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In re State Farm Mutual Automobile Insurance Co.

Court of Appeals of Texas, Fourth District, San Antonio

May 9, 2018


          Original Mandamus Proceeding [1]

          Sitting: Sandee Bryan Marion, Chief Justice, Rebeca C. Martinez, Justice Patricia O. Alvarez, Justice



         In the underlying underinsured motorist lawsuit, the real parties in interest sued relators on contractual and extra-contractual causes of action. The trial court severed plaintiffs' contractual claim from their extra-contractual claims, but did not abate the extra-contractual claims pending resolution of the contract claim. In this mandamus proceeding, relators assert the trial court erred when it refused to abate the extra-contractual claims. We agree and conditionally grant the petition for writ of mandamus.


         The real parties in interest (hereinafter, the "plaintiffs") were involved in an automobile accident, which they contend was caused by the negligence of the other driver whom they allege is underinsured. After the accident, the other driver's insurance company tendered the full per person liability policy limit of $30, 000 to each plaintiff. The plaintiffs then made a claim to their insurance company, State Farm Mutual Automobile Insurance Company, under their policy that includes coverage for injuries, damages, and expenses sustained due to an underinsured motorist. According to plaintiffs, State Farm never responded to their demand; therefore, they sued State Farm and its two adjustors, Janet Ann Lorenz-Floyd and Lisa Horton. Plaintiffs alleged State Farm and its employees (collectively, the "relators") failed to pay in accordance with the terms of the policy. The plaintiffs alleged causes of action for breach of contract, as well as extra-contractual claims for violations of the Texas Insurance Code. The relators filed an answer and a motion asking the trial court to (1) sever plaintiffs' contractual claim from their extra-contractual claims and (2) abate the extra-contractual claims until the contract claim is resolved. The plaintiffs did not challenge the request for a severance, but objected to an abatement. The trial court granted the severance and denied the abatement. Relators then filed their petition for writ of mandamus in this court. The plaintiffs filed a response to the petition, to which relators replied.

         In their petition, relators argue the trial court erred by not granting the abatement because the plaintiffs may not litigate their extra-contractual claims until after they obtain a judgment establishing (1) the other driver is at fault, (2) the extent of the resulting damages, and (3) the other driver is underinsured. Relators assert that until plaintiffs obtain this judgment, State Farm is under no contractual duty to pay underinsured motorist ("UIM") benefits.


         The Texas Insurance Code provides as follows:

In this section, "uninsured or underinsured motorist coverage" means the provisions of an automobile liability insurance policy that provide for coverage in at least the limits prescribed by Chapter 601, Transportation Code, that protects insureds who are legally entitled to recover from owners or operators of uninsured or underinsured motor vehicles damages for bodily injury, sickness, disease, or death, or property damage resulting from the ownership, maintenance, or use of any motor vehicle.

Tex. Ins. Code Ann. § 1952.101(a) (West 2009) (emphasis added).

         The Texas Supreme Court has interpreted this language to mean "the UIM insurer is under no contractual duty to pay benefits until the insured obtains a judgment establishing the liability and underinsured status of the other motorist." Brainard v. Trinity Universal Ins. Co., 216 S.W.3d 809, 818 (Tex. 2006) (interpreting prior version of statute). "Neither requesting UIM benefits nor filing suit against the insurer triggers a contractual duty to pay." Id. "Where there is no contractual duty to pay, there is no just amount owed." Id. The Brainard Court held the plaintiff's argument that a "UIM policy is to be treated like other contracts, for which damages are liquidated in a judicial proceeding and attorney's fees incurred are recoverable, misinterprets the nature of UIM insurance":

The UIM contract is unique because, according to its terms, benefits are conditioned upon the insured's legal entitlement to receive damages from a third party. Unlike many first-party insurance contracts, in which the policy alone dictates coverage, UIM insurance utilizes tort law to determine coverage. Consequently, the insurer's contractual obligation to pay benefits does not arise until liability and damages are determined.

Id.; see also Weber v. Progressive County Mut. Ins. Co., 05-17-00163-CV, 2018 WL 564001, at *3 (Tex. App.-Dallas Jan. 26, 2018, no pet. h.) (mem. op.) (concluding trial court did not abuse its discretion when it sustained special exceptions that Weber's claim for breach of contract was premature because her petition did not assert she had obtained a judgment against the underinsured driver; ...

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