Claimant/Named Insured Limited to $30K Statutory Minimum when Houston First Court Declines to Find a “Separation of Insureds” Implied in Auto Policy
A closer look at Texas Farm Bureau Mutual Ins. Co. v. Minchew.
Garza v. Allstate Fire & Cas. Ins. Co., No. 7:19-CV-129, 2020 WL 3077596 (S.D. Tex. June 10, 2020)
By Lauren L. Burgess, Hanna & Plaut, LLC
The Southern District of Texas, McAllen Division recently issued an opinion in a UIM case that precludes the recovery of extra-contractual damages absent a finding that the insured was entitled to benefits.
In Garza v. Allstate, the plaintiff brought suit against Allstate for violations of Chapter 541 of the Texas Insurance Code on the basis that Allstate denied his underinsured motorist claim “without providing any explanation.” Plaintiff specifically alleged that he was “not seeking any of the proceeds of the UIM insurance policy entered into with” Allstate, and his complaint did not include a breach of contract claim, so the sole issue was extracontractual liability. Allstate filed a motion to dismiss the claims pursuant to Fed. R. Civ. P. 12(b)(6), arguing that Plaintiff’s claims were barred by Brainard v. Trinity Universal, 216 S.W.3d 809 (Tex. 2006). Plaintiff countered that reliance on Brainard’s requirement that the insured obtain a judgment to establish entitlement to recover UIM benefits was misplaced because Chapter 541’s standard was that liability need only be reasonably clear. See Tex. Ins. Code §541.060(a)(3).
Evaluating whether extra-contractual claims for violations of the Texas Insurance Code may be brought absent a claim for breach of contract or a judgment creating a contractual duty to pay the UIM benefits, the Court made an Erie guess and looked to USAA Texas Lloyds Company v. Menchaca for guidance. The court ultimately held that the claims should be dismissed because the insured failed to show that he was entitled to the benefits of the underlying UIM policy or extreme conduct on the part of the insurer to constitute an independent injury.
This case highlights the type of artful pleading by a plaintiff/insured in an attempt to avoid Brainard’s requirement that the insured obtain a judgment against the third-party tortfeasor to create an obligation on the part of the insurer to pay UM/UIM benefits. The Court even noted, “Plaintiff’s decision to request damages for ‘mental anguish’ and past and future medical expenses in the same breath suggests to the Court that Plaintiff is in all actuality seeking the benefits of the underlying UIM policy, which would be barred under the independent-injury rule [of Menchaca].” The case also shows how Menchaca’s independent injury analysis can be applied in the UM/UIM context.