in Re State Farm Mutual Automobile Insurance Company ( 2020 )

Opinion issued March 17, 2020
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-19-00821-CV
———————————
IN RE STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY,
Relator
Original Proceeding on Petition for Writ of Mandamus
MEMORANDUM OPINION
Relator, State Farm Mutual Automobile Insurance Company, seeks
mandamus relief in connection with the trial court’s refusal to abate extra-
contractual claims brought by the plaintiff in her suit to seek
uninsured/underinsured motorist (“UIM”) benefits. We conditionally grant the
petition for writ of mandamus.1
Background
Real party in interest, Amanda Marie Sanchez Garza, was involved in an
automobile accident with Ofelia Castillo-Lara. Garza alleges she was injured in the
accident, that Castillo-Lara caused the accident, and that Castillo-Lara is
uninsured. Garza made a claim for UIM benefits on her State Farm automobile
insurance policy. Id. The parties disagree as to whether State Farm made an offer
to Garza to settle the claim.2 Garza sued State Farm seeking a declaratory judgment
that she is entitled to UIM benefits. She also asserted claims for breach of the duty
of good faith and fair dealing, for violations of chapters 541 and 542 of the Texas
Insurance Code, and for violations of the Texas Deceptive Trade Practices-
Consumer Protection Act, TEX. BUS. & COM. CODE § 17.50(a)(4) (“DTPA”).3
1
The underlying case is Amanda Marie Sanchez Garza v. State Farm Mut. Auto.
Ins. Co., cause number 2019-26133, pending in the 113th District Court of Harris
County, Texas, the Honorable Rabeea Sultan Collier presiding. Certain of the
claims in the underlying case have been severed into cause number 2019-26133-A.
2
State Farm says in its petition for mandamus relief that it made a settlement offer
to Garza “to attempt to resolve the claim.” In her response, Garza contends State
Farm “stated that it would provide coverage for the claim” but “failed to evaluate
Garza’s claim, make her an offer, deny the claim or respond” to the claim.
3
Garza’s claims for breach of the duty of good faith and fair dealing, for violations
of chapters 541 and 542 of the Texas Insurance Code, and for violations of the
Texas Deceptive Trade Practices-Consumer Protection Act, TEX. BUS. & COM.
CODE § 17.50(a)(4) are referred to collectively as “the extra-contractual claims.”
2
State Farm filed an opposed motion for severance and abatement of Garza’s
extra-contractual claims. In its motion, State Farm asserted that severance was
required because Garza had not established her entitlement to UIM benefits; that
severance was mandatory because State Farm had made an offer to settle the entire
claim; and that abatement was warranted in order to prevent State Farm from
“having to conduct discovery and prepare for trial on claims which are not ripe
until the jury has determined whether UIM benefits are owed.” The trial court
granted State Farm’s motion in part, severing the extra-contractual claims but
refusing to abate them. State Farm filed a motion for reconsideration, which the
trial court denied.
In its petition for mandamus relief, State Farm asserts the trial court abused
its discretion in refusing to abate the extra-contractual claims until such time as the
declaratory action has been adjudicated. Garza asserts that because her statutory
claims stem from State Farm’s failure to respond to the claim – as opposed to its
failure to satisfactorily respond to the claim – no such adjudication is required in
order for her extra-contractual claims to be ripe and, therefore, abatement was not
warranted.
Standard of Review
Mandamus will issue to correct a clear abuse of discretion for which there is
no adequate remedy by appeal. See In re Prudential Ins. Co., 148 S.W.3d 124,
3
135–36 (Tex. 2004) (orig. proceeding); Walker v. Packer, 827 S.W.2d 833, 839-40
(Tex. 1992) (orig. proceeding); see also Patton Boggs LLP v. Moseley, 394 S.W.3d
565, 569 (Tex. App.—Dallas 2011, no pet.). A trial court abuses its discretion “if
‘it reaches a decision so arbitrary and unreasonable as to amount to a clear and
prejudicial error of law’ or if it clearly fails to correctly analyze or apply the law.”
In re Cerberus Capital Mgmt., L.P., 164 S.W.3d 379, 382 (Tex. 2005) (orig.
proceeding) (citations omitted). A trial court lacks discretion to determine “what
the law is or in applying the law to the facts.” Prudential Ins., 148 S.W.3d at 135.
Therefore, a “clear failure by the trial court to analyze or apply the law correctly
will constitute an abuse of discretion.” In re Liberty Ins. Corp., 496 S.W.3d 229,
232 (Tex. App.—Houston [1st Dist.] 2016, orig. proceeding) (citing In re Allstate
Cty. Mut. Ins. Co., 85 S.W.3d 193, 195 (Tex. 2002) (orig. proceeding)). Texas
courts have held an order denying a motion to abate extra-contractual claims from
claims seeking UM/UIM benefits may be set aside by mandamus. See e.g., In re
Colonial Cty. Mut. Ins. Co., No. 01-19-00391-CV, 2019 WL 5699735, at *2 (Tex.
App.—Houston [1st Dist.] Nov. 5, 2019, orig. proceeding); In re Am. Nat. Cty.
Mut. Ins. Co., 384 S.W.3d 429, 439 (Tex. App.—Austin 2012, orig. proceeding).
Declaratory Action for UIM Benefits
UIM benefits are available to an insured after the insured shows (1) his auto
policy includes UIM coverage; (2) an uninsured or underinsured motorist’s
4
negligence caused the accident that resulted in covered damages; (3) the amount of
the insured’s damages; and (4) the insurance coverage available from the
uninsured/underinsured motorist's insurance coverage is deficient. Colonial Cty.,
2019 WL 5699735, at *2 (citing In re Liberty Cty. Mut. Ins. Co., 537 S.W.3d 214,
220 (Tex. App.—Houston [1st Dist.] 2017, orig. proceeding)). The Texas
Insurance Code requires UIM coverage to
provide for payment to the insured of all amounts that the insured is
legally entitled to recover as damages from owners or operators
of underinsured motor vehicles because of bodily injury or property
damage, not to exceed the limit specified in the insurance policy, and
reduced by the amount recovered or recoverable from the insurer of
the underinsured motor vehicle.
TEX. INS. CODE § 1952.106 (emphasis added).
The UIM policy “is unique because, according to its terms, benefits are
conditioned upon the insured’s legal entitlement to receive damages from a third
party.” Brainard v. Trinity Universal Ins. Co., 216 S.W.3d 809, 818 (Tex. 2006).
Whereas the insurance policy itself dictates coverage in most first-party insurance
contracts, tort law determines coverage in a UIM policy. Id. Tort law is implicated
because, given the Insurance Code’s requirement that UIM policies pay benefits
only for what an insured is “legally entitled to recover,” an adjudication of the
tortfeasor’s liability and the amount of the insured’s damages is a prerequisite to
the policyholder’s recovery of UIM benefits. Id. at 815 (citing Henson v. Southern
Farm Bureau Cas. Ins. Co., 17 S.W.3d 652, 653 (Tex. 2000)). Therefore, “the
5
UIM insurer is under no contractual duty to pay benefits until the insured obtains a
judgment establishing the liability and underinsured status of the other motorist.”
Brainard, 216 S.W.3d at 818.
Rather than asserting a breach of contract claim to obtain UIM benefits,
Garza seeks declaratory relief as to her right to UIM benefits. The Uniform
Declaratory Judgments Act “creates an appropriate claim under which an insured
may obtain the legal determination required to recover under his UM/UIM policy.”
Allstate Ins. Co. v. Irwin, No. 04-18-00293-CV, 2019 WL 3937281, at *4 (Tex.
App.—San Antonio Aug. 21, 2019, pet. filed); see also Allstate Ins. Co. v. Jordan,
503 S.W.3d 450, 456 (Tex. App.—Texarkana 2016, no pet.)
(“[A] declaratory judgment is an appropriate method of establishing the
prerequisites to recovery in a UIM benefits case.”). Garza seeks damages for past
and future medical expenses, past and future pain and suffering, past and future
mental anguish, and past and future physical impairment/incapacity.4 Given that
the declaratory action remains pending, there has been no adjudication of Castillo-
Lara’s liability or of the amount of Garza’s damages, if any, in connection with her
UIM claim. Therefore, the amount, if any, that Garza is “legally entitled to
4
Garza also seeks punitive damages, which typically cannot not be recovered on
UIM policies. See, e.g., Brainard v. Trinity Universal Ins. Co., 216 S.W.3d 809,
813 (Tex. 2006) (citing cases).
6
recover” has not been determined and State Farm is under no obligation to pay
UIM benefits at this time. Brainard, 216 S.W.3d at 818; Colonial Cty., 2019 WL
5699735, at *2; Liberty Cty., 537 S.W.3d at 220.
Extra-contractual Claims
Garza’s extra-contractual claims comprise breach of the duty of good faith
and fair dealing and alleged violations of the Texas Insurance Code and the DTPA.
She asserts in her extra-contractual claims, inter alia, that State Farm made
misrepresentations in connection with the UIM policy, failed to acknowledge her
claim, failed to provide a reasonable explanation for denying her claim, failed to
reasonably and promptly investigate her claim, and failed to promptly attempt to
settle or pay the claim.
Garza’s declaratory action for benefits is discrete from the extra-contractual
claims that pertain to State Farm’s handling of her claim. “A breach of an
insurance contract claim is separate and distinct from bad faith, Insurance Code or
DTPA causes of action. Uninsured motorist claims and bad faith claims have been
recognized as separate and distinct causes of action which might each constitute a
complete lawsuit within itself.” United States Fire Ins. Co. v. Millard, 847 S.W.2d
668, 672 (Tex. App.—Houston [1st Dist.] 1993, orig. proceeding) (citations
omitted). It is well-settled that extra-contractual claims made by a UIM
policyholder hinge on the policyholder’s entitlement to UIM benefits. “An insured
7
must first establish that the insurer is liable on the contract before the insured can
recover on extra-contractual causes of action against an insurer for failing to pay or
settle a UIM insurance claim.” Colonial Cty., 2019 WL 5699735, at *2 (citing
Liberty Cty., 537 S.W.3d at 220); see also In re Allstate Cty. Mut. Ins. Co., 447
S.W.3d 497, 501 (Tex. App.—Houston [1st Dist.] 2014, orig. proceeding) (“[A]n
insured generally must first establish that the insurer is liable on the contract before
the insured can recover on extra-contractual causes of action against an insurer for
failing to promptly pay, failing to settle, or failing to investigate an underinsured
motorist insurance claim.”) (citing cases).
This Court, like other Texas courts of appeal, has required extra-contractual
claims to be severed and abated until the entitlement to UIM benefits has been
determined. Indeed, this Court recently issued mandamus relief in such a case. In
Colonial County, the plaintiff sued her insurer, asserting it did not pay UIM
benefits as required by her policy after a motor vehicle accident. 2019 WL
5699735, at *1.5 She asserted claims for breach of contract and extra-contractual
claims for breach of the common-law duty of good faith and fair dealing, Texas
5
In In re Colonial Cty. Mut. Ins. Co., the plaintiff asserted the insurer “failed to
attempt to effectuate a prompt, fair and equitable settlement of a claim,” “failed to
adopt and implement reasonable standards for prompt investigation of claims
arising under its policies,” and “refused to pay a claim without conducting a
reasonable investigation with respect to the claim.” No. 01-19-00391-CV, 2019
WL 5699735, at *4 (Tex. App.—Houston [1st Dist.] Nov. 5, 2019, orig.
proceeding).
8
Insurance Code violations and DTPA violations. Id. The insurer filed a motion to
sever and abate the extra-contractual claims from the underlying UIM claim. Id.
The trial judge severed the extra-contractual claims but only abated discovery as to
the bad faith claim. Id. The insurer sought mandamus relief. Id.
This Court explained that “[a]n insured’s claim for breach of an insurance
contract is ‘distinct’ and ‘independent’ from claims that the insurer violated its
extra-contractual common-law and statutory duties.” Id. at *2 (quoting USAA Tex.
Lloyds Co. v. Menchaca, 545 S.W.3d 479, 489 (Tex. 2018)). Further, this Court
held an insured cannot recover on extra-contractual causes of action for failure to
pay or settle a UIM claim before establishing the insurer is liable on the insurance
contract. Colonial Cty., 2019 WL 5699735, at *2. “Thus, our Court and others
have required extra-contractual claims to be severed and abated until the UIM
breach of contract claim is determined.” Id. (citing Liberty Cty., 537 S.W.3d at
220; Allstate Cty., 447 S.W.3d at 504; In re Progressive Cty. Mut. Ins. Co., 439
S.W.3d 422, 428 (Tex. App.—Houston [1st Dist.] 2014, orig. proceeding)).
In granting the insurer’s mandamus relief in Colonial County, this Court said
the plaintiff’s extra-contractual claims were “predicated upon the denial of UIM
benefits” and, therefore, the plaintiff could not recover on the statutory extra-
contractual claims for denial of the UIM benefits “unless she first demonstrates
9
that she has a right to those benefits under the policy.” 2019 WL 5699735, at *4.
The court said,
[T]he severed extra-contractual claims are not yet ripe and could be
rendered moot by the underlying liability determination in the breach
of contract case. The trial court was, therefore, required to abate the
Statutory Extra-contractual Claims asserted against Colonial and
abused its discretion by denying abatement of the claims.
Id.
Garza does not address Colonial County in her response to State Farm’s
petition.6 She asserts, however, that her Insurance Code claims is not dependent on
the determination of her entitlement to UIM benefits and, therefore, the trial court
properly refused to abate those claims. Garza distinguishes the cases relied on by
State Farm, which “involve actions taken by an insurer after they properly
responded to a claim, although the insurer may have subsequently failed to pay or
settle the claim” from cases in which the insurer did not “properly respond” to the
claim, which she asserts was the case here (but which State Farm disputes).
However, Garza does not cite any cases that make that distinction and we have not
found any. Regardless, that is a distinction without a difference. The supreme court
6
State Farm filed a letter with the Court two days after Colonial County was issued,
quoting the opinion and noting that the legal principles are the same. The
plaintiff’s allegations in Colonial County include claims that the insurer “failed to
attempt to effectuate a prompt, fair and equitable settlement of a claim” and
“failed to adopt and implement reasonable standards for prompt investigation of
claims arising under its policies.” 2019 WL 5699735, at *4. The allegations of
Insurance Code violations in Colonial County closely track – and in some cases,
use virtually the same language as – some claims asserted by Garza.
10
has recognized that “the Insurance Code offers procedural protections against
misconduct likely to lead to an improper denial of benefits and little else.”
Menchaca, 545 S.W.3d at 500 (emphasis added).
In Colonial County, we noted the “general rule that an insured cannot
recover policy benefits as actual damages for an insurer's statutory violation if the
insured has no right to those benefits under the policy.” Colonial Cty., 2019 WL
5699735, at *3 (citing Menchaca, 545 S.W.3d at 495). However, “regardless of
whether an insured is entitled to benefits under a policy, this general rule does not
preclude the possibility of an insured recovering damages for a statutory violation
that causes an injury independent from the loss of the benefits. . . .” Colonial Cty.,
2019 WL 5699735, at *3 (citing Menchaca, 545 S.W.3d at 495). We explained:
This “independent-injury rule” applies only if damages are truly
independent of the insured's right to receive policy benefits. It does
not apply if the insured's statutory or extra-contractual claims “are
predicated on [the loss] being covered under the insurance policy” or
if the damages “flow” or “stem” from the denial of the claim for
policy benefits. When an insured seeks to recover damages that “are
predicated on,” “flow from,” or “stem from” policy benefits, the
general rule applies and precludes recovery unless the policy entitles
the insured to those benefits.
Colonial Cty., 2019 WL 5699735, at *3 (citations omitted). Garza concedes in her
response that her statutory claims “are not premised on an independent-injury
theory . . . In this case, Garza was covered under the policy, so the independent-
injury rule does not apply.”
11
To the extent Garza relies on Menchaca, she is mistaken. The supreme court
in Menchaca was asked “whether the insured can recover policy benefits based on
the insurer’s violation of the Texas Insurance Code even though the jury failed to
find that the insurer failed to comply with its obligations under the policy.” 545
S.W.3d at 484. In Colonial County, this Court noted Menchaca “did not involve a
UIM claim or whether contractual and extra-contractual claims should be severed
and abated. Instead, it involved a first-party claim by the insured against her
insurer for storm damage to the insured’s claim.” Colonial Cty., 2019 WL
5699735, at *3 (citing Menchaca, 545 S.W.3d at 484). We stated, “even assuming,
arguendo, that Menchaca applies to UIM claims, the decision does not support the
trial court’s denying abatement of the Statutory Extra-contractual Claims . . . the
[Menchaca] Court ‘clarif[ied] and affirm[ed] the general rule that an insured
cannot recover policy benefits as actual damages for an insurer’s statutory
violation if the insured has no right to those benefits under the policy.’” 2019 WL
5699735, at *3 (quoting Menchaca, 545 S.W.3d at 495).7, 8
7
Garza relies in her response to State Farm’s petition on cases that pre-date
Brainard and that do not address UIM policies, the analyses of which are unique
from other types of policies. See, e.g., Liberty Nat. Fire Ins. Co. v. Akin, 927
S.W.2d 627 (Tex. 1996) (homeowner’s policy); Viles v. Sec. Nat. Ins. Co., 788
S.W.2d 566 (Tex. 1990) (homeowner’s policy); Transp. Ins. Co. v. Moriel, 879
S.W.2d 10 (Tex. 1994) (worker’s compensation policy); Lyons v. Millers Cas. Ins.
Co., 866 S.W.2d 597 (Tex. 1993) (homeowner’s policy).
8
Garza relies on several cases that support State Farm’s position. See, e.g., Accardo
v. Am. First Lloyds Ins. Co., CIV.A. H-11-0008, 2013 WL 4829252, at *1 (S.D.
12
Garza relies on an opinion we issued in 2014 in support of her position that
her misrepresentation claims should not be abated. Our opinion in that case,
Allstate County, is inapposite. Like Garza, the plaintiffs in Allstate County brought
a declaratory action against their insurer for a determination of coverage under a
UIM policy. 447 S.W.3d at 498. The plaintiffs also asserted claims against Allstate
for breach of contract, for acting in bad faith by failing to settle or to attempt to
settle the claim, and for violating sections 541.060(a)(2) and 541.060(a)(7) of the
Insurance Code by failing to attempt in good faith to settle the claim and by
refusing to properly investigate, evaluate and pay the claim. Id. at 498-99.
Tex. Sept. 10, 2013) (noting extra-contractual bad faith claim was abated until
tortfeasor’s liability and plaintiffs’ damages were established); State Farm Mut.
Auto. Ass’n v. Cook, No. 04-18-00729-CV, 2019 WL 4453763, at *1, 5 (Tex.
App.—San Antonio Sept. 18, 2019, no pet.) (stating in case where extra-
contractual claims “were severed and abated pending a judgment establishing
[insured’s] entitlement” to UIM benefits, “[o]nce a legal proceeding establishes
that the insured is entitled to UM/UIM coverage and resolves the damages
amounts, the bad-faith claim is ripe for consideration.”) (quoting Accardo, 2013
WL 4829252, at *5) (emphasis added); Woods v. Argonaut Midwest Ins. Co., No.
6:15-CV-139, 2016 WL 3653518, at *2 (E.D. Tex. Mar. 18, 2016) (dismissing
claims for breach of contract, violations of the Insurance Code, fraud and
negligent misrepresentation as premature, given that tortfeasor’s liability had yet
to be established, and abating claims for bad faith and DTPA violations pending
adjudication of tortfeasor’s liability); In re Allstate Prop. & Cas. Ins. Co., No. 14-
12-00867-CV, 2012 WL 5987580, at *2 (Tex. App.—Houston [14th Dist.] Nov.
29, 2012, orig. proceeding) (holding trial court abused its discretion denying
motion to sever and abate extra-contractual claims, stating, “The supreme court
has determined . . . that until the insured prevails in his [UIM] contractual claim he
cannot require the insurance company to defend the bad faith claim.”) (citation
omitted); In re Am. Nat. County Mut. Ins. Co., 384 S.W.3d 429, 439 (Tex. App.—
Austin 2012, orig. proceeding) (holding trial court abused its discretion denying
motion to sever and abate extra-contractual claims from UIM contractual claims).
13
However, the plaintiffs also asserted misrepresentation claims jointly against
Allstate, Insurance Network of Texas, Eddie Croix Insurance Agency, Inc., and
adjuster Randy Croix, all of whom allegedly (1) “were involved in the sale and
servicing of the [UIM] policy,” and (2) violated the Insurance Code and the DTPA
by representing the plaintiffs were covered under the policy when they were not. 9
Id. at 499. Allstate filed a motion to sever and abate the extra-contractual and
misrepresentation claims until the contract claims were decided, but the trial court
denied the motion. Id.
Allstate sought mandamus relief to compel severance and abatement of the
extra-contractual claims. Id. This Court granted relief as to the claims brought
solely against Allstate. Id. at 501. We held that those claims, in which the plaintiffs
alleged Allstate “acted in bad faith by failing to settle their contractual claim, that
Allstate failed to make a good faith settlement offer, and that Allstate failed to
properly investigate their contractual claim,” required severance because they
“would be negated by a determination that they lacked coverage under the
insurance contract, requiring Allstate to prepare for and litigate the settlement
claims, which may have not yet accrued and may be rendered moot . . . .” Id. at
9
The misrepresentation claims were asserted in the alternative to the extra-
contractual claims asserted against Allstate, in the event the fact finder found the
plaintiffs did not have coverage under the policy’s UIM provision. In re Allstate
Cty. Mut. Ins. Co., 447 S.W.3d 497, 499 (Tex. App.—Houston [1st Dist.] 2014,
orig. proceeding).
14
502.10 However, we held the trial court did not abuse its discretion denying the
motion to sever the misrepresentation claims. Id. at 504.
Allstate County is distinguishable for several reasons. First, Allstate County
involved a dispute as to whether there was an effective UIM policy, not whether
the policyholder was entitled to benefits on an existing UIM policy, which is the
case here. Second, this Court’s holding that the misrepresentation claims need not
be abated was fact driven. The misrepresentation claims were asserted jointly
against Allstate, Insurance Network of Texas, the insurance agency and the
insurance agent. Id. at 499, 503. In our opinion, we noted that if Allstate was liable
for the misrepresentation claims, the liability would be based on the agent’s
conduct. Id. at 503. We further noted the other defendants did not file similar
motions to sever and abate and that Allstate did not seek severance of the claims
asserted against it from the claims asserted against the other defendants. Id. “As a
result, [plaintiffs’] misrepresentation claims against Allstate involve the same facts
10
We noted in Allstate County that the plaintiffs’ discovery requests included
requests for “production of all documents related to lawsuits and claims against
Allstate regarding the denial of claims under business automobile policies.” 447
S.W.3d at 502 n.3 (Tex. App.—Houston [1st Dist.] 2014, orig. proceeding). We
said, “Allowing [plaintiffs] to conduct broad discovery into Allstate’s claims
handling history regarding unrelated accidents and then allowing the introduction
of such information at the trial of [plaintiffs’] breach of contract claim would be
manifestly unjust.” Id. at 502. Some of Garza’s discovery requests to State Farm
about its claims history could, similarly, have the same prejudicial result during
the trial on the UIM claims and may be rendered moot, depending on the
determination of the declaratory action.
15
and issues as, and are interwoven with, the misrepresentation claims against
Insurance Network of Texas, Eddie Croix Insurance Agency, Inc., and [agent]
Randy Croix, which claims would remain pending in the underlying lawsuit
regardless of any severance of these claims against Allstate.” Id. Third, the
misrepresentation claims in Allstate County were not bad faith claims. Id. On the
contrary, they involved the determination of whether the plaintiffs had procured
UIM insurance. Id.
Our opinion is bolstered by Garza’s failure to identify specific
misrepresentations in her pleadings, which only quote statutory language and
provide generalities as to the purported misrepresentations. “[T]o to bring an
actionable claim for an alleged misrepresentation by an insurer, the plaintiff must
identify the specific misrepresentation the insurer made.” Ramirez v. GEICO, 548
S.W.3d 761, 772 (Tex. App.—El Paso 2018, pet. denied) (granting insurer’s
summary judgment motion on DTPA claims about alleged misrepresentations
about the policy and its benefits because insured “did not point to any specific
misrepresentations Geico made, did not indicate when and/or where the alleged
misrepresentations were made, and did not indicate who made them. More
importantly, he presented no evidence that any misrepresentation occurred.”).
Finally, we note that although Garza asserts a declaratory judgment claim
rather than a breach-of-contract claim to determine her entitlement to UIM
16
benefits, the reasoning in Colonial County and in the other cases involving UIM
benefits and extra-contractual claims is applicable here. Given that Garza’s extra-
contractual claims may be rendered moot depending on the adjudication of her
declaratory action, State Farm should not be required to litigate them or answer
discovery about other claims before the declaratory action is resolved. Therefore,
we conclude that the trial court should have abated Garza’s extra-contractual
claims and abused its discretion in declining to do so.
No adequate remedy by appeal
If mandamus does not issue and State Farm is forced to engage in discovery
regarding the extra-contractual claims, it will lose its substantial right to avoid the
time and expense of discovery for claims that are not ripe and may ultimately be
rendered moot. In that event, it will have no adequate remedy by appeal. See, e.g.,
Colonial Cty., 2019 WL 5699735, at *5 (stating UIM insurer lacked adequate
remedy by appeal because “if mandamus is not granted it stands to lose substantial
rights by being required to engage in discovery and prepare for claims that may be
rendered moot and may have not even yet accrued.”); In re United Fire Lloyds,
327 S.W.3d 250, 256 (Tex. App.—San Antonio 2010, orig. proceeding) (same).
Garza’s discovery requests support our conclusion that the trial court should
have abated discovery as to the extra-contractual claims. Her original petition
included requests for disclosures, seventy requests for admissions, twenty-two
17
interrogatories and 109 requests for production. Of those, numerous requests and
interrogatories have no bearing on the declaratory action. For example, Garza’s
requests for production include requests for claims-denied journals and “similar
documents,” not limited to UIM claims, for the past five years; for all complaints
made to the Texas Department of Insurance in the past five years, not limited to
UIM claims; for claims and underwriting files for all UIM claims denied in the
past five years; for complaint letters involving UIM policies from the past five
years; for petitions and judgments from lawsuits involving State Farm in the past
five years where Insurance Code and other statutory and common-law infractions
were alleged in connection with any type of State Farm insurance policy; for the
“entire file” of the agent who sold the policy to Garza; all documents regarding
reserves set with regard to Garza’s claim; all documents regarding State Farm’s
organizational structure; all materials used in the training of State Farm’s agents
who sell policies and claims-handling personnel; all advertisements used or
approved regarding automobile insurance; employment agreements between State
Farm and any adjuster who worked on Garza’s UIM claim; and documents
reflecting investigations, reviews, remedial or disciplinary actions in the past five
years taken against any State Farm employee or agent who evaluated, adjusted or
handled Garza’s UIM claim. Garza’s interrogatories request identifying
information about all UIM claims and lawsuits involving State Farm from the past
18
five years; about anyone who in the last five years has submitted any type of
complaint, “legal or otherwise,” relating to UIM claims; and about anyone who
trained any adjuster or investigator who “evaluated, adjusted and/or handled
Plaintiff’s claims.” Several of Garza’s requests for admissions also pertained only
to the extra-contractual claims.
This Court has held that requests for production of insurer manuals,
instruction booklets, protocols, and other documents about the general
investigation and handling of UIM claims, as well as for documents about claims
and lawsuits filed against the insurer “as the result of nonpayment of [UIM] claims
in Texas, regardless of whether . . . liability was denied” are irrelevant to UIM
contract claims. See, e.g., Progressive Cty., 439 S.W.3d at 427 (“[T]he
introduction of Progressive’s claims handling history in unrelated accidents at the
time of [the plaintiff’s UIM] breach-of-contract claim would be manifestly
unjust.”). More recently, we held that “[i]surers have a substantial right not to
undergo the expense of litigating and conducting discovery on issues that
ultimately may be unnecessary because of the result in the underlying tort case.”
Colonial Cty., 2019 WL 5699735, at *5. For these reasons, State Farm has no
adequate remedy by appeal if discovery is not abated as to Garza’s extra-
contractual claims.
Conclusion
19
Accordingly, we conditionally grant mandamus relief, directing the trial
court to: vacate that portion of its June 21, 2019 order that denies abatement; to
abate the extra-contractual claims that were severed into Cause No. 2019-26133-A
until such time as the claims in Cause No. 2019-26133 are resolved; and for further
proceedings consistent with this opinion. The writ will issue only if the trial court
fails to comply.
Russell Lloyd
Justice
Panel consists of Justices Keyes, Lloyd, and Hightower.
20