By Julie Lambeth, J.D., Executive Vice President, PartnerSource

The Trend

From time to time, we notice trends in the letters of representation that come across our desks. Not long ago, nearly every letter included a preservation of evidence notice accompanied by an exhaustive explanation of what materials we must retain to avoid a spoliation allegation. More recently, a different pattern has emerged: an increasing number of demand letters are labeled as Stowers Demands—even when they fail to meet the actual requirements of the doctrine.

What Is a Stowers Demand?

A Stowers Demand operates as a cost shifting framework designed to create leverage for the claimant by introducing potential conflict between the insured and the carrier. 

The doctrine comes from G.A. Stowers Furniture Co. v. American Indemnity Co. (Tex. Ct. App. 1929) and requires insureds and insurers to evaluate qualifying demands with the care of a reasonable and prudent person. It’s important to know that if a valid Stowers Demand is mishandled by the insured or insurer, they may be liable for the full amount of an adverse judgment, even one exceeding policy limits.

To illustrate this point, let’s imagine ABC Company has a nonsubscriber insurance policy with a self-insured retention of $250,000 and a per employee policy limit of $1,000,000. A valid Stowers Demand for $300,000 is received on a claim that has liability exposure and medical expenses of $30,000. After reviewing the claim file, ABC Company determines that although there is liability exposure, the damages would not exceed their self-insured retention. They decline the demand. At trial, the jury finds ABC Company negligent and awards the plaintiff $350,000. Because ABC Company did not engage the carrier in the decision to decline the Stowers Demand, they are responsible for the entire $350,000 award. 

Let’s take this a step further. Say the medical expenses incurred on the claim are $175,000 and the Stowers Demand is for policy limits. ABC Company declines the demand. The jury finds ABC Company negligent and awards $1,200,000. In this scenario, not only would ABC Company be responsible for the remainder of their self-insured retention, they would be responsible for the entire award--including the $200,000 above the policy limit. 

As you can see, the underlying strategy of using a Stowers Demand is clear: pressure the insured into settling early by suggesting that failure to do so could expose them to damages above their self-insured retention and beyond policy limits. 

Elements of a Valid Stowers Demand

Simply labeling a settlement request as a Stowers Demand does not make it so. A valid Stowers Demand must satisfy all three of the following elements:

1. Must Be Within Policy Limits

An enforceable Stowers Demand must request an amount within the policy limits. Most plaintiff attorneys will issue a demand for policy limits to avoid restricting themselves with a specific number they may not know during pre litigation. While this allows for flexibility, a blanket demand for full limits can fail the reasonableness requirement when the injuries or exposure do not justify such an amount.

A newer tactic is emerging: some plaintiff attorneys now demand a specific amount within policy limits, often within the insured’s self-insured retention. This approach can increase pressure on the insured and enhance the claimant’s argument that the demand is reasonable. Even without a formal “hammer clause,” many policies require the insured not to unreasonably refuse a settlement the carrier believes should be accepted. This creates the very leverage the Stowers doctrine is intended to generate.

2. Must Include an Unconditional Full Release

The Stowers doctrine also requires that the demand include an unconditional, full release of the insured. Conditional language—phrases such as “if,” “provided that,” or “subject to”—creates restrictions on the settlement and prevents the demand from being truly capable of acceptance. When conditions are added, the offer is no longer a clear opportunity to settle; therefore, it is not an effective Stowers Demand.

3. Must Be Reasonable in Both Time and Amount

The final element of an enforceable Stowers Demand is reasonableness, both in the time allowed for response and the amount demanded in light of the insured’s potential exposure.

Timeframe

A Stowers Demand must provide a reasonable period for evaluating risk and formulating a meaningful response. What constitutes “reasonable” depends on the facts and circumstances of the claim. While some courts have found a 14 day window acceptable, a general rule of thumb is that 30 days allows sufficient time for investigation, assessment, and internal review. Demands with arbitrarily short deadlines frequently fail this element.

Potential Exposure

To determine whether a demand is reasonable, one must analyze the likelihood that a judgment would exceed the policy limits. In other words: Would a reasonable, prudent person—faced with the facts, injuries, and circumstances of the case—accept the demand?

It is increasingly common to see plaintiff attorneys label a policy limits demand as a “Stowers Demand” even when the injuries are minor or when liability may rest with a third party. These demands are not enforceable under Stowers because a reasonable insured/insurer would not pay six or seven figures for a minimal exposure case. As a result, most of the Stowers Demands we receive fail the reasonableness test and therefore do not satisfy the doctrine.

Where plaintiff attorneys gain leverage is through a demand for a specific dollar amount beneath the self insured retention—an amount that appears modest compared to potential exposure. This strategic positioning is designed to intensify the perceived risk to both the insured and the insurer.  

Coordinating with Your Carrier

Before rejecting any demand—especially one involving questionable excess exposure risk—it is critical to consult with your carrier. Obtaining carrier approval helps safeguard against future allegations that declining the demand was unreasonable and subjecting you to exposure for a full adverse judgment.  

Conclusion

Although Stowers labeled demands are increasingly common, most do not satisfy the doctrine’s strict requirements. Understanding the true elements of a Stowers Demand—policy limits compliance, an unconditional release, and overall reasonableness—allows you to distinguish legitimate risk from mere leverage tactics. By evaluating each demand through this framework and coordinating closely with your carrier, you can protect your interests, support sound decision making, and confidently navigate claims strategy without being pressured by labels that fail to meet the legal standard.

Your PartnerSource Team Leader is available to assist you through the Stowers analysis and, if necessary, help coordinate with the carrier to ensure alignment, documentation, and risk protection.