What does Stowers Doctrine mean? Read on to discover the definition & meaning of the term Stowers Doctrine - to help you better understand the language used in insurance policies.
Holds that a liability insurer that undertakes the defense of an insured has a duty to act in good faith in settling a liability claim; named for a seminal Texas case, G.A. Stowers Furniture Co. v. American Indem. Co., 15 S.W.2d 544 (Tex. Comm'n App. 1929). Courts have interpreted the "duty to defend" language in standard insurance policies as giving liability insurers absolute control over the conduct of the defense. Whether to settle a liability claim is therefore completely within the discretion of the liability insurer under the terms of the policy contract. If the injured party makes a pretrial offer to settle a liability claim for an amount within the liability policy limit, the insurer is not obligated to accept the offer and has the contractual right to take the claim to trial. To protect insureds from abusive practices, courts impose an extracontractual duty on insurers to act in good faith when deciding whether to reject a pretrial settlement offer that is within policy limits. If the insurer acts unreasonably and rejects a good pretrial settlement offer within policy limits, unwisely takes the claim to trial, loses, and the jury returns a verdict against the insured for an amount above policy limits, the defaulting insurer may be liable to pay the entire judgment under the Stowers Doctrine, even the excess portion above policy limits.
We hope the you have a better understanding of the meaning of Stowers Doctrine.