606 S.W.3d 774
Tex. App.2019Background
- Irwin was injured in a car wreck with Brenda Alonso and settled with her insurer for Alonso’s $30,000 policy limits.
- Irwin demanded UIM benefits from his insurer, Allstate, for remaining damages; Allstate offered $500.
- Irwin sued Allstate under the Texas Uniform Declaratory Judgments Act (UDJA) seeking a declaration that he was legally entitled to recover excess damages under his $50,000 UIM policy.
- Parties stipulated to UIM coverage and the $30,000 offset; the jury found Irwin’s wreck damages were $498,968.36.
- Trial court entered judgment awarding Irwin $50,000 (policy limit), $2,002.28 costs, and $45,540 in attorney’s fees under the UDJA.
- Allstate appealed, arguing the UDJA is not the proper vehicle for UIM benefits claims and that attorney’s fees were improper absent a breach-of-contract claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether an insured may use the UDJA to establish prerequisites (liability/damages) for recovering UIM benefits | Irwin: UDJA may be liberally used to determine validity of his right to recover under the policy; Brainard does not preclude UDJA | Allstate: Brainard requires a judgment against tortfeasor in a separate suit; insured cannot obtain that judgment via declaratory relief against insurer | Court: An insured may use the UDJA to establish prerequisites to UIM recovery; UDJA suits are an appropriate vehicle |
| Whether attorney’s fees are recoverable under the UDJA for a UIM declaratory action | Irwin: UDJA §37.009 authorizes equitable attorney’s fees for declaratory actions; fees are available without a separate matured breach claim | Allstate: Fees only recoverable under Chapter 38 for breach of contract after insurer’s duty to pay matures per Brainard; UDJA used to circumvent Chapter 38 limitations | Court: Attorney’s fees are recoverable under the UDJA for UIM declaratory claims; UDJA authorizes equitable fees and is distinguishable from Chapter 38 |
Key Cases Cited
- Brainard v. Trinity Universal Insurance Co., 216 S.W.3d 809 (Tex. 2006) (UM/UIM carrier’s duty to pay is conditioned on insured’s legal entitlement to recover from third party)
- Henson v. Southern Farm Bureau Casualty Ins. Co., 17 S.W.3d 652 (Tex. 2000) (discusses prerequisite judgment for triggering UIM obligation)
- State Farm Fire & Casualty Co. v. Gandy, 925 S.W.2d 696 (Tex. 1996) (favoring reduction of litigation and recognizing declaratory relief’s efficiency)
- Elbaor v. Smith, 845 S.W.2d 240 (Tex. 1992) (refusing to enforce certain settlement agreements against insurer)
- Allstate Ins. Co. v. Jordan, 503 S.W.3d 450 (Tex. App.—Texarkana 2016) (held insured may use UDJA to establish UIM damages but declined to allow UDJA fees under Chapter 38)
- MBM Financial Corp. v. Woodlands Operating Co., L.P., 292 S.W.3d 660 (Tex. 2009) (limits use of declaratory actions to obtain otherwise impermissible attorney’s fees)
- Ortiz v. State Finance Mutual Automobile Ins. Co., 955 S.W.2d 353 (Tex. App.—San Antonio 1997, writ denied) (discussing mandatory UM/UIM coverage under Texas law)