Burgess v. Allstate Fire & Cas. Ins. Co.

• Decision Date: 24 November 2021
• Docket Number: 03-20-00088-CV
• Parties: Barbara BURGESS, Appellant v. ALLSTATE FIRE AND CASUALTY INSURANCE COMPANY, Appellee
• Court: Texas Court of Appeals

641 S.W.3d 474

Barbara BURGESS, Appellant

v.ALLSTATE FIRE AND CASUALTY INSURANCE COMPANY, Appellee

NO. 03-20-00088-CV

Court of Appeals of Texas, Austin.

Filed: November 24, 2021

Sarah J. Allen, for Appellee.

Joshua A. Fogelman, Austin, Justin A. Hill, San Antonio, for Appellant.

Before Justices Goodwin, Baker, and Kelly

OPINION

Chari L. Kelly, Justice Appellant Barbara Burgess sued her uninsured/underinsured motorist (UIM) insurer, Allstate Fire and Casualty Insurance Company, for common law bad faith and violations of the Insurance Code arising from Allstate's handling of her claim for UIM benefits. Allstate moved for summary judgment, asserting that it could not be liable on Burgess's extracontractual claims as a matter of law because it promptly paid UIM benefits after Burgess obtained a judgment establishing that Allstate was contractually obligated to pay. After the trial court granted Allstate's summary judgment and dismissed Burgess's claims, she appealed to this Court. Because Allstate's compliance with its contractual obligation to pay UIM benefits does not preclude Burgess from maintaining her extracontractual claims and because Burgess has sufficiently alleged an injury for which she could, if proven, recover damages, we reverse the trial court's grant of summary judgment and remand for further proceedings.

BACKGROUND

An insurance policy is a contract that establishes the respective rights and obligations to which an insurer and its insured have mutually agreed. USAA Tex. Lloyds Co. v. Menchaca , 545 S.W.3d 479, 488 (Tex. 2018) (citing RSUI Indem. Co. v. The Lynd Co. , 466 S.W.3d 113, 118 (Tex. 2015) ). To protect responsible motorists from financial loss caused by uninsured and underinsured drivers, Texas law requires automobile insurers to include UIM coverage in their policies unless their insured rejects that coverage in writing. Tex. Ins. Code § 1952.101. A UIM insurance contract provides policy benefits to the insured for amounts that he or she is legally entitled to recover as damages from owners and operators of uninsured or underinsured motor vehicles because of bodily injury or property damage. See id. § 1952.106.

"[A] UIM contract is unlike many first-party insurance contracts because, according to its terms, benefits are conditioned upon the insured's legal entitlement to receive damages from a third party." In re American Nat'l Cnty. Mut. Ins. Co. , 384 S.W.3d 429, 437 (Tex. App.—Austin 2012, orig. proceeding). Therefore, to establish an insurer's contractual obligation to pay UIM benefits, the insured must obtain legal determinations as to the third-party's liability and underinsured status.¹ Brainard v. Trinity Universal Ins. Co. , 216 S.W.3d 809, 818 (Tex. 2006).

In addition to an insurer's contractual obligations, the common law and the Texas Insurance Code impose extracontractual duties on insurers related to the handling and processing of insurance claims. Under the common law, an insurance company owes a duty of good faith and fair dealing to its insured in its handling and processing of a claim for benefits. Arnold v. National Cnty. Mut. Fire Ins. Co. , 725 S.W.2d 165, 167 (Tex. 1987). Similarly, an insurer may be liable to its insured for unfair settlement practices under Chapter 541 of the Insurance Code. See Tex. Ins. Code § 541.060 (prohibiting insurers from engaging in unfair settlement practices). As relevant here, an insurer violates Chapter 541 by (1) misrepresenting a material fact or policy provision relating to coverage at issue; (2) failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement of a claim with respect to which the insurer's liability has become reasonably clear; (3) refusing to pay a claim without conducting a reasonable investigation with respect to the claim; and (4) failing to promptly provide a reasonable explanation of the basis in the policy, in relation to the facts or applicable law, for the insurer's denial of a claim or offer of a compromise settlement of a claim. See id. § 541.060,(a)(1), (2)(A), (3), (7) ; see also id. §§ 541.151, .152 (private right of action for damages); Tex. Bus. & Com Code § 17.50 (providing that consumer may maintain DTPA action for act or practice violating of Chapter 541, Insurance Code).

In August 2014, Burgess was injured when her automobile was struck by another driver. Burgess later filed a coverage suit against Allstate, seeking a declaration as to her legal entitlement to her UIM policy benefits. See Allstate Ins. Co. v. Irwin , 627 S.W.3d 263, 265 (Tex. 2021) ("If not otherwise determined, however, a judgment establishing these prerequisites to [UIM] coverage may be obtained in a direct action against the insurance carrier."). While that suit was pending, Burgess settled her claim with the other driver for his $100,000 policy limit and then, in September 2018, demanded that Allstate pay her UIM policy limit of $50,000. Allstate refused Burgess's demand without making a counteroffer.²

In March 2019, Burgess's coverage suit against Allstate proceeded to a jury trial. At the conclusion, the jury returned a verdict finding that the other driver was at fault for the accident and that Burgess was entitled to $386,008 in compensatory damages. Specifically, the jury awarded Burgess $75,000 for past physical pain and $311,009 for future medical-care expenses. On March 27, 2019, consistent with the jury's verdict, the trial court signed a final judgment declaring that Burgess was entitled to UIM benefits in the amount of $50,000. After the jury's verdict but before the trial court signed the judgment, Allstate paid Burgess her $50,000 UIM policy limit plus accrued interest.

In June 2019, Burgess filed the suit underlying this appeal. In her petition, Burgess asserts a variety of extracontractual claims stemming from Allstate's denial of her claim and withholding of UIM benefits until the trial court signed the judgment establishing coverage. Specifically, Burgess claims that Allstate breached the common-law duty of good faith and fair dealing and engaged in certain unfair settlement practices set forth in Chapter 541. In Burgess's view, if Allstate had properly handled her claim, in good faith and in compliance with Chapter 541, it would have settled her UIM claim for policy limits without the necessity of a trial.

Allstate filed a traditional motion for summary judgment, in which it asserted that it was not liable on Burgess's claims as a matter of law. Specifically, Allstate argued that because it timely paid the UIM benefits after Burgess obtained a coverage judgment, "there has been no breach of contract as a matter of law and, as a result, there are no facts to support liability for any extra-contractual claims." Allstate also argued that its liability did not become "reasonably clear" until the trial court signed the coverage judgment and that it "did not refuse to pay [Burgess's] policy benefits without conducting a reasonable investigation because the trial of Burgess's UIM claim at which it was legally determined who was at fault and the amount of damages was the investigation."

The trial court granted Allstate's motion for summary judgment and dismissed all of Burgess's claims with prejudice. This appeal followed.

STANDARD OF REVIEW

To prevail on a traditional summary-judgment motion, the movant must demonstrate that there are no genuine issues of material fact and that it is entitled to judgment as a matter of law. Tex. R. Civ. P. 166a(c) ; Provident Life & Accident Ins. Co. v. Knott , 128 S.W.3d 211, 215-16 (Tex. 2003). When the movant satisfies this initial summary-judgment burden, the burden shifts to the nonmovant to produce evidence raising an issue of fact. See Tex. R. Civ. P. 166a(c). We review a trial court's ruling on a motion for summary judgment de novo. Tarr v. Timberwood Park Owners Ass'n , 556 S.W.3d 274, 278 (Tex. 2018).

DISCUSSION

The primary legal question presented by Allstate's motion for summary judgment, and now before this Court on appeal, is whether an insured can maintain extracontractual claims for common-law bad faith and for unfair settlement practices under Chapter 541 when those claims are based on an insurer's withholding of UIM benefits until the insured obtains a judgment establishing coverage.³ Allstate contends that the Texas Supreme Court's decision in Brainard v. Trinity Universal Insurance Co. , 216 S.W.3d at 816-18, is dispositive of this issue and establishes that such claims cannot, as a matter of law, be maintained.

In Brainard , the Texas Supreme Court considered whether the insured, who had successfully established his right to UIM benefits in a coverage suit, could recover attorney's fees against his insurer under Chapter 38 of the Texas Civil Practice and Remedies Code. Id. at 817 ; see Tex. Civ. Prac. & Rem. Code §§ 38.001 -.002. The court's resolution of that issue turned on whether the insured, Brainard, had "presented" his claim for UIM benefits, as required by Chapter 38.⁴ Brainard , 216 S.W.3d at 818. In concluding that Brainard had not presented his claim, the Supreme Court explained that a UIM insurer is contractually obligated to pay only those damages which the insured is "legally entitled to recover" and that, consequently, an insurer's contractual duty to pay UIM benefits does not arise "until the insured obtains a judgment establishing liability and underinsured status of the other motorist." Id. "Neither requesting UIM benefits nor filing suit against the insurer triggers a contractual duty to pay." Id. Thus, for purposes of recovering attorney's fees under Chapter 38, a claim for UIM benefits is "not presented until the trial court signs a judgment establishing the negligence and underinsured status of the other motorist." Id. Because his UIM insurer had timely paid benefits after the trial court signed the judgment establishing coverage, Brainard was not entitled to recover his attorney's fees under Chapter 38. Id. at 819.

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