Motion to Abate in FREEMAN, ARTEMIZ vs. PROGRESSIVE COUNTY MUTUAL INSURANCE COMPANY| Trellis.Law

On April 11, 2019 a Motion-Secondary was filed involving a dispute between Freeman, Artemiz, and Progressive County Mutual Insurance Company, for Motor Vehicle Accident in the District Court of Harris County.

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CAUSE NO. 2019

ARTEMIZ FREEMAN IN THE DISTRICT COURT OF

Plaintiff

HARRIS COUNTY, TEXAS
PROGRESSIVE COUNTY MUTUAL
INSURANCE COMPANY

Defendant
JUDICIAL DISTRICT

DEFENDANT REPLY TO PLAINTIFF’S RESPONSE TO DEFENDANT’S
MOTION TO SEVER AND ABATE

TO THE HONORABLE JUDGE REBEEA SULTAN COLLIER:

COMES NOW, Defendant Progressive County Mutual Insurance Company (hereafter

referred to as “Progressive” or “Defendant”) and files its Reply to Plaintiff’s Response to

Defendant’s Motion to Sever and Abate, pursuant to Rules 41 and 174(b) of EXAS ULES OF

IVIL ROCEDURE, and in support thereof, would respectfully show the Court the following:

RGUMENTS AND UTHORITIES

Texas insured have two paths to take to establish damages caused by an insurer’s violation

of the Insurance Code: “either the insured establishes (1) a right to receive benefits under the

policy or (2) an injury independent of a right to benefits. Regardless of whether Plaintiff is

asserting contractual and extracontractual claims asserting extracontractual claims

which is unclear from her previously filed pleadings and prior motions furcation and abatement

In re State Farm Mut. Auto. Ins. Co., 19 0791, 2021 WL 1045651, at *3 (Tex. Mar. 19, 2021)
are appropriate to determine whether Progressive breached the UIM policy. Under these

circumstances, a determination otherwise, according to the Texas Supreme Court, is an abuse of

discretion.

a. Both contractual and extracontractual claims.

When asserting a UIM claim, plaintiffs commonly assert claims for breach of their

insurance policy as well as statutory (extracontractual) claims pursuant to the Texas Insurance

Code. These trials are often bifurcated to first determine the liability for the third-party motorist

and the damages suffered by the insured. After the Plaintiff is successful in the first trial, then they

may proceed with second trial—litigating the extracontractual violations.2

As discussed in greater detail in Defendant’s Motion to Sever and Abate, Plaintiff pled

breach of contract, breach of duty of good faith and fair dealing, violation of Chapter 541 and 542

of the Insurance Code, and violations of the DTPA.3 Under Menchaca, “a plaintiff seeking

recovery of benefits owed under an insurance policy must first establish his entitlement to policy

benefits as a contractual matter before he can recover them as damages for an Insurance Code

claim.”4 This commonly followed process is logical for two reasons: (1) bifurcation preserves

judicial resources, and (2) evidence of the insurer’s settlement may be admissible in one phase of

the trial but inadmissible in the other.5 Plaintiff has not plead a truly independent injury, therefore,

her extracontractual claims cannot survive absent a showing of entitlement to benefits under the

2
In re State Farm Mut. Auto. Ins. Co., 19-0791, 2021 WL 1045651 (Tex. Mar. 19, 2021).
3
See Pl.’s 1st Am. Pet., filed June 26, 2019 (Plaintiff also sought Declaratory Judgment).
4
USAA Texas Lloyd v. Menchaca, 545 S.W.3d 479 (Tex. 2018). See also, In re State Farm Mut. Auto. Ins. Co., 19-
0791, 2021 WL 1045651, at *1 (Tex. Mar. 19, 2021).
5
In re State Farm Mut. Auto. Ins. Co., 19-0791, 2021 WL 1045651 (Tex. Mar. 19, 2021).

2
policy. Accordingly, Plaintiff’s contractual and extracontractual claims must be bifurcated until

the Plaintiff fully establishes that she is entitled to benefits under the policy.

b. Extracontractual claims only.

If Plaintiff is now choosing to abandon her breach of contract claims and pursue her

extracontractual claims only, the Supreme Court’s recent State Farm decision also dictates that

this matter be bifurcated and abated.6 Plaintiffs Nicastro and Dodd both sought UIM benefits

following a motor vehicle accident with a third-party tortfeasor. However, they only brought

Insurance Code claims and asserted there was no breach of contract claim to sever and abate. The

Texas high court recognized that despite the legal acrobatics, the Nicastro and Dodd plaintiffs still

had to establish a right to benefits under the policy in order to proceed with their statutory claims.7

Similar to the Nicastro and Dodd plaintiffs, Plaintiff Freeman has not plead any injuries

independent of her right to receive policy benefits. Each of her extracontractual claims are

predicated upon entitlement to the policy benefits. Accordingly, her claims should be bifurcated

and a trial on her extracontractual claims abated until she obtains a determination of the third-party

driver’s liability and amount of damages.

II. CONCLUSION AND PRAYER

Menchaca made it clear, “an insured cannot recover any damages based on an insurer's

statutory violation if the insured had no right to receive benefits under the policy and sustained no

injury independent of a right to benefits.”8 Here, regardless of whether Plaintiff is asserting both

6
In re State Farm Mutual Insurance Company is attached to Defendant’s Reply for the Court’s convenience as
APPENDIX A.
7
Id. at *7 (“While Nicastro and Dodds pleaded their cases unlike past UIM plaintiffs, the showings they must make
in order to recover are the same showings required of other UIM plaintiffs who pleaded both breach-of-contract and
statutory claims and were required to try those claims separately.”)
8
USAA Texas Lloyds v. Menchaca, 545 S.W.3d 479, 489 (Tex. 2018)

3
contractual and extracontractual claims, or extracontractual claims only, this matter must be

bifurcated and abated until there is a judicial determination of Plaintiff’s right to receive benefits

under the insurance policy.

WHEREFORE, PREMISES CONSIDERED, Defendant prays its Motion for Severance

and Abatement be granted; that the UIM case alone proceed to trial and the breach of contract and

extra-contractual claims be severed; that all discovery not relevant to the UIM case be abated until

after resolution of the UIM case; and for such other and further relief to which Defendant may

show itself justly entitled.

Respectfully Submitted,

SMITH PARKER ELLIOTT, PLLC

_________________________________
Patrick N. Smith
SBN: 00797458
PSmith.service@spe-law.com
Dominique M. Boykins
SBN: 24097410
DBoykins.service@spe-law.com
10355 Centrepark Dr., Suite 240
Houston, Texas 77043
Tel: (832) 220-5400
Fax: (832) 220-3225

ATTORNEYS FOR DEFENDANT,
PROGRESSIVE COUNTY MUTUAL
INSURANCE COMPANY

4
CERTIFICATE OF SERVICE

I certify that on this the 3rd day of May 2021 copy of the foregoing instrument was served
on all counsel of record listed below, together with this Certificate of Service and the original was
promptly filed with the District Clerk’s office of Harris County, Texas.

Robert S. Kwok
Joshua R. Leal
KWOK DANIEL LTD., L.L.P.
jleal@kwoklaw.com
9805 Katy Freeway, Suite 850
Houston, Texas 77024
Tel: (713) 773-3389
Fax: (713) 773-3960
ATTORNEYS FOR PLAINTIFF

☐ mail
☐ personal delivery
☐ delivery to clerk’s office
☒ electronic means

__________________________________________
Patrick N. Smith/Dominique M. Boykins

5
In re State Farm Mutual Automobile Insurance Company, --- S.W.3d ---- (2021)
64 Tex. Sup. Ct. J. 539

insurer lacked adequate appellate remedy.
2021 WL 1045651

NOTICE: THIS OPINION HAS NOT BEEN RELEASED
Petition conditionally granted.
FOR PUBLICATION IN THE PERMANENT LAW
REPORTS. UNTIL RELEASED, IT IS SUBJECT TO
REVISION OR WITHDRAWAL. On Petition for Writ of Mandamus
Supreme Court of Texas.
Attorneys and Law Firms
IN RE STATE FARM MUTUAL
Beth D. Bradley, Dallas, Matthew P. Rigney, Lisa Ann Songy,
AUTOMOBILE INSURANCE COMPANY for Amici Curiae American Property Casualty Insurance
and Terecina Shahan, Relators Association, Insurance Council of Texas.
In re State Farm Mutual Automobile
Armando De Diego, Melissa A. Lorber, Austin, for Relators
Insurance Company and Todd Shahan, Terecina, State Farm Mutual Automobile Insurance
Joseph Dauper, Relators Company.

No. 19-0791, No. 19-0792 Carlos Cortez, Meghana Wadhwani, Matthew J. Kita, Dallas,
| for Real Party in Interest.
Argued December 2, 2020
Opinion
|
OPINION DELIVERED: March 19, 2021 Justice Blacklock delivered the opinion of the Court.

Synopsis *1 These original proceedings arise from suits by holders
Background: Insureds brought action against insurer for of underinsured motorist (“UIM”) insurance seeking recovery
violation of insurance code, alleging that insureds were against their insurers following trafficaccidents. Plaintiffs
injured in automobile accidents and that insurer violated in such cases often bring claims for breach of their
insurance code by failing to pay underinsured motorist insurance policies as well as statutory, extracontractual claims
(UIM) benefits. Insurer moved for bifurcated trial, arguing authorized by the Insurance Code. The common practice has
that before its liability for extracontractual claims could be been to sever and abate the Insurance Code claims while an
determined, initialtrialwas necessary to establish liability initial trial is conducted on the breach-of-contract claim to
and underinsured status of other motorists. The County Court determine whether the underinsured motorist was liable for
at Law No. 1, Dallas County, Sally Montgomery, J., denied the accident and, if so, the amount of damages suffered by
motion. Insurer petitioned for mandamus relief. The Dallas the insured. A plaintiff who succeeds in this first phase of the
Court of Appeals, 606 S.W.3d 780, denied petition. Insurer case may then proceed to litigate its Insurance Code claims in
petitioned the Supreme Court for mandamus relief. light of the result of the initial trial.

A wrinkle in the cases before us is that the insureds did not
sue for breach of their insurance policies. Although they seek
Holdings: The Supreme Court, Blacklock, J., held that: recovery of the amount they claim to be owed under their
policies, they brought only extracontractual, Insurance Code
insurer's alleged violation of insurance code was not claims. They contend that because they brought only statutory
truly independent of insureds' right to receive benefits claims, and because there are no breach-of-contract claims
under UIM policy, and thus insureds could not recover to sever and try first, no bifurcation of trial is required. As
damages for insurer's alleged insurance-code violations under explained below, we disagree.
independent-injury theory;

trial court abused its discretion by denying insurer's motion Under USAA Texas Lloyds v. Menchaca, 545 S.W.3d
to bifurcate; and 479 (Tex. 2018), a plaintiff seeking recovery of benefits

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In re State Farm Mutual Automobile Insurance Company, --- S.W.3d ---- (2021)
64 Tex. Sup. Ct. J. 539

owed under an insurance policy must first establish his explanation for the discrepancy between the amount paid and
entitlement to policy benefits as a contractual matter before the amount requested. Dodds' UIM policy limit is $50,000.
he can recover them as damages for an Insurance Code
claim. As a result, although the plaintiffs'
claims in these Nicastro and Dodds both sued State Farm and two State Farm
cases are not labeled breach of contract, they nevertheless adjusters, who they allege failed “to attempt in good faith
must establish State Farm's liabilityunder their insurance to effectuate a prompt, fair,and equitable settlement of a
policies as a prerequisite to recovery on their Insurance Code claim with respect to which the insurer's liability has become
claims. Just as an initial “car crash” trial is typically required
reasonably clear,” Tex. Ins. Code § 541.060(a)(2)(A), and
to determine the underinsured motorist's liabilityand the
failed to “promptly provide to a policyholder a reasonable
amount of damages when the insured brings both breach-of-
explanation of the basis in the policy, in relation to the facts
contract and Insurance Code claims, insureds who bring only
or applicable law, for the insurer's denial of a claim or offer
Insurance Code claims seeking policy benefits as damages
must also succeed in an initial“car crash” trialin order of a compromise settlement of a claim,” id. § 541.060(a)
to lay the predicate for their statutory claims. We therefore (3). Neither Nicastro nor Dodds sued State Farm for breach
conditionally grant the petitions for writ of mandamus and of his UIM policy.
direct the trialcourts to proceed in accordance with this
opinion. Dodds' UIM policy covers amounts he is “legally entitled to
recover” from an underinsured motorist when “the total limits
of insurance and self-insurance for bodily injury liability from
all sources are less than the amount needed to compensate
I.
the insured for bodily injury damages.” Nicastro's policy
covers amounts he is “legally entitled to recover” from an
BACKGROUND underinsured motorist whose limit of liability “is not enough
to pay the full amount the covered person is legally entitled
Real Partiesin Interest Al Dodds and Alexander Nicastro to recover as damages.” As damages for their Insurance Code
have UIM insurance with State Farm. The same counsel claims, Nicastro and Dodds both seek the amounts State Farm
represents Nicastro and Dodds in this Court. allegedly should have paid them under their UIM policies.

Nicastro was injured when Dominique Smith allegedly In both cases, State Farm filed motions for bifurcated trial
swerved into Manuel Reyes who, in turn, collided with under Rule 174(b). State Farm argued that before its liability
Nicastro. Nicastro seeks to recover “past medical expenses for Insurance Code claims can be determined, an initial trial is
and anticipated future medical expenses totaling up to necessary to establish the liability and underinsured status of
$438,247.00.” According to State Farm, Nicastro provided the other motorists. The matters to be determined in this initial
documentation of $11,747 in incurred medical costs. Nicastro trial,State Farm contends, are necessary predicates to the
requested State Farm approve his acceptance of a $30,000 plaintiffs' statutory claims. As State Farm sees it, the plaintiffs
settlement with Smith's insurer. State Farm obliged and told must obtain a judicial determination that the third parties are
Nicastro he “has been fullyindemnified” for his medical liable for their injuries and are underinsured motorists before
expenses. Nicastro then sought UIM benefits from State the plaintiffscan recover on theirInsurance Code claims.
Farm. His UIM policy limit is $100,000, but State Farm Nicastro and Dodds opposed State Farm's motions, arguing
refused to pay anything. that (1) they may recover UIM benefits as extracontractual
damages without firstestablishing that they are “legally
*2 Dodds was injured when Jose Cojchamale allegedly entitled to recover” from the underinsured motorists if they
ran a red lightand struck his vehicle. The impact caused do not allege a breach-of-contract claim, and (2) this Court's
Dodds to strike another vehicle. Dodds seeks to recover
decision in USAA Texas Lloyds v. Menchaca, 545 S.W.3d
past medical expenses of $45,668.92 and future medical
expenses of $212,250.00, totaling $257,918.92. With State 479 (Tex. 2018), overruled Brainard v. Trinity Universal
Farm's approval, Dodds accepted a $30,000 settlement from Insurance Co., 216 S.W.3d 809 (Tex. 2006), and changed
Cojchamale's insurer, the maximum amount of Cojchamale's well-established principles governing UIM claims.
policy. Dodds then sought UIM benefits from State Farm,
which paid Dodds an additional $18,190.41 without an

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In re State Farm Mutual Automobile Insurance Company, --- S.W.3d ---- (2021)
64 Tex. Sup. Ct. J. 539

The trialcourts denied State Farm's motions. State Farm for the insurer's denial of a claim or offer of a compromise
petitioned for mandamus relief in the Fifth Court of Appeals, settlement.” As an initial matter, the parties disagree about
arguing the trialcourts abused their discretion in denying what the plaintiffs must show to recover on their Insurance
State Farm's motions to bifurcate. The court of appeals denied Code claims. We must resolve that disagreement before
the petitions without substantive explanation. State Farm filed assessing whether State Farm is entitled to the bifurcated trials
mandamus petitions in this Court. it seeks.

State Farm contends a UIM insurer has no obligation to pay
policy benefits as damages for Insurance Code claims unless
II.
the insured first establishes the insurer's liability under the
UIM policy. To establish that liability, State Farm argues, the
STANDARD OF REVIEW insured must obtain a judicial determination that the other
motorist is liable for the crash and has insurance coverage
Mandamus is an extraordinary remedy that will issue “only insufficient to cover the insured's damages. Nicastro and
to correct a clear abuse of discretion or the violation of Dodds disagree. They contend State Farm is liable to them if
a duty imposed by law when there is no other adequate it violates the Insurance Code, irrespective of whether they
remedy by law.” Walker v. Packer, 827 S.W.2d 833, can prove entitlement to policy benefits. They argue that
to succeed on their Insurance Code claims they must only
839 (Tex. 1992) (orig. proceeding) (quoting Johnson
show that (1) State Farm failed to offer them fair settlements
v. Fourth Court of Appeals, 700 S.W.2d 916, 917 (Tex.
when its liability became “reasonably clear,” or (2) State Farm
1985) (orig. proceeding)). Generally, mandamus relief is
failed to provide reasonable explanations for its denials of the
unavailable “to correct incidental trialcourt rulings when
claims or offers of compromise settlements. Tex. Ins. Code
there is a remedy by appeal.” In re Entergy Corp.,
142 S.W.3d 316, 320 (Tex. 2004) (orig. proceeding) (per §§ 541.060(a)(2)(A), (a)(3).
curiam). A trial court abuses its discretion when its “ruling is
arbitrary and unreasonable, made without regard for guiding In Menchaca,1 this Court recognized two paths an insured
legal principles or supporting evidence.” In re Nationwide may take to establishthe damages caused by an insurer's
Ins. Co. of Am., 494 S.W.3d 708, 712 (Tex. 2016) (orig. violation of the Insurance Code: either the insured establishes
proceeding). We determine the adequacy of an appellate (1) “a right to receive benefits under the policy” or (2) “an
remedy “by balancing the benefits of mandamus review
injury independent of a right to benefits.” 545 S.W.3d
against its detriments.” In re Team Rocket, L.P., 256 at 500. Under the first path, ifan insured “establishes a
S.W.3d 257, 262 (Tex. 2008) (orig. proceeding). right to receive benefits under the insurance policy [he]
can recover those benefits as ‘actual damages’ under the
[Insurance Code] if the insurer's statutory violation causes the
III. loss of benefits.” Id. at 495. And under the second path, “if
an insurer's statutory violation causes an injury independent
THE INSURANCE CODE CLAIMS of the insured's right to recover policy benefits, the insured
may recover damages for that injury even if the policy does
*3 Nicastro and Dodds sued State Farm for violations of
not entitle the insured to receive benefits.” Id. at 499. As
sections 541.060(a)(2)(A) and (a)(3) of the Insurance
Menchaca made clear, there is no alternative to these two
Code. An insurer violates section 541.060(a)(2)(A) if it pathways. “An insured cannot recover any damages based
“fail[s] to attempt in good faith to effectuate a prompt, fair, on an insurer's statutory violation if the insured had no right
and equitable settlement of a claim with respect to which the to receive benefits under the policy and sustained no injury
insurer's liability has become reasonably clear.” An insurer
independent of a right to benefits.” Id. at 489.
violates section 541.060(a)(3) if it“fail[s] to promptly
provide to a policyholder a reasonable explanation of the *4 The plaintiffs contend this two-pronged framework is
basis in the policy, in relation to the facts or applicable law, limited to homeowners' insurance claims like the one in

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In re State Farm Mutual Automobile Insurance Company, --- S.W.3d ---- (2021)
64 Tex. Sup. Ct. J. 539

from policy benefits, the general rule applies and precludes
Menchaca, but that is not the case. The dual pathway
recovery unless the policy entitles the insured to those
outlined in Menchaca emerges from a line of cases
benefits.” Id.
that includes UIM cases and does not distinguish between
varietiesof insurance policies. See, e.g., Provident Am. Nicastro and Dodds emphasize that theirclaims under the
Ins. Co. v.Castañeda, 988 S.W.2d 189, 198 (Tex. 1998) Insurance Code are not premised on the denial of benefits.
(addressing damages recoverable if an insurer fails to Instead, they are premised on the failure to offer a reasonable
adequately investigate a health insurance policy claim); settlement and the failure to explain the denial of benefits.
Republic Ins. Co. v. Stoker, 903 S.W.2d 338, 341 (Tex. True, the claims are premised on State Farm's violations of
1995) (recognizing the possibilityan insurer may cause the Insurance Code, not its violations of the UIM policies.
injury independent of UIM policy claim when denying the But as explained in Menchaca and prior cases, when it
claim); Aranda v.Ins. Co. ofN. Am., 748 S.W.2d 210, comes to damages, the question is not whether the insured's
213 (Tex. 1988) (developing test to assess whether insurer's claims are independent of the right to receive policy benefits.
denial of insurance claims was in “good faith” in workers' The question is whether the alleged “damages are truly
independent of the insured's right to receive policy benefits.”
compensation context), overruled by Tex. Mut. Ins. Co. v.
Ruttiger, 381 S.W.3d 430 (Tex. 2012). Id. at 499–500 (emphasis added); see also Castañeda,
988 S.W.2d at 198 (“[N]one of the actions or inactions of
Provident American was the producing cause of any damage
separate and apart from those that would have resulted from
A.
a wrongful denial of the claim.”).2

INDEPENDENT INJURY *5 Again, the only damages claimed by Nicastro and Dodds
are predicated on State Farm's obligation to pay them under
Relying on Menchaca's second path, Nicastro and Dodds their UIM policies. Said otherwise, the insureds' theory of
allege State Farm caused them independent injuries by damages is thatif State Farm had followed the Insurance
violating the Insurance Code. We continue to recognize “the Code, it would have paid more in UIM benefits than it did.
possibility that in denying [a] claim, the insurer may commit These are not “damages [that] are truly independent of the [ ]
some act, so extreme, that would cause injury independent of right to receive policy benefits.” Id. To the contrary, the
the policy claim.” Stoker, 903 S.W.2d at 341. To establish insureds' entitlement to these damages is entirely predicated
“injury independent of the policy claim,” however, Nicastro on their entitlement to policy benefits. They assert no injuries
and Dodds must show their “damages are truly independent independent of the denial or underpayment of benefits. Their
statutory claims are merely a means to recoup damages in the
of [their] right to receive policy benefits.” Menchaca,
amount of a reasonable settlement offer under the policies;
545 S.W.3d at 500. In other words, to recover under an
they are not “truly independent” of Nicastro's and Dodds'
independent-injury theory, the insureds must establish that
State Farm's statutory violations caused an injury apart from rights to receive policy benefits. See id. at 499–500. As
State Farm's failure to pay as much as the insureds believe a result, the insureds cannot recover for State Farm's alleged
they should have been paid under their UIM policies. Insurance Code violations under an “independent-injury”
theory.3
Here, however, the only injury Nicastro and Dodds assert
is State Farm's failure to adequately pay them under their
UIM policies. They seek, as damages for their Insurance
B.
Code claims, the amount they believe State Farm should
have offered or paid under the policies. This is precisely the
theory of recovery Menchaca foreclosed in the absence RIGHT TO RECEIVE BENEFITS UNDER THE
of a rightto policy benefits: “When an insured seeks to POLICY
recover damages that are predicated on, flow from, or stem

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In re State Farm Mutual Automobile Insurance Company, --- S.W.3d ---- (2021)
64 Tex. Sup. Ct. J. 539

Because the insureds do not allege “damages [that] are truly CV, 2019 WL 5699735, at *5 (Tex. App.—Houston [1st
independent of the insured's right to receive policy benefits,” Dist.] Nov. 5, 2019, orig. proceeding) (per curiam) (mem.
they must establish their rights to policy benefits in order to op.) (ordering the trial court to abate the severed statutory
extracontractual claims until resolution of breach of contract
recover on their Insurance Code claims. Id. Establishing
a right to UIM policy benefits,however, is not always a suit).4
straightforward enterprise. As this Court previously observed,
a “UIM contract is unique because, according to its terms, *6 We agree with the many court of appeals decisions
benefits are conditioned upon the insured's legal entitlement holding that “extra-contractual claims must be [bifurcated]
until the underinsured motorist breach of contract claim
to receive damages from a third party.” Brainard, 216
is determined.” In re AllstateFire & Cas. Ins. Co., No.
S.W.3d at 818.
12-17-00266-CV, 2017 WL 5167350, at *4 (Tex. App.—
Tyler Nov. 8, 2017, orig. proceeding) (mem. op.).In the
This “unique” aspect of UIM claims arisesfrom both the
unique context of UIM litigation, this common bifurcation
Insurance Code and the terms of UIM policies. The Insurance
process makes sense for at least two reasons.
Code requires that UIM coverage must:

provide for payment to the insured of all sums which he First,bifurcation tends to preserve judicial resources. The
shall be legally entitled to recover as damages from owners plaintiffs' Insurance Code claims cannot be resolved without
or operators of underinsured motor vehicles because first determining whether State Farm has a contractual
of bodily injury or property damage in an amount up duty to pay UIM benefits. “The rationale for requiring
to the limit specified in the policy, reduced by the [bifurcation] of these types of [statutory] claims is that they
amount recovered or recoverable from the insurer of the may be rendered moot by a determination of underlying
underinsured motor vehicle. [non-]liability.” Id. The insureds' statutory claims need not
Tex. Ins. Code § 1952.106 (emphasis added). The policies be considered at all if State Farm has no duty to pay under
at issue here employ similar “legally entitled to recover” their policies. Like any other litigant,“[i]nsurers have a
language. Under both the Insurance Code and these policies, substantial right not to undergo the expense of litigating
State Farm “is obligated to pay damages which the insured and conducting discovery on issues that ultimately may be
is ‘legally entitled to recover’ from the underinsured unnecessary because of the result of the underlying tort case.”
In re Colonial Cnty. Mut. Ins. Co., 2019 WL 5699735, at *5;
motorist.” Brainard, 216 S.W.3d at 818. In Brainard, see also In re Germania Ins. Co., 2018 WL 1904911, at *4
we interpreted this language to mean that an “insurer's (“If the causes were not severed, Germania would be required
contractual obligation to pay benefits does not arise until to put forth the effort and expense of conducting discovery,
liability and damages are determined.” Id. Thus, in order preparing for trial, and conducting voir dire on bad faith and
to establish State Farm's liability to them under their UIM other extra-contractual claims that could be rendered moot
policies—as they must to recover on their Insurance Code by the portion of the trial relating to breach of contract for
claims—Nicastro and Dodds must first obtain determinations uninsured motorist benefits.”).
of the third-party drivers' liability and the amount of damages.
Second, bifurcation of trialis proper because evidence of
With this legal background in mind, we must decide whether the insurer's settlement offer may be admissible in one phase
State Farm is entitled to bifurcated trials, which would consist of the trial but inadmissible in the other. When determining
of (1) initial “car crash” trials to determine the underinsured whether an insurer has breached its UIM policy by failing
motorists' liabilities and therefore State Farm's liability underto pay, courts frequently exclude evidence of a settlement
the UIM policies and, if the insureds succeed at the initial offer because the offer “creates prejudice” by suggesting
trials, (2) trials of the Insurance Code claims to determine the insurer has already admitted some liability. In re State
whether State Farm violated its statutory obligations. State Farm Mut. Auto. Ins. Co., 395 S.W.3d at 234; Tex. R. Evid.
Farm urges us to follow the practice of the courts of appeals, 408.5 On the other hand, in the trial of bad-faith claims, the
which routinely require bifurcation of trial in cases, like settlement offer is generally admissible as evidence of the
these two, where the insurer's liability for statutory claims is insurer's good-faith (or bad-faith) efforts to resolve the claim.
predicated on its liability for breach of the UIM policy. See,
See Liberty Nat'l Fire Ins. Co. v. Akin, 927 S.W.2d 627, 630
e.g., In re Colonial Cnty. Mut. Ins. Co., No. 01-19-00391-

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64 Tex. Sup. Ct. J. 539

(Tex. 1996).6 “Absent [bifurcation], an insurer is presented of the trials of the Insurance Code claims, pursuant to Rule
with a ‘Catch-22’ in thatits decision to admit or exclude 174(b), which would not require the plaintiffs to amend their
evidence of a settlement offer jeopardizes the successful pleadings or bring unwanted claims.
defense of the other [issue].” In re State Farm Mut. Auto. Ins.
Co., 395 S.W.3d at 234. “[I]n this situation, the trial court can“When all of the facts and circumstances of the case
only reach one decision which adequately protects the parties' unquestionably require a separate trialto prevent manifest
rights and that is to order [bifurcation] of the [issues].” In reinjustice, and there is no fact or circumstance supporting or
Am. Nat'l Mut. Ins. Co., 384 S.W.3d at 435. tending to support a contrary conclusion, and the legal rights
of the parties will not be prejudiced thereby, there is no room
*7 We agree with the consensus view of the courts of appeals for the exercise of discretion.” Womack v. Berry, 156 Tex.
on this point. Requiring State Farm to litigate its liability for44, 291 S.W.2d 677, 683 (1956). Because the Insurance Code
UIM policy benefits alongside its liability for extracontractual claims at issue here require Nicastro and Dodds to make the
claims would unduly prejudice the insurer and amounts to very same showings as the many other plaintiffs whose UIM
an abuse of discretion by the trial court. See id. at 434 (“[A] claims are routinely subject to bifurcated trials, the trial courts
majority of intermediate courts of appeals have concluded that abused their discretion by denying State Farm's motions to
it is an abuse of discretion for a trial court to refuse to grant a
bifurcate trial under Rule 174(b).
severance of contractual claims from extra-contractual claims
when an offer of settlement has been made by the insurer.”).

IV.
Of course, all the court of appeals cases cited above arise from
cases involving both breach-of-contract claims and Insurance
Code claims. Nicastro and Dodds argue that their cases should ADEQUATE APPELLATE REMEDY
be treated differently because they brought only Insurance
Code claims. As a result, they contend, there is no breach-of- State Farm argues it lacks an adequate appellate remedy due
contract claim to “sever” and no claim to “abate.” Even so, the to the time and money it would waste waiting on the eventual
logic of the commonly applied sever-and-abate rule applies reversal of improperly conducted proceedings. Nicastro and
with equal force here, although the procedural machinations Dodds respond that State Farm has an adequate remedy by
may be slightly different. While Nicastro and Dodds pleaded appeal: “It can pursue discovery, attempt to prove that it did
their cases unlike past UIM plaintiffs, the showings they must not violate the Insurance Code, and seek summary judgment,
make in order to recover are the same showings required a declaratory judgment, prevail at trial, and if it fails at any of
of other UIM plaintiffs who pleaded both breach-of-contract these options, it can always challenge the sufficiency of the
and statutory claims and were required to try those claims evidence (or any other adverse ruling) in a traditional appeal.”
separately. Real Party in Interest's Response at 2–3. We agree with State

Case Info

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RABEEA COLLIER Track Judge’s New Case

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Document Filed Date

May 03, 2021

Case Filing Date

April 11, 2019

County

Parties

FREEMAN, ARTEMIZ Plaintiff
LEAL, JOSHUA R. Attorney for the Plaintiff
LEAL, JOSHUA RUDY Attorney for the Plaintiff
PARKER, LAUREN ALBERTS Attorney for the Defendant
PROGRESSIVE COUNTY MUTUAL INSURANCE COMPANY Defendant
PROGRESSIVE COUNTY MUTUAL INSURANCE COMPANY BY SERVING ITS Registered Agent
Robert Kwok Attorneys for Plaintiffs
Garrett Wilson Attorneys for Plaintiffs
Patrick Smith Attorneys for Defendants
Dominique Boykins Attorneys for Defendants

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Motion-Secondary: FREEMAN, ARTEMIZ vs. PROGRESSIVE COUNTY MUTUAL INSURANCE COMPANY

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