Opinion
NO. 14-20-00390-CV
10-20-2020
IN RE JAMES RIVER INSURANCE COMPANY, Relator
ORIGINAL PROCEEDING WRIT OF MANDAMUS
151st District Court Harris County, Texas
Trial Court Cause No. 2019-22405
MEMORANDUM OPINION
On June 5, 2020, relator James River Insurance Company filed a petition for writ of mandamus in this court. See Tex. Gov't Code Ann. § 22.221; see also Tex. R. App. P. 52. In the petition, James River asks this court to compel the Honorable Mike Engelhart, presiding judge of the 151st District Court of Harris County, to set aside his April 13, 2020 order denying James River's motion to sever and abate real party in interest Kelly Larsson's extra-contractual claims in the underlying uninsured/underinsured motorist coverage suit. We conditionally grant the petition.
The court requested a response to the petition from Larsson. See Tex. R. App. P. 52.4 (providing that court must not grant relief before requesting response). However, no response was filed.
BACKGROUND
Larsson sued Megan Molina for damages sustained in a rear-end motor vehicle accident. Larsson subsequently added James River as a defendant. Larsson claims that she was covered at the time of the accident by a policy issued by James River and the policy provides uninsured/underinsured motorist ("UIM") coverage. Larsson alleges that she is entitled to UIM benefits because she incurred medical expenses for her injuries in excess of the limits of Molina's insurance policy. Larsson is seeking a declaratory judgment that she is entitled to UIM benefits under the policy issued by James River.
Larsson also alleges that she submitted medical evidence of her damages to James River and James River's liability under the policy is reasonably clear, but James River failed to make a settlement offer. Larsson asserts extra-contractual claims against James River for unfair settlement practices.
Larsson served discovery requests on James River, in which she seeks information related to James River's handling of Larsson's claim, as well as James River's claims-handling history concerning unrelated accidents, and information related to Larsson's right to UIM benefits. James River filed a motion to sever and abate Larsson's extra-contractual claims and to abate these claims until the issue of coverage is decided in the declaratory judgment action. The trial court denied James River's motion on April 13, 2020.
In this original proceeding, James River asserts that the trial court abused its discretion by denying James River's motion for severance and abatement of Larsson's extra-contractual claims.
STANDARD OF REVIEW
Ordinarily, to be entitled to a writ of mandamus, a relator must show that the trial court clearly abused its discretion, and that the relator lacks an adequate remedy by appeal. In re Dawson, 550 S.W.3d 625, 628 (Tex. 2018) (original proceeding) (per curiam). A trial court clearly abuses its discretion if it reaches a decision so arbitrary and unreasonable as to amount to a clear and prejudicial error of law or if it clearly fails to analyze the law correctly or apply the law correctly to the facts. In re H.E.B. Grocery Co., L.P., 492 S.W.3d 300, 302-03 (Tex. 2016) (orig. proceeding) (per curiam); In re Cerberus Capital Mgmt., L.P., 164 S.W.3d 379, 382 (Tex. 2005) (orig. proceeding) (per curiam).
The adequacy of an appellate remedy must be determined by balancing the benefits of mandamus review against the detriments. In re Team Rocket, L.P., 256 S.W.3d 257, 262 (Tex. 2008) (orig. proceeding). Because this balance depends heavily on circumstances, it must be guided by analysis of principles rather than simple rules that treat cases as categories. In re McAllen Med. Ctr., Inc., 275 S.W.3d 458, 464 (Tex. 2008) (orig. proceeding). In evaluating benefits and detriments, we consider whether mandamus will preserve important substantive and procedural rights from impairment or loss. In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 136 (Tex. 2004) (orig. proceeding). We also consider whether mandamus will "allow the appellate courts to give needed and helpful direction to the law that would otherwise prove elusive in appeals from final judgments." Id. Finally, we consider whether mandamus will spare the litigants and the public "the time and money utterly wasted enduring eventual reversal of improperly conducted proceedings." Id.
ANALYSIS
Rule 41 of the Texas Rules of Civil Procedure governs severance of claims. See Tex. R. Civ. P. 41. "Any claim against a party may be severed and proceeded with separately." Id. A trial court has broad discretion in the severance of claims, but that discretion is not unlimited. Black v. Smith, 956 S.W.2d 72, 75 (Tex. App.—14th Dist.] 1997, orig. proceeding). The trial court has a duty to order severance when "all of 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." Womack v. Berry, 291 S.W.2d 677, 683 (Tex. 1956) (orig. proceeding).
Claims are properly severable if: (1) the controversy involves more than one claim; (2) the severed claim is one that would be the proper subject of a lawsuit if independently asserted; and (3) the severed claim is not so interwoven with the remaining claims that it involves the same facts and issues. State v. Morello, 547 S.W.3d 881, 889 (Tex. 2018). The controlling reasons for severance are to do justice, avoid prejudice, and further convenience. Guar. Fed. Sav. Bank v. Horseshoe Operating Co., 793 S.W.2d 652, 658 (Tex. 1990).
An insured's claim for breach of an insurance contract is distinct and independent from claims that the insurer violated its extra-contractual common law and statutory duties. USAA Tex. Lloyds v. Menchaca, 545 S.W.3d 479, 489 (Tex. 2018). UIM claims and bad faith claims have been recognized as separate and distinct claims, which might each constitute a complete lawsuit within itself. United States Fire Ins. Co. v. Millard, 847 S.W.2d 668, 672 (Tex. App.—Houston [1st Dist.] 1993, orig. proceeding). A UIM insurer has no contractual duty to pay benefits until the liability of the other driver and the amount of damages sustained by the insured are determined. Brainard v. Trinity Universal Ins. Co., 216 S.W.3d 809, 818 (Tex. 2006). To recover benefits under a UIM policy, a policy beneficiary must show (1) the insured has UIM coverage; (2) the other driver negligently caused the accident that resulted in the covered damages; (3) the amount of the insured's damages; and (4) the other driver's insurance coverage is deficient. In re Liberty Cty. Mut. Ins. Co., 537 S.W.3d 214, 220 (Tex. App.—Houston [1st Dist.] 2017, orig. proceeding).
An insured first must establish that the insurer is liable on the contract before the insured can recover on extra-contractual claims against an insurer for failure to pay or settle a UIM insurance claim. Id.; see also In re Old Am. Cty. Mut. Ins. Co., No. 13-12-00700-CV, 2013 WL 398866, at *4 (Tex. App.—Corpus Christi Jan. 30, 2013, orig. proceeding) (mem. op.) (stating that "to prevail on their extra-contractual claims against Old American, plaintiffs must first demonstrate that Old American was contractually obligated to pay their uninsured motorist claim."); In re State Farm Mut. Auto. Ins. Co., 395 S.W.3d 229, 238 (Tex. App.—El Paso, 2012, orig. proceeding) ("Texas insurance law generally conditions recovery for bad faith and extracontractual claims on a recovery for breach of the insurance contract itself." (quoting Smith v. Allstate Ins., No. H-03-0651, 2007 WL 677992, at *5 (S.D. Tex. Feb. 27, 2007))).
Larsson alleged that, pursuant to the policy, James River was obligated to pay Larsson UIM benefits for bodily injury caused by Molina, the owner of an uninsured or underinsured motor vehicle. Larsson further alleged that, although she gave notice that she was seeking UIM benefits under the policy, James River "failed to respond in any meaningful way" or make a settlement offer. With regard to her extra-contractual claims, Larsson alleged that James River generally failed to (1) effect a prompt, fair, and equitable settlement in good faith; (2) conduct a reasonable investigation into Larsson's claims for UIM benefits; and (3) promptly pay Larsson's claim for UIM benefits. Larsson's extra-contractual claims relate to and are premised on an alleged contractual obligation to pay her UIM claims.
James River has no contractual obligation to pay Larsson UIM benefits until Larsson establishes the liability and underinsured status of Molina. Larsson also has sought discovery related to her extra-contractual claims. This discovery is irrelevant to her declaratory judgment action for breach of the policy. The introduction of information on Larsson's extra-contractual claims during the trial on Larsson's breach-of-contract claim would be manifestly unjust. See In re Progressive Cty. Mut. Ins. Co., 439 S.W.3d 422, 427 (Tex. App.—Houston [1st Dist.] 2014, orig. proceeding) (holding that introduction of irrelevant evidence of insured's claims handling history in unrelated accidents at breach-of-contract trial would be manifestly unjust). Requiring James River to try the extra-contractual claims with the breach-of-contract claim would not do justice, avoid prejudice, or further convenience. See Guar. Fed. Sav. Bank, 793 S.W.2d at 658. Therefore, the trial court abused its discretion by not severing Larsson's extra-contractual claims from her breach-of-contract claim.
Abatement of Larsson's extra-contractual claims necessarily must accompany severance of those claims from the breach-contract-of claim. See Millard, 847 S.W.2d at 673. Without abatement, the parties will be put to the effort and expense of conducting discovery and preparing for trial on claims that may be rendered moot by a judgment in favor of Molina on liability and damages or a judgment in favor of James River on breach of the policy. See id.
Moreover, James River does not have an adequate remedy by appeal for the trial court's denial of the request for severance and abatement. James River will lose the important right not to have Larsson's extra-contractual claims tried with her breach-of-contract claim. See Prudential Ins. Co. of Am., 148 S.W.3d at 136 (stating that appellate court may consider whether mandamus will preserve important substantive and procedural rights from impairment or loss in determining whether relator has adequate remedy by appeal). Also, James River should not have to incur costs and fees to conduct discovery, prepare for trial, and conduct voir dire on extra-contractual claims that could be rendered moot by a prior trial relating to UIM benefits. See In re United Fire Lloyds, 327 S.W.3d 250, 256 (Tex. App.—San Antonio 2010, orig. proceeding) (holding that insured should not be required to put forth effort and expense to conducting discovery, preparing for trial, and conducting voir dire on bad faith claims that could be rendered moot by the portion of trial on UIM benefits); see also Prudential Ins. Co. of Am., 148 S.W.3d at 136 (stating that appellate court may consider whether mandamus will spare the litigants and the public "the time and money utterly wasted enduring eventual reversal of improperly conducted proceedings").
CONCLUSION
We conclude that the trial court abused its discretion by denying James River's motion to sever and abate Larsson's extra-contractual claims and that James River does not have an adequate remedy by appeal. Accordingly, we conditionally grant James River's petition for writ of mandamus and direct the trial court to (1) vacate its April 13, 2020 order denying James River's motion to sever and abate Larsson's extra-contractual claims; and (2) grant James River's motion to abate and sever the extra-contractual claims. The writ will issue only if the trial court does not act in accordance with this opinion.
PER CURIAM Panel consists of Chief Justice Frost and Justices Zimmerer and Poissant.