What Is the Stowers Doctrine?
The Stowers doctrine is a cornerstone of Texas insurance law that protects insured drivers from being personally exposed to judgments exceeding their policy limits. Under this doctrine, an insurance company has a legal duty to exercise ordinary care when handling settlement opportunities on behalf of its insured. In plain terms, if a valid, reasonable settlement offer is made within policy limits, and the insurance company unreasonably refuses it, the insurer—not the insured—can later be held responsible for any excess judgment beyond those limits.
To trigger a Stowers duty, the settlement offer must meet specific criteria: it must be within the policy limits, unconditional, and must include an offer to fully release the insured from liability. If the insurer rejects such an offer and a jury later awards an amount greater than the policy, the insurer can be sued for negligence or bad faith for failing to settle. As the Fifth Circuit explained in Am. Guar. & Liab. Ins. Co. v. ACE Am. Ins. Co., 990 F.3d 842 (5th Cir. 2021), the key question is whether a reasonable and prudent insurer would have accepted the offer given the likelihood of an excess judgment.
In personal injury litigation, the Stowers doctrine is a powerful tool for both policyholders and plaintiffs. Insurance companies often try to save a few thousand dollars by making lowball offers, even when liability is clear and the injuries are serious. This gamble can backfire—if the case goes to trial and the verdict exceeds policy limits, the insurer may have to pay the entire amount, not just the policy maximum. In effect, the Stowers doctrine forces insurers to treat settlement negotiations seriously and to prioritize their insured’s financial protection over corporate cost-saving strategies.
For injury victims, Stowers letters are a strategic way to pressure insurers into paying fair value without prolonged litigation. For insured defendants, it’s a safeguard—ensuring that if their insurance company refuses a reasonable settlement, they won’t be left personally responsible for an outsized judgment.
