In re State Farm Mut. Auto. Ins. Co.

• Decision Date: 19 November 2020
• Docket Number: No. 02-20-00144-CV,02-20-00144-CV
• Citation: 614 S.W.3d 316
• Parties: IN RE STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Relator
• Court: Texas Court of Appeals

614 S.W.3d 316

IN RE STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Relator

No. 02-20-00144-CV

Court of Appeals of Texas, Fort Worth.

Delivered: November 19, 2020

ATTORNEYS FOR RELATOR: MELISSA A. LORBER, ENOCK KEVER PLLC, AUSTIN, TEXAS, ARMANDO DE DIEGO, THE LAW OFFICE OF ARMANDO DE DIEGO, P.C., DALLAS, TEXAS.

ATTORNEYS FOR REAL PARTY IN INTEREST: KIRK PITTARD, LANA P. BEVERLY, DURHAM, PITTARD & SPALDING, LLP, DALLAS, TEXAS, STEVEN C. LAIRD, SETH D. MCCLOSKEY, LAW OFFICES OF STEVEN C. LAIRD, PC, FORT WORTH, TEXAS.

Before Sudderth, C.J.; Birdwell and Bassel, JJ.

Opinion by Justice Birdwell We address in this original proceeding a facially unremarkable discovery dispute which nevertheless has revealed an apparent conflict in this state's jurisprudence concerning when and the manner in which a cause of action for uninsured/underinsured motorist benefits accrues or ripens. The conflict arises due to the unique incorporation of the elements of a negligence cause of action against the uninsured or underinsured motorist into the contractual terms of the UM/UIM coverage provided by the standard automobile liability policy. And the two lines of precedent with which the district court grappled treat an insurer's obligation to pay covered benefits as determined by either (1) the contractual handling and adjustment¹ of a claim by the insurer, independent of and without resort to the filing and successful prosecution of a lawsuit by the insured to a binding judgment against the insurer, or (2) the judicial handling and adjustment of a claim through the filing and successful prosecution of a lawsuit by the insured to a judgment binding upon the insurer.

The first line of precedent flows from the recognition of the common law duty of good faith and fair dealing in the UM/UIM context. In 1987, in Arnold v. National County Mutual Fire Insurance , the Supreme Court of Texas held that a common law cause of action for an insurer's breach of its duty of good faith and fair dealing accrues when the insured under a standard automobile liability policy providing UM coverage obtains a binding judgment against the insurer for benefits, the payment of which the insurer had no reasonable basis to deny or delay. 725 S.W.2d 165, 166–67 (Tex. 1987). In so holding, the Arnold court employed an accrual analysis that clearly contemplated a contractual obligation to pay a claim for UM benefits without the insured having to file and successfully prosecute a direct action to obtain a binding judgment for benefits against the insurer. See id.

Moreover, in 1990, in Murray v. San Jacinto Agency , the supreme court modified Arnold to hold that an insurer's common law cause of action for an insurer's breach of its duty of good faith and fair dealing accrues on the date the insurer denies the UM/UIM claim, not the date of the final resolution of the underlying direct action. 800 S.W.2d 826, 828–29 (Tex. 1990). Consistent with Arnold , the accrual analysis in Murray clearly contemplated a contractual obligation to pay such a claim without the insured having to file and successfully prosecute a direct action to a binding judgment for benefits against the insurer. See id.

The second line of precedent flows from a presentment analysis that generally forecloses the recovery of attorney's fees in direct actions for UM/UIM benefits. In 2006, in Brainard v. Trinity Universal Insurance , the supreme court held, without reference to either Arnold or Murray , that, because an insurer is under no contractual duty to pay benefits under a standard automobile liability policy providing UIM coverage unless and until the insured obtains a judgment for such benefits that the insurer is thereby bound to pay, presentment of the claim requires the rendition of such a judgment. 216 S.W.3d 809, 818–19 (Tex. 2006) ; see also State Farm Mut. Auto. Ins. v. Nickerson , 216 S.W.3d 823, 824 (Tex. 2006) ; State Farm Mut. Auto. Ins. v. Norris , 216 S.W.3d 819, 822–23 (Tex. 2006). In so holding, the presentment analysis in Brainard contemplated the insured filing and successfully prosecuting a direct action to a binding judgment against the insurer as a condition precedent to contractual liability for UIM benefits.² See 216 S.W.3d at 818–19.

The apparent conflict between Arnold , as modified by Murray , and Brainard , is thereby unmistakable. Brainard contemplates the accrual of an obligation to pay a claim for UM/UIM benefits only after the judicial handling and adjustment of a UM/UIM claim by direct action, with the insurer contesting coverage through the exhaustion of all appeals without any extracontractual liability exposure.³ Arnold , as modified by Murray , contemplates the accrual of an obligation to pay UM/UIM benefits from the insurer's contractual handling and adjustment of the claim and holds that forcing an insured to prosecute a direct action for benefits when the insurer's liability is reasonably clear constitutes a breach of its duty of good faith and fair dealing.⁴

Having already paid a binding "policy limits" judgment for UIM benefits to its insured, Real Party in Interest, Paula C. Mentzer, at the conclusion of her direct action in the county court at law, Relator, State Farm Mutual Automobile Insurance Company seeks mandamus relief from discovery propounded by Mentzer in support of common law bad faith and statutory extracontractual liability causes of action she brought subsequently and separately in the district court on the grounds that Brainard , as a matter of law, forecloses the accrual or ripening of any and all such causes of action arising from the handling and adjustment of her claim for UIM benefits, and thereby renders such discovery both irrelevant and unlikely to lead to the discovery of admissible evidence. Because Brainard did not expressly overrule either Arnold or Murray and thereby foreclose the accrual or ripening of the common law bad faith cause of action asserted by Mentzer due to State Farm's alleged contractual mishandling and maladjustment of her claim, we are bound by the doctrine of stare decisis to hold that the district court did not abuse its discretion by following the precedent of Arnold , as modified by Murray , in entering an order compelling such discovery, and we accordingly deny the mandamus relief requested.⁵

I. Factual and Procedural Background

On or about February 20, 2016, the car in which Mentzer was riding as a front seat passenger was involved in a motor vehicle accident with a pickup truck driven by Robert Rodriguez. Mentzer suffered serious physical injuries as a result of the accident.

On January 2, 2018, Mentzer filed a direct action against State Farm in County Court at Law No. 2 of Tarrant County seeking a judgment for UIM benefits and alleging the negligence of Rodriquez proximately caused her personal injuries in excess of his automobile liability coverage. Along with her original petition, Mentzer served written discovery in the form of requests for disclosure, requests for production, interrogatories, and requests for admissions. As part of her written discovery, Mentzer requested production of true and correct copies of her State Farm policy and the entirety of State Farm's claim file, as well as copies of all non-privileged email messages, written communications, records, or materials regarding Mentzer in State Farm's possession. Mentzer also sought production of any and all policy and procedure manuals for the training of State Farm adjusters in effect before the accident, and copies of any and all work papers or other documentation "used for the purpose of estimating, calculating[,] or formulating opinions regarding contingent liabilities" related to Mentzer's direct action.

Beginning January 14, 2019, the county court at law conducted a trial of Mentzer's direct action for UIM benefits. Shortly before trial, the parties agreed to the following evidentiary stipulations: (1) the State Farm policy made the basis of Mentzer's direct action for UIM benefits was in full force and effect at the time of the underlying motor vehicle accident involving the vehicle driven by Rodriguez; (2) Mentzer was a "covered person" under the policy at the time of the accident; (3) the policy limits for UM/UIM coverage payable by State Farm at the time of the accident was $30,000; (4) the vehicle driven by Rodriguez was an "underinsured motor vehicle" as defined by the State Farm policy at the time of the accident; (5) Rodriguez was covered by a standard automobile liability policy at the time of the accident with policy limits of $50,055, which had previously been tendered to Mentzer; and (6) the State Farm policy provided UIM coverage for past and future damages at the time of the accident, including (a) physical pain and suffering, (b) mental pain and suffering, (c) physical impairment, (d) medical care expenses, and (e) lost wages. During the trial, on the record and before the verdict, counsel for State Farm further stipulated that Mentzer incurred past medical expenses in the amount of $24,909.60 and past lost wages in the amount of $6,631.20.

After the conclusion of the evidence on January 16, 2019, the county court at law submitted a charge to the jury asking the following question: "What sum of money, if any, paid now in cash, would fairly and reasonably compensate Paula Mentzer for her injuries, if any, that were proximately caused by the occurrence in question?" The jury shortly thereafter returned a unanimous verdict for $157,550 in total damages, broken down for the following elements submitted: $42,000 (past physical pain and suffering); $17,500 (future physical pain and suffering); $27,300 (past mental anguish); $17,200 (future mental anguish); $34,650 (past physical impairment); and $18,900 (future physical impairment).

When combined with the amounts stipulated for past medical expenses and past lost wages, the total amount of damages sustained by Mentzer as a result of the accident was $189,090.80.

On March 13, 2019,...