The Texas Supreme Court has conditionally granted writs of mandamus in multiple cases involving underinsured motorist case. But don’t let the unanimous decision fool you because four justices, including the Chief Justice, indicated in a concurring opinion that they would entertain a case to overrule Brainard v. Trinity Universal Insurance Co. and its progeny, of which this case is latest-born.
In re State Farm Mutual Automobile Insurance Company and Lindsey Nicole Dessart (No. 23-0755; April 25, 2025) arose from a dispute between State Farm and its policyholder over entitlement to underinsured motorist (UIM) benefits under the policy. Policyholder was injured in a collision with a third-party and was paid $50,000 in policy benefits under the third-party’s policy. She then sued State Farm, seeking a declaratory judgment on UIM coverage under the policy and extra-contractual claims against State Farm and its adjuster under the Texas Insurance Code. State Farm moved to abate discovery on the extra-contractual claims until a determination of policyholder’s entitlement to UIM benefits and to sever those claims for a second trial if policyholder prevails on the UIM claim. Policyholder objected that bifurcation for a separate trial is improper. The trial court agreed and denied State Farm’s motion. Policyholder then sought to depose a State Farm corporate representative and the adjuster. State Farm moved to quash for failure to meet the proportionality requirements of Rule 192.4, TRCP. The trial court likewise denied the motion to quash and issued an order compelling both depositions. And to complete the trifecta, the trial court granted policyholder’s motion to quash State Farm’s request for her medical records through depositions on written questions and limited discovery to medical services provided only on the date of the collision. State Farm sought emergency relief and mandamus. The Dallas Court of Appeals denied both.
In an opinion by Justice Devine, SCOTX conditionally granted mandamus. He commenced the analysis with a discussion of Brainard and a review of four decisions affirming that (1) “the insured must still succeed in an initial UIM-coverage trial before litigating the merits of the extracontractual claims,” (2) bifurcation of the issues is the appropriate procedural approach, (3) the Uniform Declaratory Judgment Act can be used as a procedural vehicle to obtain judgment against a UIM insurer on the other motorist’s liability and the insured’s damages, and (4) deposing the insurer’s corporate representative when the representative lacks personal knowledge of the relevant car-crash facts must be limited in scope.
Turning to the analysis itself, Justice Devine first considered whether State Farm was entitled to an abatement of Plaintiff’s extracontractual claims while her UDJA claims were determined in the first phase of a bifurcated proceeding. The Court said yes, restating that the first State Farm decision contemplated “two separate trials under Rule 174(b), not a single bifurcated trial… By concluding that the insurer was entitled to these separate trials, we implied that this bifurcation usually would involve different juries, thereby allowing an adequate time for discovery on extracontractual matters if an insured is unsuccessful in the initial car-crash trial.” Rejecting Plaintiff’s “same jury, two phases” argument, the Court reiterated that “trial courts should protect the insurer’s ‘substantial right’ not to undergo the expense of litigating and conducting discovery on issues that ultimately may be unnecessary because of the result of the underlying tort case.” Further, it doesn’t matter whether Plaintiff asserts a breach of contract claim or a UDJA claim, the logic is the same. The Court thus held that “the trial court clearly abused its discretion in denying State Farm’s motion to abate [Plaintiff’s] extracontractual claims while her UDJA claims are pending in the trial court.” Pointing to the 10 other similar mandamus petitions pending on the same issues, the Court further determined that State Farm had no adequate remedy on appeal.
The next issue involved proportionality. State Farm argued that its corporate representative should not be deposed about extracontractual claims until liability had been established in the first trial because the representative didn’t have personal knowledge of relevant facts about the crash. Under the proportionality rule, TRCP 192.4, a UIM insurer may support its proportionality concerns by disclosing “documents, or referenced previously disclosed documents, providing the [requested] information in its possession regarding the liability and damages in the case. That information, combined with [the insurer]’s lack of personal knowledge of any relevant facts, could show that a corporate representative’s deposition would provide little if any additional benefit in relation to the cost” (quoting USAA II). State Farm did that in this case and further demonstrated that preparing its corporate representative for a deposition would cost “18 additional [employee]-hours” and “approximately $4,000 in attorney’s fees.” Given that “much of the information [Plaintiff] seeks by deposition would be unreasonably cumulative or duplicative of the documents already produced, including the entire nonprivileged case file,” and “State Farm’s lack of personal knowledge on the narrowed issues, any likely benefit of the proposed deposition is outweighed by the demonstrated burden and expense of the proposed discovery.” The trial court thus abused its discretion in denying State Farm’s motion to quash the deposition notice while Plaintiff’s UDJA claims were pending.
TCJL’s amicus curiae brief in this case asked SCOTX to grant State Farm’s petition and to provide additional guidance to trial courts and UIM litigants about with regard to how SCOTX’s decision in Allstate Ins. Co. v. Irwin, 627 S.W.3d 263 (Tex. 2021) is supposed to work. As you recall, this 5-4 decision opened the door to the use of a Chapter 38, CPRC, declaratory judgment action in UIM cases to determine the insurer’s liability under the policy and the insured’s damages before moving on to any breach of contract or extracontractual claims. In this case the trial court’s orders would have resulted in one jury hearing all claims more or at less at one time. As we state in our brief:
But what happens when the trial court refuses to follow the script and, as it did here, orders discovery to proceed on the insured’s extracontractual claims before the insurer’s liability under the policy and the insured’s damages have been legally adjudicated, as Brainard presumably still requires? Here the trial court compounded the error by refusing to quash the depositions of the insurer’s corporate representative and claims adjuster, which have nothing to do with the UDJA case, and further by limiting the insurer’s discovery of the insured’s medical records from either before or after the date of the collision, which have everything to do with the UDJA case. The upshot of this maneuvering, in our view, is to bulldoze the jury with allegations of how badly the insurer treats its insureds, obscuring the underlying issue of whether the insurer is liable under the policy to begin with, and, if so, for how much. Put another way, reptile theory comes to UIM litigation. This state of affairs cannot be what the Court had in mind when it decided Irwin.
The Court’s decision brings much-needed clarity to the proper procedures for resolving UIM claims on an orderly and efficient basis. Let’s hope the trial courts that previously misapplied the law get the message and clean up their act accordingly.
Justice Sullivan, joined by Chief Justice Blacklock, Justice Devine, and Justice Young, concurred in the judgment but called on the Court to overrule its precedent in Brainard and to revisit State Farm I, which required bifurcation. He pointed to Justice Birdwell’s concurring opinion in a recent Fort Worth Court of Appeals decision, in which he “urge[d] the Supreme Court to (1) return the UM/UIM relationship to one of insurer-insured, not judgment debtor-judgment creditor; and (2) reaffirm that an insurer’s performance under its UM/UIM coverage requires contractual adjustment of the insured’s claim, including tender of payment in the amount adjusted, not merely the satisfaction of a final judgment of damages.” In re Progressive County Mutual Insurance Company and Melissa Sue Craig (No. 02-25-00039-CV; March 20, 2025; J. Birdwell, concurring).
