U.S. Fire Ins. Co. v. Millard

• Decision Date: 12 February 1993
• Docket Number: No. 01-93-00066-CV,01-93-00066-CV
• Citation: 847 S.W.2d 668
• Parties: UNITED STATES FIRE INSURANCE COMPANY, Relator, v. The Honorable Richard MILLARD, Judge of the 189th District Court of Harris County, Texas, Respondent. (1st Dist.)
• Court: Texas Court of Appeals

Page 668

847 S.W.2d 668

UNITED STATES FIRE INSURANCE COMPANY, Relator, v. The Honorable Richard MILLARD, Judge of the 189th District Court of Harris County, Texas, Respondent.

No. 01-93-00066-CV.

Court of Appeals of Texas, Houston (1st Dist.).

Feb. 12, 1993.

Rehearing Denied Feb. 25, 1993.

Vance Christopher, Maureen McPherson, Houston, for relator.

John S. Powell, William Neumann, Jr., Houston, for respondent.

Before HEDGES, DUGGAN and O'CONNOR, JJ.

OPINION

HEDGES, Justice.

Relator, United States Fire Insurance Company (the defendant), petitions this Court to mandamus respondent, the Honorable Richard Millard, to vacate his order of January 11, 1993, denying the defendant's motion to sever and abate. This is the second time the defendant has petitioned this Court to issue a writ of mandamus against Judge Millard in this suit. ¹

The underlying lawsuit arises from a motor vehicle accident that occurred November 7, 1986, between Carthie O. Williams and Evelyn Williams (the plaintiffs) and Rhoyal Pickersgill, an uninsured motorist. The defendant was the plaintiffs' insurer and carried their uninsured motorist coverage. The plaintiffs' third amended original petition contains claims for breach of contract, breach of the duty of good faith and fair dealing, and violations of both the Insurance Code and the Texas Deceptive Trade Practices-Consumer Protection Act (DTPA).

Both before and after the suit was filed, the defendant conducted settlement negotiations with the plaintiffs and made several settlement offers. Before the plaintiffs filed their lawsuit, the defendant offered $5,000. After suit was filed, the defendant increased its offer to $12,500. The plaintiffs base their bad faith claims on the perceived inadequacy of the defendant's settlement offers.

Mandamus issues only to correct a clear abuse of discretion or a violation of a duty imposed by law when there is no other adequate remedy at law. Walker v. Packer, 827 S.W.2d 833, 839 (Tex.1992); Johnson v. Fourth Court of Appeals, 700 S.W.2d 916, 917 (Tex.1985). A relator who attacks the ruling of a trial court must establish, under the circumstances of the case, that the facts and the law permit the trial court to make but one decision. Johnson, 700 S.W.2d at 917; Cronen v. Smith, 812 S.W.2d 69, 71 (Tex.App.--Houston [1st Dist.] 1991, orig. proceeding). When a trial judge exercising an otherwise discretionary authority has but one course to follow and one way to decide, the discretionary power is effectively destroyed. Jones v. Strayhorn, 321 S.W.2d 290, 295 (Tex.1959).

Rules 41 and 174(b) of the Texas Rules of Civil Procedure vest the trial court with broad discretion to sever and order separate trials of causes of action. Guaranty Fed. Sav. Bank v. Horseshoe Operating Co., 793 S.W.2d 652, 658 (Tex.1990); Marshall v. Harris, 764 S.W.2d 34, 35 (Tex.App.--Houston [1st Dist.] 1989, no writ). The trial court's discretion is not unlimited, however. Womack v. Berry, 291 S.W.2d 677, 683 (Tex.1956). The court must exercise "a sound and legal discretion within the limits created by the circumstances of the particular case." Id. The supreme court stated:

When all the facts and circumstances of the case unquestionably require a separate trial to prevent manifest injustice, and there is no fact or circumstance supporting or tending to support a contrary conclusion, and the legal rights of the parties will not be prejudiced thereby, there is no room for the exercise of discretion. The rule then is peremptory in operation and imposes upon the court a duty to order a separate trial. While the refusal to order a separate trial under such circumstances is usually termed a clear abuse of discretion, it is nevertheless a violation of a plain legal duty.

Id. (emphasis added). To find an abuse of discretion, we must conclude that the facts and circumstances of this case extinguish any discretion in the matter. Johnson, 700 S.W.2d at 918; Womack, 291 S.W.2d at 683.

For a severance to be proper, the following elements are necessary: (1) the controversy must involve more than one cause of action; (2) the severed cause of action must be one that would be the proper subject of a lawsuit if independently asserted; and (3) the severed causes must not be so intertwined as to involve the same identical facts and issues. Ryland Group, Inc. v. White, 723 S.W.2d 160, 161 (Tex.App.--Houston [1st Dist.] 1986, orig. proceeding) (trial court abused its discretion by dividing single causes of action into multiple claims). A severance is appropriate if a controversy involves two or more separate and distinct causes of action, each of which might constitute a complete lawsuit within itself. Ryland, 723 S.W.2d at 161; see also State Farm Ins. Co. v. Wilborn, 835 S.W.2d 260, 261 (Tex.App.--Houston [14th Dist.] 1992, orig. proceeding) A breach of an insurance contract claim is separate and distinct from bad faith, Insurance Code or DTPA causes of action. See Wilborn, 835 S.W.2d at 261; Balderama v. Western Casualty Life Ins. Co., 794 S.W.2d 84, 89 (Tex.App.--San Antonio 1990), rev'd on other grounds, 825 S.W.2d 432 (Tex.1991). 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. Wilborn, 835 S.W.2d at 261.

The defendant argues that when a plaintiff alleges both uninsured motorist and bad faith claims and there have been ongoing settlement negotiations and offers, severance is required. In support of this argument, the defendant urges that severance is proper because the plaintiffs' contract claim under their uninsured motorist policy is separate and distinct from their tort and statutory causes of action.

Evidence of settlement negotiations is generally inadmissible. Rule 408 provides in part:

Evidence of (1) furnishing or offering or promising to furnish, or (2) accepting or offering or promising to accept, a valuable consideration in compromising or attempting to compromise a claim which was disputed as to either validity or amount is not admissible to prove liability for or invalidity of the claim or its amount. Evidence of conduct or statements made in compromise negotiations is likewise not admissible.

TEX.R.CIV.EVID. 408.

Thus, the defendant's offers of settlement and other evidence relating to the parties' negotiations would be inadmissible on the plaintiffs' uninsured motorist claim. Rule 408 does not, however, require exclusion of such evidence when it is offered for a purpose other than proof of liability or the amount of a claim. TEX.R.CIV.EVID. 408. The defendant's offers of settlement would be relevant to plaintiffs' bad faith, Insurance Code and DTPA claims.

The Fourteenth Court of Appeals recently addressed a situation virtually identical to the case before us. In Wilborn, the plaintiff sued the defendant insurance company to recover under the uninsured motorist provision of her insurance policy. She also sought to recover damages for alleged violations of the DTPA, the Insurance Code, and for breach of the duty of good faith and fair dealing. When the trial court judge denied the defendant insurance company's motion for separate trials and plea in abatement, the defendant sought a writ of mandamus requiring the judge to vacate the order. Wilborn, 835 S.W.2d at 261. The defendant argued, among other things, that if the causes of action were tried together, its offer of settlement could be admitted in evidence by the court and would prejudice the trial of the uninsured motorist claim.

The Fourteenth Court held that the case met the requirements for severance, because the causes of action represented two separate and distinct claims, each of which could constitute a lawsuit within itself. The court recognized an irreconcilable conflict between the respective parties' interests if severance were denied. Either a trial court refuses to admit evidence of settlement offers, thereby acknowledging defendant's right under Rule 408 to exclude such evidence but denying a plaintiff the right to use it to establish essential elements of a bad faith claim; or the trial court admits evidence of settlement offers, satisfying plaintiff's proof requirements but abrogating defendant's right to exclude such evidence. Faced with these competing interests, the court concluded:

The resolution of this conflict leaves but one decision to protect all interests involved and that is to order severance of the two causes of action and to abate the proceedings on the bad faith claim until final disposition of the uninsured motorist claim.

Id. at 262.

We agree with the Wilborn decision and apply its reasoning to the case before us. We find that the plaintiffs' contractual and extra-contractual claims are separate and distinct and that each could constitute a discrete lawsuit. Severing these claims avoids problems inherent with settlement offer evidence and thus removes the possibility of prejudice to one or the other of the parties.

There is a second, and equally compelling, justification for severance in cases such as the one before us. The bad faith, Insurance Code, and DTPA Claims depend upon the outcome of the contractual cause of action. If in the uninsured motorist claim lawsuit, the defendant is found liable for damages in an amount equal to or less than its highest settlement offer, then the plaintiffs' other claims will be rendered moot. This result obtains because the extra-contractual claims are based on allegations of bad faith on the part of defendant in its investigation of the plaintiffs' claims and inadequacy of its settlement offers. If, in the underlying case, the defendant prevails on liability, or if the finder of fact concludes that the plaintiffs' damages do not exceed the defendant's settlement offer, then defendant's conduct necessarily cannot have been in bad faith. It would be a waste of the court's, the jury's, the parties', and the attorneys'...