State Farm Mutual Automobile Association v. Cook

          From the 288th Judicial District Court, Bexar County, Texas Trial Court No. 2016-CI-21431 Honorable Stephani A. Walsh, Judge Presiding

          Sitting: Patricia O. Alvarez, Justice, Irene Rios, Justice Liza A. Rodriguez, Justice

          Liza A. Rodriguez, Justice

         AFFIRMED IN PART; REVERSED AND RENDERED IN PART

         This is a permissive appeal of a trial court's order denying a motion for summary judgment which presents the following two controlling questions of law as set forth in the trial court's order:

In Brainard v. Trinity Universal Ins. Co., 216 S.W.3d 809, 818 (Tex. 2006), the Texas Supreme Court explained that an uninsured motorist (UM) 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."

Can a[] UM insured nonetheless sustain a common law or statutory bad faith claim against a UM insurer that withholds payment of UM benefits until such a judgment is obtained?

Can a UM insured sustain a prompt payment claim against a UM insurer that timely pays UM benefits after such a judgment is obtained?

         State Farm Mutual Automobile Association asserts the answer to these questions is "no." With regard to the first question, State Farm argues its liability for the UM claim is not "reasonably clear" until such a judgment is obtained, and no bad faith claim arises as a matter of law until its liability becomes "reasonably clear." With regard to the second question, State Farm argues its liability to pay the claim did not arise until the date the judgment was obtained, and its payment of the claim nine business days after the judgment was entered conclusively established prompt payment as a matter of law. We hold the answer to the first question is "yes," while the answer to the second question is "no."

         Background

         Appellee Veatrice Cook was injured in an automobile accident when a vehicle driven by Roger Cervantes, an uninsured motorist, collided with her vehicle. Cook filed a claim with State Farm seeking uninsured motorist benefits under her policy's coverage. Cook demanded the full policy limit of $100,000, while State Farm offered to pay $15,255.00. As a result, Cook sued Cervantes and State Farm alleging Cervantes's negligence caused her injuries. With regard to State Farm, Cook asserted a breach of contract claim and extra-contractual bad faith and prompt payment claims. Cook's extra-contractual claims were severed and abated pending a judgment establishing her entitlement to uninsured motorist benefits.

         At the trial on Cook's negligence claim, State Farm stipulated Cervantes's negligence proximately caused the accident and Cervantes was an uninsured motorist. The question of damages was submitted to the jury, and the jury awarded Cook: (1) $18,989.05 for past medical expenses; (2) $119,525.00 for future medical expenses; (3) $15,000.00 for past physical pain and mental anguish; (4) $20,000.00 for future physical pain and mental anguish; (5) $50,000.00 for past physical impairment; and (6) $85,000.00 for future physical impairment. Based on the policy limit, the trial court entered a judgment against State Farm for $100,000.00. The judgment was entered on April 12, 2018, and State Farm paid the judgment in full on April 25, 2018.

         On July 31, 2018, State Farm filed a motion for summary judgment in the severed cause asserting it was entitled to a take-nothing judgment on Cook's extra-contractual claims because it was not liable for those claims as a matter of law. As previously noted, the trial court denied State Farm's motion but found an immediate appeal of the aforementioned controlling questions of law would materially advance the ultimate termination of the litigation. This court then granted State Farm's petition for permission to appeal.

         Standard ...