in Re Allstate County Mutual Insurance Company
447 S.W.3d 497
Tex. App.2014Background
- Raymond and Stacy Briers (individually and as representatives of their son Grant’s estate) sought underinsured motorist (UIM) benefits from Allstate after Grant died in a car crash; Allstate denied coverage, saying neither Raymond nor Grant was an insured under the employer's business auto policy.
- The Briers sued for declaratory relief and breach of contract (UIM benefits) and asserted extra-contractual claims against Allstate: bad faith, unfair settlement practices (Ins. Code §541.060(a)(2)), and failure to promptly pay (Ins. Code §541.060(a)(7)) — collectively called the “settlement claims.”
- The Briers also pleaded alternative misrepresentation/DTPA claims against Allstate and insurance agents (alleging they misrepresented coverage) that would provide recovery even if the policy did not cover the Briers.
- Allstate moved to sever and abate the extra-contractual claims pending resolution of the threshold coverage/breach-of-contract issue; the trial court denied severance.
- Allstate petitioned for mandamus. The Court of Appeals granted mandamus in part: it held severance and abatement of the settlement claims was mandatory but affirmed denial of severance of the misrepresentation/DTPA claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether extra-contractual settlement/bad-faith claims must be severed/abated pending coverage determination | Briers: settlement claims are viable and should proceed with the breach claim | Allstate: settlement claims should be severed and abated because extra-contractual liability depends on first proving contractual liability; litigating them now is wasteful and prejudicial | Held: Severance and abatement of the settlement/bad-faith/unfair-practices/failure-to-pay claims was required and trial court abused discretion by denying severance |
| Whether misrepresentation/DTPA claims must be severed from breach-of-contract claim | Briers: misrepresentation/DTPA claims are alternative causes of action and may provide recovery even if the policy does not cover them; should remain with breach claim | Allstate: sought severance of misrepresentation claims against it (but did not sever claims against other defendants); claimed prejudice if tried together | Held: Trial court did not abuse its discretion in refusing to sever misrepresentation/DTPA claims; they are independent, interwoven with agents’ claims, and may survive even if contract claim fails |
| Whether Allstate has an adequate remedy by appeal (necessity of mandamus) | Allstate: denial of severance forces unnecessary discovery/trial preparation on claims that may not accrue; appeal is inadequate | Briers: (implicit) normal appellate review is adequate | Held: Mandamus available for settlement claims because appeal would not avoid the waste and prejudice of litigating potentially moot extra-contractual claims |
| Scope of discovery into insurer’s claim-handling history | Briers: sought broad producer/claims history discovery to support extra-contractual claims | Allstate: such discovery is prejudicial and unjust if extra-contractual claims are premature | Held: Allowing broad claims-history discovery before coverage determination would be manifestly unjust; supports severance/abatement of settlement claims |
Key Cases Cited
- Walker v. Packer, 827 S.W.2d 833 (Tex. 1992) (mandamus standard for correcting trial-court abuse of discretion)
- Liberty Nat’l Fire Ins. Co. v. Akin, 927 S.W.2d 627 (Tex. 1996) (relationship between breach-of-contract and bad-faith claims; circumstances warranting severance)
- Progressive County Mut. Ins. Co. v. Boyd, 177 S.W.3d 919 (Tex. 2005) (insurer cannot be liable for failing to settle or investigate claims it had no contractual duty to pay)
- Brainard v. Trinity Universal Ins. Co., 216 S.W.3d 809 (Tex. 2006) (elements required to establish UIM coverage)
- In re American Nat’l County Mutual Ins. Co., 384 S.W.3d 429 (Tex. App.—Austin 2012) (orig. proceeding) (severance/abatement of extra-contractual claims often required when coverage is disputed)
- In re United Fire Lloyds, 327 S.W.3d 250 (Tex. App.—San Antonio 2010) (orig. proceeding) (same)
- Millard v. U.S. Fire Ins. Co., 847 S.W.2d 668 (Tex. App.—Houston [1st Dist.] 1993) (orig. proceeding) (distinguishing contract and extra-contractual claims and discussing severance)
- Womack v. Berry, 291 S.W.2d 677 (Tex. 1956) (duty to sever when separate trial is required to prevent manifest injustice)