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Insurance 101 – Stowers Demand and What It Means for Car Accidents

By January 31, 2019 No Comments
Insurance 101 - Stowers Demand and What It Means for Car Accidents - Attorney Zachary Herbert

Learn the amazing story behind a Stowers Demand, and its impact on insurance companies and victims of car accidents.

Insurance companies have a duty to act in their policy holders’ best interest.  They have a duty to accept reasonable settlement offers on behalf of the policy holder within policy limits where doing so would be in the policy holder’s best interest.  This responsibility is due to the unique nature of the contractual agency relationship between an insurance company and the policy holder. Within the insurance contract, insurance companies reserve right to defend any suit for damages on behalf of the policy holder.  Also, the policy holder may not admit liability or settle any case without the consent of the insurance company. Courts have found that insurance companies owe a duty of care and diligence to those that they insure. They are to act as “a man of ordinary care and prudence would exercise in the management of his own business.” But, it wasn’t always this way.

Mamie Bichon, Stowers, and American Indemnity Company

On January 23, 1920 at about 7:00 p.m., an G. A. Stowers Furniture Company (Stowers) delivery driver was traveling down Austin Street in Houston, TX when the truck collided with a wagon on the side of the road.  The crash made the delivery truck inoperable. The delivery driver did not stay by the truck or light up the area to warn oncoming traffic. Mamie was a drug store employee who had just ended her shift when she got into a Ford Coupe headed down the same street the Stowers delivery truck was stopped on.  Unable to see the delivery truck, her vehicle collided with the unlit and unmarked Stowers delivery vehicle and flipped. As a result, Mamie was severely injured.

Stowers had an insurance policy in the amount of $5,000 with American Indemnity Company.  The insurance company had the contractual right to defend any suit on behalf of Stowers for damages or loss; and, prevented Stowers from admitting liability or settling any suit without permission from the insurance company.

Prior to trial, Mamie offered to settle for an amount of $4,000, well below the policy limits of $5,000.  The insurance company refused to settle for anything less than $2,500. The case ended up in court where a jury awarded $12,207 in damages.  With interest, court costs, and fees tacked on, Stowers furniture ended up paying Mamie Bichon $14,107.15.

American Indemnity Company admitted that the offer to settle the case for $4,000 by Mamie was a good one and that it should have settled on behalf of Stowers.  American Indemnity Company’s position was that it had satisfied its contractual obligations to pay the limits of the policy and that it had no duty to settle the case, regardless of whether it was in their policy holders’ best interest.  They also stated that they had the contractual right to defend any suit on behalf of the policy holder, Stowers, regardless of whether or not settling would be to the benefit of the policy holder. Their position put Stowers at considerable risk and ultimately cost them an extra $10,000.  As a result, Stowers filed a claim against American Indemnity Company for the excess judgment.

The court found that the insurance company owed a duty of care and diligence to the insured to act as “a man of ordinary care and prudence would exercise in the management of his own business.” Mamie Bichon’s case was very significant at the time and permanently altered the relationship between insurance companies and their policy holders in Texas.  It continues to be significant today.

Stowers Demands In Practice

A Stowers demand is an agreement by the plaintiff in a lawsuit to settle a case within policy limits.  In practice, this can be less than actual damages. There are a variety of reasons that plaintiffs can offer to settle cases within policy limits rather than going to trial and seeking the full extent of possible damages.  Often, a defendant will not have money to pay a claim outside the insurance policy and seeking more money that does not exist is an effort in futility. Additionally, an insurance company ignores a Stowers demand at their own risk.  If they fail to settle within policy limits, then the insurance company is potentially liable for the full amount of damages adjudged at trial.

A Stowers demand requires that “(1) the claim against the insured is within the scope of coverage, (2) the demand is within the policy limits, 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 judgement.”  The claim must be covered by the insurance company, the demand must be within policy limits, and the duty to settle is triggered when it is reasonable that the insured could owe more than the insurance policy limits at trial.

Cases involving personal injury can be complicated.  It is not enough to establish who was at fault, damages must also be proved and are subject to a jury determination.  There are times in which you legitimately may be injured more than what the defendant can pay. A Stowers demand is something that should be carefully considered with your personal injury lawyer in the process of negotiation and litigation.  Personal injury attorney Zach Herbert, has the necessary skill and experience to assist you in every stage of litigation to get you the best results possible. Call the personal injury law firm of Herbert Law Group in Dallas today to discuss your case.


Media Contact:

Attorney Zach Herbert

(T): 214-414-3808



  1. G. A. Stowers Furniture Company v. American Indemnity Co., 15 S.W.2d 544, 548 (Tex. App. 1929).
  2. G. A. Stowers Furniture Company v. American Indemnity Co., 15 S.W.2d 544, 545-546 (Tex. App. 1929).
  3. Mid-Continent Insurance Co. v. Liberty Mut. Ins. Co., 236 S.W.3d 765, 776 (2007).