525 S.W.3d 786
Tex. App.2017Background
- Steven Okelberry (insured) was injured in a 2008 collision; Farmers issued him a $500,000 UIM policy. Home State (liability carrier for the truck) had a $750,000 policy.
- The underlying personal-injury claims (Steven and his two sons) settled for $729,993.88; three checks totaling $639,988.77 were paid to or on behalf of Steven (one check for $320,776.71 payable jointly to Steven and his wife Patricia).
- Farmers had consented to the liability settlement; Patricia was not a party to the underlying suit and had not asserted a loss-of-consortium claim before the settlement.
- Steven sued Farmers for UIM benefits; a jury found $825,675.84 in damages (exceeding Farmers’ $500,000 limit). The trial court applied only a partial offset (treating half of the joint check as Patricia’s community share) and awarded Steven the full $500,000 UIM limit.
- Farmers sought credit for the full $639,988.77 settlement against Steven’s UIM recovery; trial court denied the full offset. Farmers appealed, arguing the entire settlement was ‘‘paid or payable’’ to Steven and therefore deductible from its UIM obligation.
Issues
| Issue | Plaintiff's Argument (Okelberry) | Defendant's Argument (Farmers) | Held |
|---|---|---|---|
| Whether Farmers may offset the full underlying settlement against UIM recovery | Offset should be limited to amounts actually paid to compensate Steven for his damages; jointly payable funds are presumptively community property so only 1/2 is Steven’s separate share | Farmers is entitled to credit for the full amount paid or payable to Steven; burden shifted to plaintiffs to show any part compensated someone else | Reversed: Farmers entitled to credit for the full $639,988.77; trial court erred by allocating 50% to Patricia |
| Who bears burden to prove allocation of an unallocated settlement | Farmers had opportunity to protect itself (it consented); burden should not automatically shift to plaintiffs | Following Ellender/Utts, once insurer shows settlement amount, burden shifts to settling plaintiffs to allocate if they want to avoid full credit | Court places burden on settling plaintiffs to prove any portion did not compensate insured; plaintiffs failed to allocate, so full credit allowed |
| Applicability of community‑property presumption to reduce insurer’s offset | Settlement proceeds are presumptively community property; insurer must rebut by clear and convincing evidence to deny 50% allocation to spouse | Community presumption does not affect whether amounts were "paid or payable" to insured for UIM credit; the insurer need not overcome community presumption to obtain full offset | Court held community‑property presumption does not control UIM offset; trial court erred in reducing offset by treating half as Patricia’s share |
| Whether evidence conclusively shows settlement paid or payable to insured | Joint check and spouse’s release suggest some amount intended for Patricia | Record (settlement agreement, minor settlement hearing, checks) conclusively shows payments were for Steven’s damages | Even if burden were on Farmers, evidence was conclusive that whole settlement was paid or payable to Steven, so full offset warranted |
Key Cases Cited
- Utts v. Short, 81 S.W.3d 822 (Tex. 2002) (trial court determines how settlement credit applies; presumption that credit applies unless nonsettling plaintiff rebuts)
- Mobil Oil Corp. v. Ellender, 968 S.W.2d 917 (Tex. 1998) (burden‑shifting: defendant shows settlement amount, burden shifts to plaintiff to allocate between credited and noncredited portions)
- Stracener v. United Servs. Auto. Ass'n, 777 S.W.2d 378 (Tex. 1989) (definition and purpose of UIM coverage)
- Brainard v. Trinity Univ. Ins. Co., 216 S.W.3d 809 (Tex. 2006) (liberal construction of UIM statutes to protect those legally entitled to recover)
- Nassar v. Liberty Mut. Fire Ins. Co., 508 S.W.3d 254 (Tex. 2017) (insurance policies construed with ordinary contract principles)
- City of Keller v. Wilson, 168 S.W.3d 802 (Tex. 2005) (standard for when evidence is conclusive)