In re State Farm Mutual Automobile Insurance Company and Terecina Shahan; In re State Farm Mutual Automobile Insurance Company and Todd Joseph Dauper

Summary

The Supreme Court of Texas conditionally granted State Farm's petitions for writ of mandamus in consolidated proceedings involving underinsured-motorist claims. The Court held that insureds seeking policy benefits as damages for Insurance Code violations must first establish their contractual entitlement to those benefits, including the third-party motorist's liability and the amount of damages. It further held that the trial courts abused their discretion by denying bifurcation of the predicate UIM issues from the Insurance Code claims.

Holdings

1. An insured seeking damages under the Insurance Code that are predicated on, flow from, or stem from UIM policy benefits must establish a right to receive those benefits under the policy unless the insured proves an injury truly independent of the right to benefits. Because Shahan and Dauper claimed only the alleged underpayment of UIM benefits and no independent injury, they had to establish State Farm's contractual liability under the UIM policies.
2. The trial courts abused their discretion by denying State Farm's motions to bifurcate. The trials had to be separated so that the insureds' entitlement to UIM benefits could be determined before trial of the extracontractual Insurance Code claims.
3. State Farm lacked an adequate remedy by appeal because it would otherwise incur substantial expense and litigation of issues that could be rendered unnecessary or require reversal. Mandamus was therefore appropriate.

Questions Presented

1. Whether insureds who assert only Insurance Code claims seeking UIM policy benefits as damages must first establish the third-party driver's liability, underinsured status, and the amount of damages establishing their contractual entitlement to UIM benefits.
2. Whether Texas Rule of Civil Procedure 174(b) authorizes bifurcation of trials of the predicate UIM-benefit issues and the Insurance Code claims even when the insureds pleaded no breach-of-contract claims.
3. Whether State Farm had an adequate remedy by appeal or whether mandamus was appropriate to correct the denial of bifurcation.

Disposition

writ_granted