No Matter How Tragic Your Loss and How Strong Your Case, Your Award May be Subject To Insurance Policy Limits

It is all too familiar: Victims of catastrophic accidents are eligible to receive maximum compensation for their monumental losses but there is very little money available with which to pay such claims. How can this happen? Is this fair? These are some of the questions which arise.

Someone who has lost a spouse or a child to an accident caused by negligence will typically file a wrongful death claim. An individual who has been badly hurt in an accident caused by an intoxicated driver may file a personal injury claim. A whole town of people maimed by a chemical explosion from a local industrial plant may seek extraordinary damages in a class action suit. However, without enough insurance coverage to compensate damages of significant amounts, these plaintiffs may face overwhelming disappointment regardless of the outcome of their cases.

This is why personal injury attorneys must examine all aspects of a case prior to proceeding with any legal action, particularly if they plan to take a case on contingency fee basis. While uninsured or underinsured motorist insurance can help in applicable automobile cases (which even having the benefit of UM or UIM is also sometimes inadequate for cases with extensive injuries and economic losses), no such comparable insurance exists if a claim falls under someone’s homeowner’s insurance policy and that policy has insufficient coverage. Likewise, a plaintiff has little recourse when a small corporate entity with no assets has insurance that falls short of what is needed to compensate multiple exorbitant claims.

Lawyers experienced in such far-reaching disasters can sometimes find multiple sources of compensation if multiple defendants are found liable. And, as we have seen, empathetic citizens, not just of the community in which the disaster has occurred, but emerging from worldwide concern, come together to offer social, medical and financial support. Yet, on an individual basis, a case may often be dead-ended because there is no equitable alternative to be found outside of the defendant’s insurance policy limits.

While there is an exception to the rule that an insurance company cannot be held liable for more then the contracted policy limits, the exception can be complicated. The exception in Texas is called the Stowers Doctrine. A Stowers duty is imposed upon an insurance company when three prerequisites are satisfied:
(1) the claim is within the scope of coverage;
(2) the demand is within the policy limits and proposes a full and final release of the defendant(s); and
(3) the terms of the demand are such that an ordinary prudent insurer would accept it, considering the likelihood and degree of the insured’s potential exposure to an excess judgment. See State Farm Lloyds Ins. Co. v. Maldonado, 963 S.W.2d 38 (Tex. 1998). Because this is a complex area of law, an individual with questions should consult a knowledgeable attorney.

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