would have resolved the case for an amount within the policy limits, and the only reason G.A. Stowers Furniture was in a position where it had to pay anything was because of American Indemnity’s choice not to settle the case before trial for a lesser amount.

The court ruled that because American Indemnity Company had control over the defense of the lawsuit and the settlement negotiations, it created the situation where the furniture store owed more than the insurance policy limits by refusing to accept an offer to resolve the case for an amount within the policy limits before trial.

Accordingly, the Stowers doctrine states that if an insurance company refuses to accept a settlement offer to resolve the case within the insurance policy limits before trial, it is liable to satisfy the entire judgment, including the portion which exceeds the insurance policy limits. In 1994, the Texas Supreme Court summarized the Stowers doctrine thusly: “[E]very reasonable demand, within policy limits should be accepted by the insurer, unless the insurer, by taking the case to trial, is willing to gamble with its own money.” Texas Farmers Ins. Co. v. Soriano, 881 S.W.2d 312, 319 (Tex. 1994).

The rationale for this is very straightforward – it is not fair to the insured for an insurance company to refuse to settle a case within the policy limits, and then leave the insured owing the difference if the judgment ends up being above the policy limits. If the insurance company had accepted the settlement offer, the insured would have been released from liability and would not have to pay anything, since the amount of the settlement would be paid by the insurance company.

If the insurance company decides to take a risk and refuse a settlement offer within policy limits, it is doing so because it is hoping to settle or resolve the case at trial for a lower amount or no money at all. These hardball negotiating tactics serve the interests of the insurance company by possibly saving it money, but they are against the interests of the insured, who has already purchased the insurance policy and just wants to resolve the case as quickly as possible without having to pay any money out of pocket. In these types of situations, if the insurance company’s gamble backfires and the result at trial is a judgment for more than the policy limits, it is not fair to the insured to make the insured pay.

Accordingly, the Stowers doctrine provides a narrow exception which allows personal injury claimants in Texas to possibly obtain more than the insurance policy limits on their claim.

Are There Specific Requirements for a Settlement Offer to Invoke the Stowers Doctrine?

The court’s opinion in the case was issued nearly a century ago. Since then, Texas law has considered a number of issues relating to the Stowers doctrine and when it applies. The specifics are detailed and complicated and well beyond the scope of this article, but at a bare minimum, a Stowers demand must:

1. Clearly and unequivocally offer to settle all claims against the insured in exchange for an amount within the insurance policy limits so that the insured gets a full release of claims in exchange for acceptance of the offer.
2. Give the insurance company sufficient time to evaluate the settlement offer and provide a response.
3. Provide the insurance company with sufficient information (or articulate the basis for the settlement offer if the information was previously provided) giving adequate notice that a reasonable insurer in the same or similar situation would accept the settlement offer.

How Often Do Personal Injury Claims Settle Above the Policy Limits Based on the Stowers Doctrine?

Rarely. First, for an insurance company to be liable for more than the policy limits under the Stowers doctrine, it must have been given a settlement offer complying with Stowers requirements – and then rejected that offer. If a claim appears to be worth the policy limits or possibly more, insurance companies will often accept a Stowers settlement demand to avoid the possibility of being required to pay more. If an insurance company rejects a Stowers offer to settle within policy limits, by definition at least one insurance adjuster has evaluated the value of the claim as less than the policy limits.

Second, even if a Stowers settlement offer is rejected, the claimant still needs to win at trial and get a judgment for a greater amount than the policy limits.

Very rarely, if an insurer feels they made a mistake by refusing a Stowers settlement offer before trial, they will offer to pay more than the policy limits to settle a case before trial. This is an extremely rare situation, and only occurs when the insurance company feels it has made a serious mistake and strongly wants to resolve the case before it goes to trial.

How Can I Use the Stowers Doctrine to Get the Insurance Company to Pay Me More for My Personal Injury Claim?

Like many aspects of Texas insurance law and personal injury law, the Stowers doctrine is complicated and detail-intensive. Used correctly, the Stowers doctrine can be a powerful weapon to put pressure on insurance companies to either settle a personal injury case for fair value or to risk being liable for a potential judgment which may exceed the policy limits.

If you or a loved one have been injured in a car accident in Houston, a truck or commercial vehicle accident in Houston, a work accident, a daycare accident, or any other type of situation where those injuries were the result of someone else’s negligence, it is important to seek legal representation as soon as possible. A personal injury lawyer from The Kishinevsky Law Firm can help you navigate the complex legal process of making a personal injury claim and dealing with the insurance company and ensure that your rights are protected. We understand the devastating impact that an injury caused by someone else’s fault can have on your life and are committed to helping you get the compensation you deserve.

Our team of skilled attorneys will work tirelessly to investigate the circumstances of your injury, gather evidence, and build a strong case on your behalf. We will negotiate with the insurance companies on your behalf and fight for your rights in court if necessary to ensure that you receive fair and just compensation for your injuries and losses.

If you’ve been injured due to the fault of someone else, don’t wait to seek legal representation. Contact our office today for a free consultation to discuss your case and see how we may be able to help you with your personal injury claim.  To schedule a free consultation, call our offices or complete our contact form and find out how we can help.