ACCEPTED FIRST COURT OF APPEALS HOUSTON, TEXAS 1/2/2015 4:28:10 PM CHRISTOPHER PRINE CLERK 01-15-00003-CV NO. ___________________ FILED IN 1st COURT OF APPEALS IN THE COURT OF APPEALS HOUSTON, TEXAS FOR THE FIRST JUDICIAL DISTRICT OF TEXAS 1/2/2015 4:28:10 PM AT HOUSTON CHRISTOPHER A. PRINE Clerk

IN RE ALLSTATE FIRE AND CASUALTY INSURANCE COMPANY

Original Proceeding from 434th Judicial District Of Fort Bend County, Texas Trial Court Cause No. 14-DCV-215228

RELATOR ALLSTATE FIRE AND CASUALTY INSURANCE COMPANY’S PETITION FOR WRIT OF MANDAMUS

Ronald J. Restrepo Texas State Bar No. 16791300 [email protected] Sarah J. Allen Texas State Bar No. 24064810 [email protected] Alexandra Ledyard Texas State Bar No. 24087903 [email protected] Louisiana Street, Suite 2300 Houston, Texas 77002 DOYLE, RESTREPO, HARVIN & ROBBINS, L.L.P. (713) 228-5100 (telephone) (713) 228-6138 (facsimile) Attorneys for Relator Allstate Fire and Casualty Insurance Company

ORAL ARGUMENT REQUESTED IDENTITY OF PARTIES AND COUNSEL Pursuant to Texas Rule of Appellate Procedure 52.3(a), the following is a complete list of all parties, and the names and addresses of all trial and appellate counsel: Relator: Allstate Fire and Casualty Insurance Company Trial Counsel for Relator: John M. Causey State Bar No.0419100 Hope & Causey I-45 North, Ste. 600 Conroe, Texas 77301 (936) 441-4673 (telephone) (936) 441-4674 (telecopier) Appellate Counsel for Relator: Ronald J. Restrepo Sarah J. Allen Alexandra Ledyard DOYLE, RESTREPO, HARVIN & ROBBINS, L.L.P. Louisiana, Suite 2300 Houston, Texas 77002 (713) 228-5100 (telephone) (713) 228-6138 (facsimile)

i Respondents: * The Honorable Judge James H. Shoemake Judge of the 434th Judicial District of Fort Bend County, Texas Jackson Street Richmond, Texas 77469 (281) 633-7653 (telephone) The Honorable Judge John Hawkins Associate Judge of the 434th Judicial District of Fort Bend County, Texas Jackson Street Richmond, Texas 77469 (281) 341-4457 (telephone) Real Parties in Interest: Charlene T. Howard and William D. Howard Trial Counsel for Real Party in Interest: Mario Martinez Law Offices of Mario A. Martinez 23123 Cinco Ranch Blvd., # 208 Katy, TX 77494 (281) 665-7924 (telephone) (281) 665-7929 (telecopier)

* Relator includes both Judge James H. Shoemake and Judge John Hawkins as Respondents because both signed the Order at issue in this mandamus proceeding. (See MR 44–45.)

ii TABLE OF CONTENTS IDENTITY OF PARTIES AND COUNSEL ...........................................................................i TABLE OF CONTENTS ................................................................................................ iii INDEX OF AUTHORITIES...............................................................................................v STATEMENT OF THE CASE ........................................................................................ vii STATEMENT OF JURISDICTION ................................................................................. viii ISSUE PRESENTED.......................................................................................................ix STATEMENT OF FACTS.................................................................................................1 ARGUMENT .................................................................................................................2 I. Standard of Review ............................................................................... 2 II. Mandamus relief is warranted in this case. ........................................... 2 A. The trial court abused its discretion when it refused to abate discovery on Plaintiffs’ extra-contractual and bad faith claims because these claims do not accrue, and would therefore be moot, unless and until Plaintiffs first succeed on their breach of contract claim. .......................... 3 1. Because Plaintiffs have not obtained a judgment establishing the liability and underinsured status of Mr. Carr, the other driver, Allstate has no contractual duty to pay UIM benefits. .............................. 3 2. Allowing discovery on Plaintiffs’ extra- contractual claims before a determination on Plaintiffs’ breach-of-contract claims is an abuse of discretion. ..................................................................... 5 B. Allstate has no clear and adequate remedy by appeal because it will lose substantial rights by being required to conduct discovery on claims that may be rendered moot...........................................................................................10

iii PRAYER .....................................................................................................................11 CERTIFICATES OF COMPLIANCE.................................................................................13 CERTIFICATE OF SERVICE ..........................................................................................14 APPENDIX October 23, 2014 Order Allowing Discovery on Plaintiffs’ Extra-Contractual Claims ........................................................................Tab A In re United Fire Lloyds, 327 S.W.3d 250 (Tex. App.—San Antonio 2010, orig. proceeding). .............................................................. Tab B In re Progressive County Mut. Ins. Co., 439 S.W.3d 422 (Tex. App.—Houston [1st Dist.] 2014, no pet.). ......................... Tab C In re Allstate County Mut. Ins. Co., No. 01-14-00068-CV, 2014 WL 5285850 (Tex. App.—Houston [1st Dist.]

Oct. 16, 2014, no pet. h.) . ..........................................................Tab D

iv INDEX OF AUTHORITIES Cases Page(s) Brainard v. Trinity Universal Ins. Co., 216 S.W.3d 809 (Tex. 2006). ......................................................................3–4 Gilbert Tex. Constr., L.P. v. Underwriters at Lloyd’s London, 327 S.W.3d 118 (Tex. 2010). .......................................................................... 4 Henson v. State Farm Bureau Cas. Ins. Co., 17 S.W.3d 652 (Tex. 2000). ............................................................................ 3 In re Allstate County Mut. Ins. Co., No. 01-14-00068-cv, 2014 WL 5285850 (Tex. App.—Houston [1st Dist.] Oct. 16, 2014, no pet. h.) . ............ 4, 9–10, 11 In re Am. Nat’l County Mut. Ins. Co., 384 S.W.3d 429 (Tex. App.—Austin 2012, orig. proceeding). ....................11 In re Progressive County Mut. Ins. Co., 439 S.W.3d 422 (Tex. App.—Houston [1st Dist.] 2014, no pet.) ..... 4–7, 9–11 In re Prudential Ins. Co. of Am., 148 S.W.3d 124 (Tex. 2004) (orig. proceeding). ..................................2–3, 11 In re United Fire Lloyds, 327 S.W.3d 250 (Tex. App.—San Antonio 2010, orig. proceeding). ................................................................... viii, 2, 7–8, 9, 11 Progressive County Mut. Ins. Co. v. Boyd, 177 S.W.3d 919 (Tex. 2005). .......................................................................... 5 U.S. Fire Ins. Co. v. Millard, 847 S.W.2d 668 (Tex. App.—Houston [1st Dist.] 1993, no writ). ................. 3 Weir v. Twin City Fire Ins. Co., 622 F. Supp. 2d 483 (S.D. Tex. 2009).........................................................5–6

v Womack v. Berry, 291 S.W.2d 677 (Tex. 1956). .......................................................................... 7 Statutes Page(s) TEX. GOV’T CODE § 22.221.................................................................................... viii Rules Page(s) TEX. R. APP. P. 52. ................................................................................................. viii

vi STATEMENT OF THE CASE Nature of the This original proceeding arises from a lawsuit filed by underlying case: Real Parties in Interest Charlene T. Howard and William D. Howard (“Plaintiffs”) against Relator Allstate Fire and Casualty Insurance Company (“Allstate”), among others. (MR 1–14). Plaintiffs seek the recovery of underinsured motorist benefits under an automobile policy issued by Allstate to Plaintiffs, as well as damages for Allstate’s asserted bad faith and statutory violations related to the handling of Plaintiffs’ claims. (MR 3–6).

Respondents: The Honorable John Hawkins, Associate Judge of the 434th Judicial District of Fort Bend County, Texas, and The Honorable James Shoemake, Judge of the 434th Judicial District of Fort Bend County, Texas Respondents’ actions Plaintiffs filed suit in the underlying case alleging that from which relief Allstate breached the underinsured motorist provisions sought: of its policy to Plaintiffs when Allstate denied full payment of their claim and, in doing so, committed bad faith and violated various statutory provisions. (MR 7– 10). Allstate moved to sever and abate the bad faith and extra-contractual claims until the preliminary issue of coverage is resolved. (MR 22–31). The trial court granted Allstate’s motion except that it allowed discovery on Plaintiffs’ extra-contractual claims to continue. (MR 44–46).

Order at issue: The trial court’s October 23, 2014 order allowing discovery on Plaintiffs’ extra-contractual and bad faith claims (MR 44–46; see also App. at Tab A).

vii STATEMENT OF JURISDICTION This Court possesses jurisdiction to grant mandamus relief from the trial court’s order allowing discovery on Plaintiffs’ bad faith and extra-contractual claims before the preliminary issue of coverage is resolved because it constitutes a clear abuse of discretion that impacts Allstate’s right to avoid the cost and expense of preparing to defend claims that may be rendered moot for which no adequate remedy exists by ordinary appeal. See TEX. GOV’T CODE § 22.221; TEX. R. APP. P. 52; In re Progressive County Mut. Ins. Co., 439 S.W.3d 422, 427 (Tex. App.—Houston [1st Dist.] 2014, no pet.) (holding that insurer had no adequate remedy by appeal where trial court’s order allowing discovery on extra-contractual claims in an uninsured motorist lawsuit would cause insurer to “lose substantial rights by being required to prepare for claims that may be rendered moot and never even accrue”); In re United Fire Lloyds, 327 S.W.3d 250, 256 (Tex. App.—San Antonio 2010, orig. proceeding) (holding that insurer did not have adequate remedy by appeal where it would “lose substantial rights by being required to prepare for claims that may be rendered moot and may have not even yet accrued”).

viii ISSUES PRESENTED 1. Whether the trial court’s refusal to abate discovery on Plaintiffs’ bad faith and extra-contractual claims until the preliminary issue of coverage is resolved is an abuse of discretion that warrants mandamus relief because Plaintiffs’ extra- contractual and bad faith claims do not accrue, and would therefore be moot, unless and until Plaintiffs first succeed on their breach of contract claim.

2. Whether Allstate has an adequate remedy by ordinary appeal where Allstate will lose substantial rights by being required to conduct discovery on claims that may be rendered moot.

ix STATEMENT OF FACTS On or about August 11, 2011, Real Parties in Interest Charlene T. Howard and William D. Howard (“Plaintiffs”) were involved in an automobile accident with another vehicle driven by James Alexander Carr. 1 As a result of that accident, Plaintiffs submitted claims to Allstate Fire and Casualty Insurance Company (“Allstate”) for underinsured motorist (“UIM”) coverage. 2 After evaluating the claims, Allstate made an offer to settle the Plaintiffs’ claims, 3 however, the Plaintiffs did not accept. 4 On or about June 5, 2014, Plaintiffs filed suit in the underlying case seeking a declaration of coverage and the recovery of UIM benefits under an automobile policy issued by Allstate to Plaintiffs (the “Policy”), as well as damages for Allstate’s asserted bad faith and statutory violations related to the offering of those benefits. 5 On August 11, 1014, Allstate filed a motion to sever and abate the Plaintiffs’ extra-contractual and bad faith claims pending trial on the contractual claim (the “Motion”).6 Plaintiffs responded to the Motion on October 5, 2014, 7 and

MR 3, ¶ 11.

Id. at ¶ 14.

See MR 22–23, Ex. 1.

See id., Ex. 2–3; see also MR 5.

MR 1–14.

MR 22–31.

MR 35–39.

the trial court signed an order on October 23, 2014 conditionally granting the Motion save and except discovery. 8 ARGUMENT I. Standard of Review Mandamus will issue to correct a clear abuse of discretion for which the relator has no adequate remedy at law. In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 135–36 (Tex. 2004, orig. proceeding). A trial court has no discretion in determining what the law is or in applying the law to the facts, and a clear failure by the trial court to analyze or apply the law correctly constitutes an abuse of discretion.

In re United Fire Lloyds, 327 S.W.3d 250, 253 (Tex. App.—San Antonio 2010, orig. proceeding). Mandamus relief is justified when parties stand to lose substantial rights. Id. Mandamus relief is also appropriate to “spare private parties and the public the time and money utterly wasted enduring eventual reversal of improperly conducted proceedings.” In re Prudential Ins. Co. of Am., 148 S.W.3d at 136.

II. Mandamus relief is warranted in this case.

Mandamus relief is warranted in this case because the record establishes that (A) the trial court abused its discretion when it refused to abate discovery on Plaintiffs’ extra-contractual and bad faith claims until the preliminary issue of

MR 44–46.

coverage is resolved, and (B) Allstate has no clear and adequate remedy at law. See id. at 135–36.

A. The trial court abused its discretion when it refused to abate discovery on Plaintiffs’ extra-contractual and bad faith claims because these claims do not accrue, and would therefore be moot, unless and until Plaintiffs first succeed on their breach of contract claim.

1. Because Plaintiffs have not obtained a judgment establishing the liability and underinsured status of Mr. Carr, the other driver, Allstate has no contractual duty to pay UIM benefits.

Underinsured motorist claims and bad faith claims are by their very nature independent, and Texas courts have recognized them as “separate and distinct causes of action which might each constitute a complete lawsuit within itself.” See U.S. Fire Ins. Co. v. Millard, 847 S.W.2d 668, 672 (Tex. App.—Houston [1st Dist.] 1993, orig. proceeding). In the context of underinsured motorist claims, “the [UIM] insurer is under no contractual duty to pay benefits until the insured obtains a judgment establishing the liability and underinsured status of the other motorist.”

Brainard v. Trinity Universal Ins. Co., 216 S.W.3d 809, 818 (Tex. 2006) (citing Henson v. State Farm Bureau Cas. Ins. Co., 17 S.W.3d 652, 653–54 (Tex. 2000)).

In Brainard, the Texas Supreme Court explained the unique nature of a UIM case as follows: The UIM contract is unique because, according to its terms, benefits are conditioned upon the insured’s legal entitlement to receive damages from a third party. Unlike many first-party insurance contracts, in which the policy

alone dictates coverage, UIM insurance utilizes tort law to determine coverage. Consequently, the insurer’s contractual obligation to pay benefits does not arise until liability and damages are determined.

Brainard, 216 S.W.3d at 818. As a result, Plaintiffs must succeed on their breach of contract claim before any extra-contractual claims could even accrue.

To succeed on their breach of contract claim, Plaintiffs must first establish that UIM coverage for their injuries existed at the time of the accident. See Gilbert Tex. Constr., L.P. v. Underwriters at Lloyd’s London, 327 S.W.3d 118, 124 (Tex. 2010) (“Initially, the insured has the burden of establishing coverage under the terms of the policy.”); In re Allstate County Mut. Ins. Co., No. 01-14-00068-CV, 2014 WL 5285850, at *4 (Tex. App.—Houston [1st Dist.] Oct. 16, 2014, no pet. h.) (providing that in order “[t]o prevail on these [extra-contractual] claims, the [plaintiffs] must first establish that Allstate is liable under the insurance contract”).

If they meet this initial burden, Plaintiffs must then establish that the other driver, Mr. Carr, negligently caused the accident and was underinsured. In re Progressive County Mut. Ins. Co., 439 S.W.3d 422, 427 (Tex. App.—Houston [1st Dist.] 2014, no pet.). “Neither requesting UIM benefits nor filing suit against the insurer triggers a contractual duty to pay.” Id. Accordingly, unless and until Plaintiffs obtain a judgment not only establishing that the Policy provided UIM coverage, but also establishing the liability and underinsured status of Mr. Carr, Allstate has no contractual obligation to pay UIM benefits to Plaintiffs.

2. Allowing discovery on Plaintiffs’ extra-contractual claims before a determination on Plaintiffs’ breach of contract claims is an abuse of discretion.

Absent proof of a valid contract claim, Allstate should not be required to provide discovery related to Plaintiffs’ extra-contractual and bad faith claims because it is irrelevant, overly broad, and prejudicial. See In Progressive, 439 S.W.3d at 427 (finding severance and abatement of extra-contractual claims was necessary to avoid prejudice because document requests relating to extra-contractual claim were irrelevant to breach of contract claim and far broader than car accident claim that must first be resolved). As already stated, in order to prevail on their extra-contractual and bad faith claims, Plaintiffs must first demonstrate that Allstate was contractually obligated to pay their UIM claim. See Progressive County Mut.

Ins. Co. v. Boyd, 177 S.W.3d 919, 922 (Tex. 2005) (recognizing bad faith claims are generally negated by a lack of coverage under the insurance policy). Thus, unless Plaintiffs can establish that Allstate breached the Policy by denying full payment of Plaintiffs’ UIM claims, Allstate cannot be liable on Plaintiffs’ extra-contractual and bad faith claims based on that denial, and all the time, effort, money, and judicial resources spent conducting discovery on those claims will have been for naught. See Weir v. Twin City Fire Ins. Co., 622 F. Supp. 2d 483, 486 (S.D. Tex. 2009) (Harmon, J.) (“If there is no contractual duty to pay, [the insurer] cannot be in ‘bad faith,’ under common law or statute, for not paying. [The insurer] cannot be guilty of not

performing a proper investigation of his UIM claim because it is the trial of the UIM claim, at which it will be determined who was at fault and the amount of damages, that constitutes the investigation.”). It is for this reason that several courts of appeals, including recent opinions from this Court, require the severance and abatement of extra-contractual claims, including discovery on such claims, in UIM coverage cases like this one.

In a recent opinion, this Court specifically addressed the prejudice involved in allowing discovery on extra-contractual claims to continue prior to a determination on an uninsured motorist breach of contract claim. See In re Progressive County Mut. Ins. Co., 439 S.W.3d 422 (Tex. App.—Houston [1st Dist.]

2014, no pet.); see also App. at Tab C. In Progressive, an insured filed suit for uninsured motorist benefits under her insurance policy, as well as damages for bad faith and statutory violations related to the denial of those benefits. Id. at 422. The insured served the carrier with a number of discovery requests, including all documents related to lawsuits and claims against the carrier regarding the denial of uninsured/underinsured motorist claims for over ten years. Id. at 427.

In response to the insurer’s motion to sever the breach of contract claim from the extra-contractual claims, the trial court judge signed an order abating the motion to sever, allowing discovery to move forward on all claims, and deferring the other issues covered by the motion until the pretrial hearing. Id. at 424. In concluding

that severance and abatement of the extra-contractual claims was required in order to avoid prejudice on behalf of the insurer, this Court held that the aforementioned discovery requests sought documents “irrelevant to the breach-of-contract claim, and the introduction of Progressive’s claims handling history in unrelated accidents at the trial of [Plaintiff’s] breach-of-contract claim would be manifestly unjust.” Id. at 427. (citing Womack v. Berry, 291 S.W.2d 677, 682–83 (Tex. 1956)). The Court went on: The trial court’s abatement of any decision on severance until the eve of trial requires the parties to engage in discovery on the extra-contractual claims and prepare for a trial on these claims, even though extra-contractual liability could only accrue if Progressive is found liable on the contract. Accordingly, the trial court’s decision to postpone severance, unless writ is granted, will require Progressive to expend resources answering discovery that is far broader than the car accident claim that must be resolved.

Id. at 427 (emphases added). Similarly, the trial court’s order—made the subject of this mandamus—allowing discovery on Plaintiffs’ extra-contractual claims to go forward subjects Allstate to irrelevant, overly broad, and prejudicial discovery.

Other recent opinions confirm that the trial court’s refusal to abate discovery on Plaintiffs’ extra-contractual claims is an abuse of discretion. In In re United Fire Lloyds, the insured filed suit for UIM benefits under his employer’s insurance policy as well as damages for bad faith and statutory violations related to the denial of those benefits. 327 S.W.3d 250, 252 (Tex. App.—San Antonio 2010, orig. proceeding);

see also App. at Tab B. After the insurer moved to sever and abate the extra- contractual and bad faith claims, the insured filed a motion to bifurcate these claims as an alternative to severance and abatement, arguing, like Plaintiffs argue here,9 that “a severance would be judicially wasteful” and “prejudice him.” Id. at 253. In reviewing the trial court’s decision to bifurcate, the San Antonio Court of Appeals discussed the unique nature of a UIM claim in that a UIM insurer “has no contractual duty to pay benefits until the insured obtains a judgment establishing the liability and underinsured status of the other motorist.” Id. at 255. “As a result,” the court continued, “a determination of [the insured’s] UIM claim may negate his bad faith claims.” Id. at 256. Thus, the court held, the trial court had abused its discretion when it refused to sever and abate the insured’s extra-contractual and bad faith claims because an insurer should not be required to prepare to litigate claims that could be rendered moot by a determination on the UIM claim: [W]e are constrained by the clear holding in Brainard, and hold that [the insurer] is under no contractual duty to pay UIM benefits until [the insured] establishes the liability and underinsured status of the other motorist. Therefore, [the insurer] should not be required to put forth the effort and expense of conducting discovery, preparing for trial, and conducting voir dire on bad faith claims that could be rendered moot by the portion of the trial relating to UIM benefits. To require such would not do justice, avoid prejudice, and further convenience. Under these circumstances, we conclude the trial court abused its See MR 38.

discretion in bifurcating the case instead of severing and abating the UIM claim from the bad faith claims. Id. (internal citations omitted) (emphases added).

Similarly, this Court reached the same result in In re Allstate County Mutual Ins. Co., No. 01-14-00068-CV, 2014 WL 5285850 (Tex. App.—Houston [1st Dist.]

Oct. 16, 2014, no pet. h.); see also App. at Tab D. In that case, the insureds filed suit for UIM benefits under their insurance policy, as well as damages for bad faith and statutory violations related to the denial of those benefits. Id. at *2. The insurer moved to sever and abate the extra-contractual and bad faith claims from the underlying coverage claim. In reviewing the trial court’s denial of the insurer’s motion, the Court held that the severance of the settlement claims was mandatory.

Id. at *3. In doing so, the Court explained that the plaintiffs’ settlement claims would be negated by a determination that they lacked coverage under the insurance contract, requiring Allstate to prepare for and litigate the . . . claims, which may have not yet accrued and may be rendered moot by the breach of contract claim, would not do justice, avoid prejudice, or further convenience.

Id. at *5 (citing In re Progressive County Mut. Ins. Co., 439 S.W.3d at 426–28). The Court went on to provide that “allowing the [insureds] to conduct broad discovery into Allstate’s claims handling history regarding unrelated accidents and then allowing the introduction of such information at the trial of the [their] breach of

contract claim would be manifestly unjust.” Id. at *5 (citing In re Progressive County Mut. Ins. Co., 439 S.W.3d at 426–27) (emphasis added).

As in Progressive, Allstate, and United Fire, the trial court’s order denying abatement of discovery on extra-contractual claims is an abuse of discretion because it does “not do justice, avoid prejudice, or further convenience.” See In re Allstate County Mut. Ins. Co., 2014 WL 5285850, at *5. Here, Allstate made an offer of settlement on Plaintiffs’ claims for UIM benefits, which was not accepted.10 Thus, consistent with Brainard and its progeny, unless and until Plaintiffs obtain a judgment establishing UIM coverage, as well as the liability and underinsured status of Mr. Carr, Allstate has no contractual obligation to pay UIM benefits. Without an existing obligation to pay, Allstate should not be required to put forth the effort and expense of conducting discovery on Plaintiffs’ bad faith and extra-contractual claims because these claims have not yet accrued and could be rendered moot by the failure of Plaintiffs’ breach of contract claim. Allowing Plaintiffs to conduct discovery on their bad faith and extra-contractual claims will require Allstate “to expend resources answering discovery that is far broader than the car accident claim that must be resolved.” See In re Progressive County Mut. Ins. Co., 439 S.W.3d at 427. Thus, the trial court’s refusal to abate discovery on these claims was an abuse of discretion

See MR 22–23, Ex. 1–3; see also MR 5.

warranting mandamus relief. See In re Allstate County Mut. Ins. Co., 2014 WL 5285850, at *5; In re Prudential Ins. Co. of Am., 148 S.W.3d at 135–36.

B. Allstate has no clear and adequate remedy by appeal because it will lose substantial rights by being required to conduct discovery on claims that may be rendered moot.

Allstate has a substantial right not to be required to put forth the expense of conducting discovery on bad faith and extra-contractual claims that do not accrue, and would therefore be moot, unless and until Plaintiffs first succeed on their breach of contract claim. See, e.g., In re Progressive County Mut. Ins. Co., 439 S.W.3d at 428 (citing In re United Fire Lloyds, 327 S.W.3d at 256). If discovery on Plaintiffs’ extra-contractual claims is permitted to advance, Allstate will be required to conduct discovery “on claims that may have not yet accrued and that could be rendered moot by . . . the trial relating to breach of contract for underinsured motorist benefits.” See In re Allstate County Mut. Ins. Co., 2014 WL 5285850, at *6 (citing In re Progressive, 439 S.W.3d at 427–28); see also In re Am. Nat’l County Mut. Ins. Co., 384 S.W.3d 429, 439 (Tex. App.—Austin 2012, orig. proceeding) (holding that insurer did not have adequate remedy by appeal where it would “lose substantial rights . . . by being required to prepare and try claims that may be rendered moot”).

Accordingly, the Court should conclude that Allstate has no adequate remedy by appeal, and mandamus relief is warranted. Id. (citing In re Progressive County Mut.

Ins. Co., 439 S.W.3d at 427–28).

PRAYER WHEREFORE, PREMISES CONSIDERED, Relator Allstate Fire and Casualty Insurance Company respectfully prays that this Court direct the trial court to amend its October 23, 2014 order to abate discovery on Plaintiffs’ extra- contractual and bad faith claims until there has been a full and final resolution of Plaintiffs’ breach of contract claims. Allstate also prays and for such other and further relief to which Allstate may be entitled.

Respectfully submitted, DOYLE, RESTREPO, HARVIN & ROBBINS, L.L.P.

By: ________________________________ Ronald J. Restrepo Texas State Bar No. 16791300 [email protected] Sarah J. Allen Texas State Bar No. 24064810 [email protected] Alexandra Ledyard Texas State Bar No. 24087903 [email protected] Louisiana Street, Suite 2300 Houston, Texas 77002 (713) 228-5100 (telephone) (713) 228-6138 (facsimile) Attorneys for Relator Allstate Fire and Casualty Insurance Company

CERTIFICATION I hereby certify that I have reviewed Relator Allstate Fire and Casualty Insurance Company’s Petition for Writ of Mandamus and conclude that every factual statement in this petition is supported by competent evidence included in the appendix or record.

____________________________________ Sarah J. Allen

CERTIFICATE OF COMPLIANCE Relying on the word count function in the word processing software used to produce this document, I hereby certify that this petition (excluding the caption, identity of parties and counsel, table of contents, index of authorities, statement of the case, statement of jurisdiction, statement of issues presented, signature, certificate of service, certification, certification of compliance, and appendix) contains 2,815 words. See TEX. R. APP. P. 9.4(i).

____________________________________ Sarah J. Allen

CERTIFICATE OF SERVICE As required by Texas Rule of Appellate Procedure 6.3 and 9.5(b), (d), (e), I certify that I have served this document and the corresponding mandamus record by electronic service or certified mail, return receipt requested, on all parties as listed below on January 2, 2015 as follows: The Honorable Judge James H. Shoemake 434th Judicial District of Fort Bend County, Texas Jackson Street Richmond, Texas 77469 The Honorable Judge John Hawkins 434th Judicial District of Fort Bend County, Texas Jackson Street Richmond, Texas 77469 Mario Martinez Law Offices of Mario A. Martinez 23123 Cinco Ranch Blvd., # 208 Katy, Texas 77494 Attorney for the Real Parties in Interest Charlene Howard and William Howard John M. Causey Hope & Causey I-45 North, Ste. 600 Conroe, Texas 77301 Trial Counsel for Relator Allstate Fire and Casualty Insurance Company

____________________________________ Sarah J. Allen

TAB A ·' 1'-DCV-215228 OTDN ; Olher Dlspotitlon/Non-Fiml . 32699'8 FILED AUG 1 l .2Q1~ ri I~I I~llllllllHllllll~llll~ NO. 14-0CV-215228 AT ~~~!{)~ v{.~~ V· ~I'

Cte~ Olllrlct Co'-Jrt. Fer1°'1rnd Ct., TX CHARLENE T. HOW ARD AND § IN THE DISTRICT COURT OF WILLIAM D. HOWARD § § VS. § FORT BEND COUNTY, TEXAS § ALLSTATE FIRE & CASUALTY § INSURANCE COMPANY AND LISA § 434TH JUDICIAL DISTRICT GRAVES ORDER GRANTING DEFENDANTS' MOTION TO SEVER AND ABATE On this day came on for consideration Defendants' Motion to Sever and Abate. The Court, having considered the motion, the prevailing case law, and the response thereto, is of the opinion that said motion is meritorious. The Court, therefore ORDERS that all of the Plaintiff.~ · claims for extra-contractual violations, including those of the Texas Deceptive Trade Practices /\ct, violations of the fnsurance Code, violntions of Chapter 37 & 38 of the Texas Civil Practice and Remedies Code, gross neglect and breach of the duty of good faith and fair dealing, arc hereby severed from the above captioned lawsuit and shall be re-designated as CAUSE NO. f'f:pc\J 2J£'.)m~i1 ii¥ Q1 S??B,· IN THE DISTRICT COURT OF FORT · BEND COUNTY, TEX A S 434TJ/ JUDICIAL DfTRJCT; AC~o is further ORDERED that !he"'following documents shall be placed in CAUSE NO. [l ,t.\ ~r;r:::v- ~s2-z. <j -A • ' :Wi e a: SL8; IN Tl/E DISTRICT COURT OF FORT BEND COUNTY, TE x AS 434TH JUDICIAL DISTRICT: /. Pluilltiff"'s Original Petition a11d Jury De111u11d; and 2. Defendants' Original Answer u11d Jury Demand.. \ SZZ ~!-A '-/- DOI.,Z. lt is further ORDERED that the CA USE NO. ( ~ ,· 14 ~9'1' ~IE8; TN THE

ROUTEOTOCOUR~CT 2 0 2014iw RT'S TOD. CLERK ,,..,.d OCT 2 3 2014 ''\J ··· -- · --·-- +- ~ · ~-- . . . . . ._.. _. , .•

DISTRICT COURT OF FORT BEND COUNTY, TEXAS 434TH JUDICIAL DISTRICT, is ~ °"~'°" e1».1 hereby abated for all aspects~mtil the underlying contract claim in Cause No. 14-DCV-215228 is resolved.

The cost for the severance of 14-DCV-215228; IN THE DISTRICT COURT OF FORT BEND COUNTY, TEXAS 434Tll JUDICIAL DISTRICT: will be borne by Defendants.

All other relief not expressly granted herein is denied.

SIGNED and ENTERED this z._6~dayof ~;2014. ~

~-z:,~'1' JUDGE PRESIDING ... ~...- ~-.-· ....·--.(·--· -.....-i-- -·----·· ... ' ·-·· ---·-·--

APPROVED AND ENTRY REQUESTED:

HOPE & CAUSEY, P.C.

c'John cif <Ycrusep John M. Causey State Bar No. 04019 100 P. 0 . Box 3188 Conroe, Texas 77305-3188 Phone: (936) 441-4673 Fax: (936) 441-46 74 E-Mail: [email protected] ATTORNEYS FOR DEFENDANTS

', Annie RPoecr.a Elliott, District Clerk of For! Ben" Coun~. Texas, do t-.areby certify that tli:: lcreJcll'~ is 11 true, correct and full copv of the ;.1~· 1Jrr;ent ~~n set out as appears of re<.Jrd m b1e ~i;J Coo~i:ll!i CouJt. Texas TJ11s lay of W- 20 l TAB B In re United Fire Lloyds, 327 S.W.3d 250 (2010)

Nature and Extent of Discretionary Power 327 S.W.3d 250 Mandamus Court of Appeals of Texas, Matters of discretion San Antonio. A trial court has no discretion in determining what the law is or applying the law to the facts, In re UNITED FIRE LLOYDS. and a clear failure by the trial court to analyze or apply the law correctly will constitute an abuse No. 04–10–00094–CV. | July 14, 2010. of discretion for mandamus purposes.

Synopsis Cases that cite this headnote Background: Employee who had been involved in motor vehicle accident with other motorist filed suit against employer's automobile insurer, asserting claim for [3] Mandamus underinsured motorist (UIM) benefits, as well as bad faith Matters of discretion claims. Insurer filed motion to sever and abate UIM claim To satisfy the clear abuse of discretion standard from bad faith claims. Employee filed motion for a bifurcated for issuance of a writ of mandamus, the relator trial. The 49th Judicial District Court, Webb County, Jose must show that the trial court could reasonably A. Lopez, J., denied insurer's motion and granted employee's have reached only one decision. motion. Insurer filed petition for writ of mandamus.

Cases that cite this headnote

Holdings: The Court of Appeals, Rebecca Simmons, J., held [4] Mandamus that: Remedy at Law Appellate court will not issue a writ of [1] trial court was required to sever and abate UIM claim from mandamus if there is a clear and adequate bad faith claims, and remedy at law. [2] insurer had no adequate remedy by appeal with respect to Cases that cite this headnote trial court's abuse of discretion in denying its motion to sever and abate. [5] Mandamus Nature and existence of rights to be protected or enforced Writ conditionally granted.

Since mandamus is intended as an extraordinary remedy, such interference is justified only when parties stand to lose their substantial rights.

West Headnotes (14) Cases that cite this headnote [1] Mandamus Remedy at Law [6] Action Severance of actions Mandamus Nature of acts to be commanded Action Nature and subject matter of actions in Mandamus will issue only to correct a clear general abuse of discretion for which the relator has no adequate remedy at law. Trial court was required to sever and abate claim for underinsured motorist (UIM) benefits Cases that cite this headnote brought by employee involved in motor vehicle accident with other motorist against employer's automobile insurer from employee's bad faith [2] Appeal and Error

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claims against insurer, as insurer was under no contractual duty to pay UIM benefits [10] Insurance until employee established the liability and Prerequisites for Claim of Breach or Bad underinsured status of the other motorist, and, Faith thus, insurer should not be required to put forth Insurance the effort and expense of conducting discovery, Bad faith in general preparing for a trial, and conducting voir dire on Contractual claims based on an insurance policy bad faith claims that could be rendered moot by and bad faith claims against an insurer are the portion of the trial relating to UIM benefits, by their nature independent, but, in most in that to require such would not do justice, avoid circumstances, an insured may not prevail on a prejudice, and further convenience. bad faith claim without first showing that the insurer breached the contract.

Severance of actions The controlling reasons for a severance of claims 2 Cases that cite this headnote are to do justice, avoid prejudice, and further convenience. [13] Insurance Uninsured or Underinsured Motorist Cases that cite this headnote Coverage

© 2014 Thomson Reuters. No claim to original U.S. Government Works. 2 In re United Fire Lloyds, 327 S.W.3d 250 (2010)

Insurance Necessity of Tort Liability OPINION Insurance Claims and Settlement Practices Opinion by: REBECCA SIMMONS, Justice.

For an insured to recover for underinsured On February 8, 2010, relator United Fire Lloyds filed a motorist (UIM) benefits under an automobile petition for writ of mandamus, seeking to compel the trial insurance policy, he must prove not only that court to (1) vacate the October 7, 2009 Order Granting the purported underinsured motorist negligently Plaintiff's Motion for a Bifurcated Trial, (2) vacate the caused the accident that resulted in the covered October 13, 2009 Order Denying Defendant United Fire damages, but also that all applicable policy Lloyd's Motion to Sever and Abate Plaintiff's Extra– provisions have been satisfied.

Contractual Claims, and (3) grant United Fire's Motion to Cases that cite this headnote Sever and Abate Plaintiff's Extra–Contractual Claims. We conditionally grant mandamus relief. [14] Mandamus Modification or vacation of judgment or order BACKGROUND Employer's automobile insurer, against which The underlying suit arose from a motor vehicle accident employee had brought claim for underinsured involving Juan Garcia and Ramon Valverde. Garcia filed motorist (UIM) benefits as well as bad faith suit against United Fire for underinsured motorist (“UIM”) claims, had no adequate remedy by appeal with benefits under his employer's insurance policy. The original respect to trial court's abuse of discretion in petition only alleged a claim for UIM benefits, but denying its motion to sever and abate UIM claim subsequently filed petitions added extra-contractual (bad from bad faith claims, and, thus, mandamus faith) claims. The Fourth *253 Amended Petition 2 alleged relief was appropriate, as if mandamus was not the following bad faith claims in violation of the Texas granted, insurer stood to lose substantial rights Insurance Code: (1) failing to commence an investigation of by being required to prepare for claims that might Garcia's claim and failing to request from the claimant all be rendered moot and might have not even yet items, statements, and forms in order to properly evaluate accrued.

Garcia's claim in violation of section 542.055; and (2) Cases that cite this headnote engaging in unfair settlement practices in violation of section 541.060. 3 United Fire contends it made a settlement offer in the amount 1 of $100,000 during mediation. However, no settlement *252 Original Mandamus Proceeding. agreement was ever reached. Later, United Fire filed a motion Attorneys and Law Firms to sever and abate Garcia's UIM claim from the bad faith claims. As the basis for the motion, United Fire asserted Clay E. Coalson, Donnell, Abernethy & Kieschnick, a severance was necessary because the introduction of the Corpus Christi, TX, Jose L. Gamez, Donnell, Abernethy & settlement offer, the policy limits, and the facts concerning Kieschnick, Edinburg, TX, for Appellant. United Fire's handling of the claim, as they relate to the bad faith claims, would prejudice United Fire in the trial Ronald A. Ramos, Nadine Nieto, Law Offices of Ronald of the UIM claim, and would confuse, complicate, and A. Ramos, P.C., Adam Poncio, Poncio Law Offices, P.C., considerably lengthen the trial. Garcia then filed a motion San Antonio, TX, Bryan W. Jones, Texas Mutual Insurance for a bifurcated trial as an alternative to the severance and Company, Austin, TX, for Appellee. abatement. As authority for his motion, Garcia relied on Sitting: KAREN ANGELINI, Justice, REBECCA this court's opinion in In re Travelers Lloyds of Tex. Ins.

SIMMONS, Justice, MARIALYN BARNARD, Justice. Co., in which we concluded the trial court did not abuse its discretion in bifurcating over severing the contractual

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claims from the bad faith claims. See 273 S.W.3d 368, 373– controverted issues at the same time. Id. Claims are properly (Tex.App.-San Antonio 2008, orig. proceeding). Garcia severable if (1) the controversy involves more than one cause contended a severance would be judicially wasteful, would of action, (2) the severed claim is one that would be the unduly prejudice him, and the disposition of the trial on the proper subject of a lawsuit if independently asserted, and (3) UIM claim would not eliminate the trial on the bad faith the severed claim is not so interwoven with the remaining claims. In response to the motion for a bifurcated trial, United action that they involve the same facts and issues. Guar. Fed. Fire asserted that a UIM claim is different from other types of Sav. Bank v. Horseshoe Operating Co., 793 S.W.2d 652, 658 contractual insurance claims because there is no contractual (Tex. 1990). “The controlling reasons for a severance are to duty to pay benefits until the insured obtains a judgment do justice, avoid prejudice, and further convenience.” Id. establishing liability and the underinsured status of the other motorist. Therefore, United Fire claimed no bad faith claims [10] Contractual claims based on an insurance policy and had yet accrued, and the trial on the UIM claim would control bad faith claims are by their nature independent. Akin, 927 the outcome of the bad faith claims. After a hearing, the trial S.W.2d at 629. “But, in most circumstances, an insured may court granted Garcia's motion for a bifurcated trial and denied not prevail on a bad faith claim without first showing that the United Fire Lloyd's motion to sever and abate. This petition insurer breached the contract.” Id. In Akin, the Texas Supreme for writ of mandamus ensued. Court concluded that a severance may be necessary in some bad faith cases. Id. at 630. For instance, when evidence is admissible only with regard to the bad faith claim and would prejudice the insurer to such an extent that a fair trial on the ANALYSIS contract claim would become unlikely. Id. I. Standard of Review [1] [2] [3] [4] [5] [6] Mandamus will issue onlyFollowing Akin, numerous intermediate courts of appeals to correct a clear abuse of discretion for which the relator have considered whether it is an abuse of discretion for has no adequate remedy at law. In re Prudential Ins. Co. a trial court to refuse to order a severance of contractual of Am., 148 S.W.3d 124, 135 (Tex. 2004) (orig. proceeding); claims from bad faith claims when a settlement offer has Walker v. Packer, 827 S.W.2d 833, 839–40 (Tex. 1992) (orig. been made. See, e.g., In re Miller, 202 S.W.3d 922, 925– proceeding). “A trial court has no ‘discretion’ in determining 26 (Tex.App.-Tyler 2006, orig. proceeding [mand. denied] ); what the law is or applying the law to the facts,” and “a clear In re Allstate Tex. Lloyds, No. 14–05–00762–CV, 2005 WL failure by the trial court to analyze or apply the law correctly 2277134, at * 4 (Tex.App.-Houston [14th Dist] Sept. 2, 2005, will constitute an abuse of discretion” *254 Walker, 827 orig. proceeding) (mem. op.); In re Allstate Indem. Co., 05– S.W.2d at 840. “To satisfy the clear abuse of discretion 03–01496–CV, 2003 WL 22456345, at *1 (Tex.App.-Dallas standard, the relator must show ‘that the trial court could Oct. 30, 2003, orig. proceeding) (mem. op.); In re Trinity reasonably have reached only one decision.’ ” Liberty Nat'l Universal Ins. Co., 64 S.W.3d 463, 468 (Tex.App.-Amarillo Fire Ins. Co. v. Akin, 927 S.W.2d 627, 630 (Tex. 1996) 2001, orig. proceeding [mand. denied] ). Eventually, parties (quoting Walker, 827 S.W.2d at 840). However, this court began seeking bifurcation of the contractual claims from the will not issue a writ of mandamus if there is a clear and bad faith claims as an alternative to severance. See In re adequate remedy at law. See Walker, 827 S.W.2d at 840. Travelers, 273 S.W.3d at 373–75; In re Allstate Tex. Lloyds, Since mandamus is intended as an extraordinary remedy, such 202 S.W.3d 895, 900 (Tex.App.-Corpus Christi 2006, orig. interference is justified only when parties stand to lose their proceeding [mand. denied] ) (concluding plaintiffs failed substantial rights. Id. at 842. to meet their burden that they would be prejudiced by the bifurcation of contractual claims under a homeowner's insurance policy and bad faith claims instead of severing and II. Severance or Bifurcation? abating the claims). But we are only aware of a few cases [7] [8] [9] Severance and bifurcation are distinct trial in the context of a UIM claim that have considered whether procedures. Hall v. City of Austin, 450 S.W.2d 836, 837–38 severance and abatement is necessary over bifurcation. See (Tex. 1970). A severance divides the lawsuit into two or more In re Allstate Prop. and Cas. Ins. Co., No. 02–07–00141– separate and independent causes. Id. However, the bifurcation CV, 2007 WL 1574964, at *1 (Tex.App.-Fort Worth May of a trial leaves the lawsuit intact but enables the court to 30, 2007, orig. proceeding) (mem. op.) (holding it was an hear and determine one or more issues without trying all abuse of discretion to bifurcate *255 instead of severing

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and abating the UIM claim from the bad faith claims); In severing and abating because it is disputed whether there is re Allstate County Mut. Ins. Co., 209 S.W.3d 742, 746–47 a covered loss. United Fire argues it should not be required (Tex.App.-Tyler 2006, orig. proceeding) (concluding it was to prepare for a trial on bad faith claims when it has no an abuse of discretion to bifurcate instead of severing the UIM contractual duty to pay the UIM claim until Garcia obtains claim from the bad faith claims). However, these cases fail to a judgment establishing the underinsured motorist's liability discuss the necessity of severance and abatement rather than and underinsured status. bifurcation in the context of a UIM claim.

Garcia responds that it is not disputed that he has a covered [11] [12] In a UIM case, “[t]he UIM insurer is obligated loss and the bad faith claims will not be mooted by a trial to pay damages which the insured is ‘legally entitled to on the UIM claim; therefore, this court should hold the recover’ from the underinsured motorist.” Brainard v. Trinity trial court did not abuse its discretion in bifurcating the Universal Ins. Co., 216 S.W.3d 809, 818 (Tex. 2006) (citing trial rather than severing and abating. 5 Garcia relies *256 TEX. INS.CODE art. 5.06–1(5)). In Brainard, the Texas primarily on In re Travelers to support his argument. See Supreme Court expounded on the uniqueness of a UIM case 273 S.W.3d at 373–75. However, we do not find In re as follows: Travelers controlling because it was not a UIM case. Id. In re Travelers involved a suit filed by homeowners against The UIM contract is unique because, their homeowners' insurance carrier for breach of contract according to its terms, benefits are and bad faith for mishandling their claim. Id. at 370. This conditioned upon the insured's legal court concluded that “[b]ecause the trial of the [plaintiffs'] entitlement to receive damages from extra-contractual claims is unaffected by the outcome of a third party. Unlike many first- their contractual claim, a single bifurcated trial preceded by party insurance contracts, in which the unified discovery and pretrial proceedings promotes judicial policy alone dictates coverage, UIM economy better than severance and abatement.” Id. at 374. insurance utilizes tort law to determine As a result, this court determined the trial court did not abuse coverage. Consequently, the insurer's its discretion in bifurcating the case because “[u]nder these contractual obligation to pay benefits circumstances, the primary justification for abatement of the does not arise until liability and extra-contractual claims—avoiding the effort and expense of damages are determined. conducting discovery on claims that may be rendered moot See Brainard, 216 S.W.3d at 818 (citing Henson v. S. Farm in a previous trial—is non-existent because the disposition of the contractual claim will not moot the extra-contractual Bureau Cas. Ins. Co., 17 S.W.3d 652, 654 (Tex. 2000)). 4 claims.” Id. Therefore, “the UIM insurer is under no contractual duty to pay benefits until the insured obtains a judgment establishing This court's determination that bifurcation is an appropriate the liability and underinsured status of the other motorist.... alternative to severance is not applicable to the present case Neither requesting UIM benefits nor filing suit against the because a UIM claim that involves a dispute as to whether insurer triggers a contractual duty to pay.” Id. there is a covered loss is distinguishable from a homeowners' insurance claim where the existence of a covered loss is not [13] Therefore, in order for Garcia to recover under his disputed. Unlike the situation presented in In re Travelers, UIM claim, he must prove not only that the purported United Fire disputes whether Garcia has a covered loss. As underinsured motorist negligently caused the accident that a result, a determination of Garcia's UIM claim may negate resulted in the covered damages, but also that all applicable his bad faith claims. See Progressive County Mut. Ins. Co. v. policy provisions have been satisfied. See Allstate Ins. Co. Boyd, 177 S.W.3d 919, 922 (Tex. 2005) (recognizing bad faith v. Bonner, 51 S.W.3d 289, 291–92 (Tex. 2001); Wellisch v. claims are generally negated by a lack of coverage under the United Servs. Auto. Ass'n, 75 S.W.3d 53, 57 (Tex.App.-San insurance policy); Akin, 927 S.W.2d at 630–31 (recognizing Antonio 2002, pet. denied) (holding that because an insurer is that judgment for the insurer on the coverage claim prohibits not obligated to pay UIM benefits until the insured becomes recovery premised only on the bad faith denial of a claim, legally entitled to those benefits, an insurer has the right to but does not necessarily bar all claims for bad faith); In re withhold payment of UIM benefits until the insured's legal Miller, 202 S.W.3d at 925 (concluding that bad faith claims entitlement is established). As a result, United Fire contends are negated by a lack of coverage under the insurance policy). the trial court abused its discretion in bifurcating rather than

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order. Typically in a mandamus situation, a party preserves its complaint by requesting an order and the trial court As a result of the foregoing, we are constrained by the clear either grants or *257 does not grant the request to enter holding in Brainard, and hold that United Fire is under no an order. See Axelson, Inc. v. McIlhany, 798 S.W.2d 550, contractual duty to pay UIM benefits until Garcia establishes (Tex. 1990). It is unclear what Garcia contends United the liability and underinsured status of the other motorist.

Fire waived since United Fire's complaint is that the trial See Brainard, 216 S.W.3d at 818. Therefore, United Fire court improperly granted a bifurcated trial over severing and should not be required to put forth the effort and expense of abating the UIM claim from the bad faith claims. United Fire conducting discovery, preparing for a trial, and conducting does not appear to complain about the form or contents of voir dire on bad faith claims that could be rendered moot the bifurcation order. Therefore, we do not find United Fire by the portion of the trial relating to UIM benefits. To waived any complaints. require such would not do justice, avoid prejudice, and further convenience. See Guar. Fed. Sav. Bank, 793 S.W.2d at 658.

Under these circumstances, we conclude the trial court abused its discretion in bifurcating the case instead of severing and CONCLUSION abating the UIM claim from the bad faith claims.

We conclude the trial court abused its discretion in granting [14] We further conclude United Fire does not have an Juan Garcia's motion for a bifurcated trial and denying adequate remedy by appeal because if mandamus is not United Fire's motion to sever and abate. Accordingly, granted it stands to lose substantial rights by being required we conditionally grant the writ of mandamus. The trial to prepare for claims that may be rendered moot and may court is ordered to (1) vacate the October 7, 2009 Order have not even yet accrued. See U.S. Fire Ins. Co. v. Millard, Granting Plaintiff's Motion for a Bifurcated Trial, (2) vacate 847 S.W.2d 668, 675 (Tex.App.-Houston [1st Dist.] 1993, the October 13, 2009 Order Denying Defendant United orig. proceeding); In re Trinity Universal Ins. Co., 64 S.W.3d Fire Lloyd's Motion to Sever and Abate Plaintiff's Extra– 463, 468 (Tex.App.-Amarillo 2001, orig. proceeding [mand. Contractual Claims, and (3) grant United Fire's Motion to denied] ). Sever and Abate Plaintiff's Extra–Contractual Claims. The writ will issue only if the trial court fails to comply within Finally, we address Garcia's contention that United Fire fourteen days. waived any complaint as to the wording or form of the

Footnotes 1 This proceeding arises out of Cause No. 2008–CVE000521–D1, Juan Garcia, Plaintiff, Texas Mutual Insurance Co., As Subrogee of Juan Garcia, Intervenor v. United Fire Lloyds, pending in the 49th Judicial District Court, Webb County, Texas, the Honorable Jose A. Lopez presiding.

2 The live petition is the Fifth Amended Petition. However, it was filed after the trial court granted the motion to bifurcate. In considering whether the trial court abused its discretion in denying United Fire's motion to sever and abate, we limit our review to the record that was before the trial court at the time the “decision was made.” In re Bristol–Myers Squibb Co., 975 S.W.2d 601, 605 (Tex. 1998).

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Cases that cite this headnote 439 S.W.3d 422 Court of Appeals of Texas, Houston (1st Dist.). [3] Mandamus Matters of discretion In re PROGRESSIVE COUNTY MUTUAL Because a trial court has no discretion in INSURANCE COMPANY, Relator. determining what the law is, the trial court abuses its discretion, thus supporting claim for No. 01–14–00199–CV. | June 12, 2014. mandamus relief, if it clearly fails to analyze or apply the law correctly.

Synopsis Background: Insured brought action against uninsured Cases that cite this headnote motorist (UM) carrier to recover for breach of contract, breach of the duty of good faith and fair dealing, and statutory violations. The 215th District Court, Harris County, Elaine H. [4] Mandamus Palmer, J., denied carrier's motion to sever and abate extra- Remedy by Appeal or Writ of Error contractual claims. Carrier petitioned for writ of mandamus. In determining whether appeal is an adequate remedy, Court of Appeals considers whether the benefits outweigh the detriments of mandamus review. [Holding:] The Court of Appeals, Harvey Brown, J., held that severance of extra-contractual claims from breach of contract Cases that cite this headnote claim was required.

[5] Action Writ conditionally granted. Severance of actions The trial court has broad discretion in the severance of causes of action. Vernon's West Headnotes (9) Ann.Texas Rules Civ.Proc., Rule 41.

Cases that cite this headnote [1] Mandamus Remedy by Appeal or Writ of Error [6] Action Mandamus Severance of actions Matters of discretion The trial court has a duty to order severance Court of Appeals may issue a writ of mandamus of causes of action when all of the facts and to correct a trial court's clear abuse of discretion circumstances of the case unquestionably require or violation of duty imposed by law when no a separate trial to prevent manifest injustice, adequate remedy by appeal exists. there is no fact or circumstance supporting or tending to support a contrary conclusion, and the Cases that cite this headnote legal rights of the parties will not be prejudiced thereby. Vernon's Ann.Texas Rules Civ.Proc., [2] Mandamus Rule 41.

Matters of discretion Cases that cite this headnote A clear abuse of discretion occurs supporting mandamus relief when the trial court's decision is so arbitrary and unreasonable that it amounts [7] Action to clear error. Severance of actions

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Claims are properly severable if: (1) the controversy involves more than one cause of Attorneys and Law Firms action; (2) the severed claim is one that would be *424 Mark R. Lapidus, Megan L. Knudsen, Lapidus the proper subject of a lawsuit if independently Knudsen, PC, Houston, TX, for Relator. asserted; and (3) the severed claim is not so interwoven with the remaining action that it Timothy R. Hightower, Alexandra Muthcler, Houston, TX, involves the same facts and issues. Vernon's for Real Party in Interest.

Ann.Texas Rules Civ.Proc., Rule 41.

Panel consists of Justices KEYES, BLAND and BROWN.

Cases that cite this headnote OPINION [8] Action Severance of actions HARVEY BROWN, Justice.

Severance of insured's extra-contractual claims Relator, Progressive County Mutual Insurance Company from breach of contract claim was required in seeks a writ of mandamus compelling the trial court to order to avoid prejudice and prevent manifest (1) vacate its order denying Progressive's motion to sever injustice to uninsured motorist (UM) carrier extra-contractual claims asserted against it and (2) enter an from need to expend resources answering order abating those extra-contractual claims until the breach- discovery far broader than the car accident of-contract claim brought by Alma Guia, the real party in claim; documents related to lawsuits and claims interest, has been resolved. We conditionally grant the writ. against carrier regarding the denial of UM and underinsured motorist (UIM) claims for over ten years were irrelevant to contract claim, and introducing carrier's claims handling history in Background unrelated accidents at trial of breach-of-contract Following an automobile collision with an uninsured claim would be manifestly unjust. Vernon's Ann.Texas Rules Civ.Proc., Rule 41. motorist's vehicle, Guia sued her insurer, Progressive. 1 While investigation into the claim was ongoing, Guia sued Cases that cite this headnote Progressive for breach of the uninsured motorist provisions in her policy, violations of Chapter 542 of the Texas Insurance [9] Mandamus Code, violations of the Deceptive Trade Practices–Consumer Modification or vacation of judgment or Protection Act, and breach of the duty of good faith and fair order dealing. Guia served Progressive with a number of discovery requests, some of which would not be relevant to the breach- Mandamus of-contract claim. Progressive filed a motion to sever the Proceedings in civil actions in general breach of contract claim for uninsured motorist coverage from Appeal was not adequate remedy for trial court's the extra-contractual claims. The trial court judge signed an improper refusal to sever and abate insured's order abating the motion to sever, allowing discovery to move extra-contractual claims from breach of contract forward on all claims, and deferring the other issues covered claim against uninsured motorist (UM) carrier, by the motion until the pretrial hearing. Progressive filed a and, thus, writ of mandamus would be granted if writ seeking to compel severance and abatement. trial court failed to comply. Vernon's Ann.Texas Rules Civ.Proc., Rule 41.

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(Tex. 1992) (orig. proceeding). A clear abuse of discretion In Liberty National Fire Insurance Co. v. Akin, the Texas occurs when the trial court's decision is so arbitrary and Supreme Court considered whether severance was required unreasonable that it amounts to clear error. See id. (quoting in a case involving breach of contract and extra-contractual Johnson v. Fourth Court of Appeals, 700 S.W.2d 916, claims against an insurer under a homeowner's policy. 927 (Tex. 1985)). Because a trial court has no discretion S.W.2d 627 (Tex. 1996). In refusing to grant mandamus relief, in determining what the law is, the trial court abuses its the Court rejected “an inflexible rule that would deny the discretion if it clearly fails to analyze or apply the law trial court all discretion and ... require severance in every correctly. See id. at 840. “In determining whether appeal case [involving bad-faith insurance claims], regardless of the is an adequate remedy, [we] consider whether the benefits likelihood of prejudice.” Id. at 630. Ultimately, the Court outweigh the detriments of mandamus review.” In re BP concluded that the contractual and extra-contractual claims Prods. N. Am., Inc., 244 S.W.3d 840, 845 (Tex. 2008) (orig. in that case were interwoven, with most evidence admissible proceeding). on both claims, and that any prejudicial effect could be ameliorated by appropriate limiting instructions. See id. The [5] [6] The trial court has “broad” discretion in the Court went on to severance of causes of action. Morgan v. Compugraphic Corp., 675 S.W.2d 729, 734 (Tex. 1984); Black v. Smith, 956 Several Texas appellate courts have S.W.2d 72, 75 (Tex.App.-Houston [14th Dist.] 1997, orig. found severance may nevertheless proceeding). However, that discretion is not unlimited. See be necessary in some bad faith U.S. Fire Ins. Co. v. Millard, 847 S.W.2d 668, 671 (Tex.App.- cases. A trial court will undoubtedly Houston [1st Dist.] 1993, orig. proceeding). The trial court confront instances in which evidence has a duty to order severance when *425 “all of the facts and admissible only on the bad faith claim circumstances of the case unquestionably require a separate would prejudice the insurer to such an trial to prevent manifest injustice, and there is no fact or extent that a fair trial on the contract circumstance supporting or tending to support a contrary claim would become unlikely. One conclusion, and the legal rights of the parties will not be example would be when the insurer prejudiced thereby.” Womack v. Berry, 156 Tex. 44, 291 has made a settlement offer on the S.W.2d 677, 682–83 (Tex. 1956) (orig. proceeding). disputed contract claim. As we have noted, some courts have concluded that the insurer would be unfairly prejudiced by having to defend the Severance of Contractual and contract claim at the same time and Extra–Contractual Claims before the same jury that would consider evidence that the insurer had [7] Texas Rule of Civil Procedure 41 governs severance of offered to settle the entire dispute. claims. See TEX.R. CIV. P. 41. The rule provides, in part, While we concur with these decisions, that “[a]ctions which have been improperly joined may be we hasten to add that evidence of this severed ... on such terms as are just. Any claim against a sort simply does not exist in this case. party may be severed and proceeded with separately.” Id. The In the absence of a settlement offer predominant reasons for a severance are to do justice, avoid on the entire contract claim, or other prejudice, and promote convenience. F.F.P. Op. Partners, compelling circumstances, severance L.P. v. Duenez, 237 S.W.3d 680, 693 (Tex. 2007). Claims are is not required. properly severable if: (1) the controversy involves more than one cause of action; (2) the severed claim is one that would be Id. (internal citations omitted); see also In re Miller, 202 the proper subject of a lawsuit if independently asserted; and S.W.3d 922, 925–26 (Tex.App.-Tyler 2006, orig. proceeding (3) the severed claim is not so interwoven with the remaining [mand. denied] ); In re Trinity Universal Ins. Co., 64 S.W.3d action that it involves the same facts and issues. Guar. Fed. 463, 468 (Tex.App.-Amarillo 2001, orig. proceeding [mand.

Sav. Bank v. Horseshoe Operating Co., 793 S.W.2d 652, 658 denied] ). Thus, in Liberty National, the Court opined a (Tex. 1990). Only the third element is in dispute here. settlement offer by an insurer may create a situation where severance of an insured's contract claim is required. 927 S.W.2d at 630 (Tex. 1996).

© 2014 Thomson Reuters. No claim to original U.S. Government Works. 3 In re Progressive County Mut. Ins. Co., 439 S.W.3d 422 (2014)

the liability and underinsured status There is no evidence in the record that Progressive made a of the other motorist. Therefore, [the settlement offer to *426 Guia. However, Liberty National insurer] should not be required to does not limit severance to cases where such an offer has been put forth the effort and expense of made, instead holding that “other compelling circumstances” conducting discovery, preparing for may also require severance. Id. In the case before us, a trial, and conducting voir dire Progressive argues that “other compelling circumstances” on bad faith claims that could be should include the effort and cost associated with conducting rendered moot by the portion of discovery on extra-contractual claims that have not yet the trial relating to [underinsured accrued because the insured's breach-of-contract claim has motorist] benefits. To require such not yet been decided. would not do justice, avoid prejudice, and further convenience. Under Several courts of appeals have considered the issues of these circumstances, we conclude severance and abatement in the context of uninsured motorist the trial court abused its discretion or underinsured motorist insurance coverage; these courts in bifurcating the case instead of have concluded that, when uninsured motorist claims are severing and abating the [underinsured involved, severance of the extra-contractual claims was motorist] claim from the bad faith required. See In re Am. Nat'l Cnty. Mut. Ins. Co., 384 S.W.3d claims.

429 (Tex.App.-Austin 2012, orig. proceeding) (concluding trial court abused discretion by denying insurer's motion for In re United Fire Lloyds, 327 S.W.3d at 256. 2 severance and abatement of extra-contractual claims where settlement offer was made on underinsured motorist claim); *427 [8] In this case, to prevail on her extra-contractual In re Reynolds, 369 S.W.3d 638, 650–55 (Tex.App.-Tyler claims against Progressive, Guia must demonstrate that 2012, orig. proceeding) (holding severance of underinsured Progressive was contractually obligated to pay her uninsured motorist claim was required to prevent prejudice); In re motorist claim. To do this, Guia must first prove that she had United Fire Lloyds, 327 S.W.3d 250, 257 (Tex.App.-San uninsured motorist coverage, that the other driver negligently Antonio 2010, orig. proceeding) (finding abuse of discretion caused the accident and was uninsured, and the amount of her in granting motion for bifurcation of trial rather than damages. See In re Reynolds, 369 S.W.3d at 652. It appears severance and abatement of extra-contractual claims); see that the first issue is not in dispute. Therefore, Guia's breach- also In re Old Am. Cnty. Mut. Fire Ins. Co., No. 13– of-contract claim will essentially involve the issues in a 12–00700–CV, 2013 WL 398866 (Tex.App.-Corpus Christi typical car wreck: the comparative negligence of Guia and the January 30, 2013, orig. proceeding) (mem. op.) (holding other driver and Guia's damages. The bad faith claim here is that severance and abatement of extra-contractual claims more complicated. In her most recent petition, she alleges that is required in many instances when insured asserts claim Progressive breached their duty of good faith and fair dealing, to uninsured or underinsured motorist benefits); In re violated the insurance code by failing to timely pay the Farmers Tex. Cnty. Mut. Ins. Co., No. 07–11–00396–CV, claim, and further alleges Progressive's conduct was knowing 2011 WL 4916303, (Tex.App.-Amarillo Oct. 17, 2011, and intentional in violation of the Deceptive Trade Practices orig. proceeding) (mem. op.) (denying mandamus because Act. In discovery, Guia seeks production of all documents complaint was not preserved, but agreeing that abatement of related to lawsuits and claims against Progressive regarding extra-contractual claims is required in most instances when the denial of uninsured/underinsured motorist claims for over an insured asserts claim to uninsured motorist benefits). ten years. Examples of these requests include: The San Antonio Court of Appeals explained its Request 3. Produce all documents of any type as to claims determination that mandamus relief was proper to compel asserted against Progressive during period from January severance and abatement of an underinsured motorist claim 1, 2001, up to and including present day as a result of from related bad faith claims as follows: nonpayment of uninsured/underinsured motorist claims in Texas regardless of whether a lawsuit was filed and/or [The insurer] is under no contractual liability was denied. duty to pay [underinsured motorist] benefits until [the insured] establishes

© 2014 Thomson Reuters. No claim to original U.S. Government Works. 4 In re Progressive County Mut. Ins. Co., 439 S.W.3d 422 (2014)

Walker, 827 S.W.2d at 839. The Corpus Christi Court of Request 4. Produce all documents of any type as to Appeals in In re United Fire Lloyds concluded the insurer all lawsuits filed against Progressive during period from did not have an adequate remedy by appeal because, if a January 1, 2001, up to and including present day, as a result writ of mandamus were not granted, the insurer stood to lose of nonpayment of uninsured/underinsured motorist claims substantial rights by being required to prepare for claims that in Texas regardless of whether liability was denied. might be rendered moot and never even accrue. In re Fire ... Lloyds, 327 S.W.3d at 256 (citing U.S. Fire Ins. Co., 847 S.W.2d at 675; In re Trinity Universal Ins. Co., 64 S.W.3d Request 16. A copy of each and every policy, manual, at 468). protocol, instruction booklet or similar writing concerning procedures for the investigation and handling of uninsured/ The Corpus Christi Court of Appeals agreed. See In re Old underinsured motorist claim which was in effect at the time Am. Cnty. Mut. Fire Ins. Co., 2013 WL 398866. Likewise, Plaintiff made her claims in this case, and for the seven other appellate courts have also found these claims do not years preceding Progressive's denial of Plaintiff's claim. have an adequate remedy by appeal. See In re Am. Nat'l Cnty.

Mut. Ins. Co., 384 S.W.3d 429, 439; In re Reynolds, 369 These requested documents are irrelevant to the breach-of- S.W.3d at 658; In re United Fire Lloyds, 327 S.W.3d at 256. contract claim, and the introduction of Progressive's claims handling history in unrelated accidents at the trial of Guia's breach-of-contract claim would be manifestly unjust. See Womack v. Berry, 291 S.W.2d at 682–83 (Tex. 1956) (orig. Conclusion proceeding).

Based on our review of the record, we conclude that Guia's extra-contractual claims against Progressive are severable, The trial court's abatement of any decision on severance until the facts and circumstances of the case require a severance to the eve of trial requires the parties to engage in discovery prevent manifest injustice, and the legal rights of the parties on the extra-contractual claims and prepare for a trial on will not be prejudiced thereby. See Womack, 291 S.W.2d these claims, even though extra-contractual liability could at 683. The trial court, therefore, abused its discretion in only accrue if Progressive is found liable on the contract. See refusing to sever and abate the uninsured motorist claims In re United Fire Lloyds, 327 S.W.3d at 256. Accordingly, from the bad faith claims pending the determination of the trial court's decision to postpone severance, unless writ Progressive's liability for the uninsured motorist damages is granted, will require Progressive to expend resources under the policy. See In re Am. Nat'l Cnty. Mut. Ins. Co., 384 answering discovery that is far broader than the car accident S.W.3d 429; In re Reynolds, 369 S.W.3d at 650–55; In re claim that must be resolved.

United Fire Lloyds, 327 S.W.3d at 257; see also In re Old Am.

Cnty. Mut. Fire Ins. Co., 2013 WL 398866; In re Farmers Consistent with In re Reynolds and In re United Fire Lloyds, Tex. Cnty. Mut. Ins. Co., 2011 WL 4916303. we conclude that severance of insured's extra-contractual claims is required in this instance to avoid prejudice.

We conditionally grant Progressive's writ of mandamus and order the trial court to vacate the February 11, 2014 Order, grant Progressive County Mutual Insurance Company's Adequate Remedy by Appeal Motion to Sever, and abate the extra-contractual claims. We are confident that the trial court will promptly comply, and [9] A writ of mandamus will issue only if there is no our writ will issue only if it does not. adequate remedy available by direct appeal. See *428

Footnotes 1 The underlying case is Alma Guia v. Jessica Nicole Estes, Relinda Estes, Progressive Insurance Company and Progressive County Mutual Insurance Company; No. 2012–57535, in the 215th District Court of Harris County, Texas, the Honorable Elaine H. Palmer presiding.

2 The court relied on the Texas Supreme Court's reasoning in Brainard v. Trinity Universal Insurance Co., 216 S.W.3d 809 (Tex. 2006), but acknowledged that Brainard concerned timing of presentment of contract claim to determine whether party was entitled to

© 2014 Thomson Reuters. No claim to original U.S. Government Works. 5 In re Progressive County Mut. Ins. Co., 439 S.W.3d 422 (2014)

attorney's fees under Chapter 38 of Texas Civil Practice and Remedies Code, rather than severance and abatement in the context of uninsured motorist claim. See In re United Fire Lloyds, 327 S.W.3d 250, 257 (Tex.App.-San Antonio 2010, orig. proceeding) (discussing Brainard, 216 S.W.3d at 818).

End of Document © 2014 Thomson Reuters. No claim to original U.S. Government Works.

© 2014 Thomson Reuters. No claim to original U.S. Government Works. 6 TAB D In re Allstate County Mut. Ins. Co., --- S.W.3d ---- (2014) 2014 WL 5285850 involves the same facts and issues. Vernon's Ann.Texas Rules Civ.Proc., Rule 41. 2014 WL 5285850 Only the Westlaw citation is currently available. Cases that cite this headnote NOTICE: THIS OPINION HAS NOT BEEN RELEASED FOR PUBLICATION IN THE [2] Action PERMANENT LAW REPORTS. UNTIL RELEASED, Severance of Actions IT IS SUBJECT TO REVISION OR WITHDRAWAL. Controlling reasons to allow a severance are to avoid prejudice, do justice, and Court of Appeals of Texas, promote convenience. Vernon's Ann.Texas Houston (1st Dist.).

Rules Civ.Proc., Rule 41.

In re ALLSTATE COUNTY MUTUAL Cases that cite this headnote INSURANCE COMPANY, Relator.

No. 01–14–00068–CV. | Oct. 16, 2014. [3] Action Severance of Actions Synopsis Trial court has a duty to order severance when Background: Insured brought action against underinsured all of the facts and circumstances of the case motorist (UIM) carrier to recover for breach of contract, unquestionably require a separate trial to prevent breach of duty of good faith in settlement, and manifest injustice, and there is no fact or misrepresentation of insurance policy. The 240th District circumstance supporting or tending to support a Court, Fort Bend County, Pedro Ruiz, J., denied carrier's contrary conclusion, and the legal rights of the motion to sever and abate extra-contractual claims. Carrier parties will not be prejudiced thereby. Vernon's petitioned for writ of mandamus.

Ann.Texas Rules Civ.Proc., Rule 41.

Cases that cite this headnote Holdings: The Court of Appeals, Sherry Radack, C.J., held that: [4] Insurance Settlement Duties; Bad Faith [1] severance of settlement claims was required, but An insurer generally cannot be liable for failing to settle or investigate a claim that it has no [2] severance of misrepresentation claims was not required. contractual duty to pay.

Cases that cite this headnote Writ granted in part.

[5] Insurance Uninsured or Underinsured Motorist West Headnotes (8) Coverage Insurance [1] Action Necessity of Tort Liability Severance of Actions Insurance Claims are properly severable if: (1) the Underinsurance; Exhausted Coverage controversy involves more than one cause of In the context of underinsured motorist action; (2) the severed claim is one that would be coverage, an insurer is under no contractual the proper subject of a lawsuit if independently duty to pay underinsured motorist benefits asserted; and (3) the severed claim is not so until the insured proves that the insured interwoven with the remaining action that it has underinsured motorist coverage, that the

© 2014 Thomson Reuters. No claim to original U.S. Government Works. 1 In re Allstate County Mut. Ins. Co., --- S.W.3d ---- (2014) 2014 WL 5285850 underinsured motorist negligently caused the promote convenience and judicial economy. accident that resulted in the covered damages, Vernon's Ann.Texas Rules Civ.Proc., Rule 41. the amount of the insured's damages, and that the underinsured motorist's insurance coverage is Cases that cite this headnote deficient.

Cases that cite this headnote Attorneys and Law Firms [6] Insurance Ronald J. Restrepo, Nicole S. Bakare, N. Kimberly Hoesl, Duty to Settle or Pay Doyle, Restrepo, Harvin & Robbins, L.L.P., Houston, TX, for Insurance Appellant.

Investigations and Inspections An insured generally must first establish that the David L. Miller, Diane F. Burgess, Miller, Scamardi & insurer is liable on the contract before the insured Carrabba, P.C., Houston, TX, for Appellee. can recover on extra-contractual causes of action Panel consists of Chief Justice RADACK and Justices against an insurer for failing to promptly pay, JENNINGS and KEYES. failing to settle, or failing to investigate an underinsured motorist insurance claim.

OPINION Cases that cite this headnote SHERRY RADACK, Chief Justice. [7] Action *1 Relator, Allstate County Mutual Insurance Company, Severance of Actions seeks a writ of mandamus compelling the trial court to (1) Severance of insured's settlement claims from vacate its December 10, 2013 order denying Allstate's motion breach of contract claim was required in order to sever and abate extra-contractual and bad faith claims to avoid prejudice and prevent manifest injustice asserted against it and (2) enter an order severing and abating to underinsured motorist (UIM) carrier from those extra-contractual and bad faith claims until the breach need to expend resources answering discovery of contract claim brought by the real parties in interest, far broader than car accident claim; allowing Raymond Briers, Jr. and Stacy Briers (collectively, Briers), insureds to conduct broad discovery into carrier's individually and as representatives of the estate of Grant claims handling history regarding unrelated Briers, has been resolved. 1 We partially grant relief. accidents and then allowing introduction of such information at trial of breach of contract claim would be manifestly unjust. Vernon's Ann.Texas Rules Civ.Proc., Rule 41. Background Cases that cite this headnote The Briers' minor son, Grant, was riding in a vehicle driven and owned by DaYonajja Williams when the vehicle was involved in a single-vehicle automobile collision. Grant died [8] Action as a result of the automobile accident. Following Grant's Severance of Actions death, the Briers filed a claim for underinsured motorist Trial court acted within its discretion when it benefits with Allstate, pursuant to a business auto policy denied underinsured motorist (UIM) carrier's issued by Allstate to Raymond Briers Jr.'s employer, T & motion to sever insureds' misrepresentation R Pipeline Services, Inc. Allstate denied the Briers' claim, claims from breach of contract claim; stating that neither Raymond nor Grant was an “insured” misrepresentation claims were asserted as under the policy and therefore they were not covered for an alternative causes of action to the breach of underinsured motorist claim. contract claim, and, therefore, requiring carrier to litigate the claims at the same time would

© 2014 Thomson Reuters. No claim to original U.S. Government Works. 2 In re Allstate County Mut. Ins. Co., --- S.W.3d ---- (2014) 2014 WL 5285850 The Briers then filed suit against Allstate, seeking a to clear error. See id. (quoting Johnson v. Fourth Court of declaratory judgment stating that the Briers were covered by Appeals, 700 S.W.2d 916, 917 (Tex. 1985)). Because a trial the policy and alleging, in a paragraph styled “Breach of court has no discretion in determining what the law is, the trial Contract,” that Allstate breached the underinsured motorist court abuses its discretion if it clearly fails to analyze or apply provisions of the insurance contract. The Briers also asserted the law correctly. See id. at 840. “To satisfy the clear abuse of the following extra-contractual causes of action: (1) that discretion standard, the relator must show ‘that the trial court Allstate acted in bad faith by failing to settle or make a good could reasonably have reached only one decision.’”Liberty faith attempt to settle the claim, which the Briers styled as Nat'l Fire Ins. Co. v. Akin, 927 S.W.2d 627, 630 (Tex. 1996) “Bad Faith”; (2) that Allstate engaged in unfair settlement (orig. proceeding) (quoting Walker, 827 S.W.2d at 840). practices by failing to make a good faith settlement offer, in violation of Texas Insurance Code section 541.060(a) “In determining whether appeal is an adequate remedy, [we] (2), styled as “Unfair Settlement Practices”; and (3) that consider whether the benefits outweigh the detriments of Allstate failed to properly investigate, evaluate, and pay mandamus review.”In re BP Prods. N. Am., Inc., 244 S.W.3d the Briers' claim, in violation of Texas Insurance Code 840, 845 (Tex. 2008) (orig. proceeding). We also consider section 541.060(a)(7), styled as “Failure to Promptly Pay “whether mandamus will spare litigants and the public ‘the Claims” (collectively, “settlement claims”). time and money utterly wasted enduring eventual reversal of improperly conducted proceedings.’”In re Team Rocket, The Briers further alleged, in the event the trial court L.P., 256 S.W.3d 257, 262 (Tex. 2008) (orig. proceeding) determined that they were not covered by the underinsured (quoting In re Prudential Ins. Co. of Am., 148 S.W.3d 124, motorist provisions in the policy, the following alternative 136 (Tex. 2004) (orig. proceeding)). causes of action: (1) that Allstate, Insurance Network of Texas, Eddie Croix Insurance Agency, Inc., and Randy Croix made material misrepresentations of fact and of law and failed Severance of Extra–Contractual and Bad Faith Claims to disclose a matter required to be disclosed, in violation of Texas Insurance Code section 541.061(3), (4), and (5), which [1] [2] Texas Rule of Civil Procedure 41 governs severance they styled as “Misrepresentation of the Insurance Policy”; of claims. SeeTEX.R. CIV. P. 41. The rule provides, in and (2) that Allstate, Insurance Network of Texas, Eddie part, that “[a]ny claim against a party may be severed and Croix Insurance Agency, Inc., and Randy Croix violated the proceeded with separately.”Id. Claims are properly severable Deceptive Trade Practices Act by representing that the Briers if: (1) the controversy involves more than one cause of action; were covered under the policy, when they were not, styled as (2) the severed claim is one that would be the proper subject “Violations of the DTPA” (collectively, “misrepresentation of a lawsuit if independently asserted; and (3) the severed claims”). claim is not so interwoven with the remaining action that it involves the same facts and issues. Guar. Fed. Sav. Bank v. *2 Allstate filed a motion to sever the extra-contractual Horseshoe Operating Co., 793 S.W.2d 652, 658 (Tex. 1990). claims from the breach of contract claim and abate those The controlling reasons to allow a severance are to avoid claims until the preliminary issue of coverage could be prejudice, do justice, and promote convenience. F.F.P. Op. decided. The trial court denied the motion. Allstate filed this Partners, L.P. v. Duenez, 237 S.W.3d 680, 693 (Tex. 2007). petition for a writ of mandamus, seeking to compel severance and abatement. [3] The trial court has “broad” discretion in the severance of causes of action. Morgan v. Compugraphic Corp., 675 S.W.2d 729, 734 (Tex. 1984); Black v. Smith, 956 S.W.2d 72, Standard of Review 75 (Tex.App.-Houston [14th Dist.] 1997, orig. proceeding).

However, that discretion is not unlimited. See U.S. Fire Ins.

We may issue a writ of mandamus to correct a trial court's Co. v. Millard, 847 S.W.2d 668, 671 (Tex.App.-Houston [1st clear abuse of discretion or violation of a duty imposed by Dist.] 1993, orig. proceeding). The trial court has a duty to law when no adequate remedy by appeal exists. See Walker v. order severance when “all of the facts and circumstances of Packer, 827 S.W.2d 833, 839 (Tex. 1992) (orig. proceeding). the case unquestionably require a separate trial to prevent A clear abuse of discretion occurs when the trial court's manifest injustice, and there is no fact or circumstance decision is so arbitrary and unreasonable that it amounts supporting or tending to support a contrary conclusion, and

© 2014 Thomson Reuters. No claim to original U.S. Government Works. 3 In re Allstate County Mut. Ins. Co., --- S.W.3d ---- (2014) 2014 WL 5285850 the legal rights of the parties will not be prejudiced thereby Because the settlement claims asserted solely against Allstate ....” Womack v. Berry, 156 Tex. 44, 291 S.W.2d 677, 683 differ from the misrepresentation claims asserted against (1956) (orig. proceeding). Allstate, Insurance Network of Texas, Eddie Croix Insurance Agency, Inc., and Randy Croix, we will consider the *3 In the context of insurance cases, a “breach of an settlement claims separately from the misrepresentation insurance contract claim is separate and distinct from bad claims. faith, Insurance Code or DTPA causes of action. Uninsured motorist claims and bad faith claims have been recognized as separate and distinct causes of action which might Severance of the Settlement Claims Is Mandatory each constitute a complete lawsuit within itself.”Millard, In their settlement claims, the Briers allege that Allstate acted 847 S.W.2d at 672 (internal citations omitted); see Akin, in bad faith by failing to settle their contractual claim, that 927 S.W.2d at 629; In re Am. Nat'l Cnty. Mut. Ins. Allstate failed to make a good faith settlement offer, and that Co., 384 S.W.3d 429, 433 (Tex.App.-Austin 2012, orig. Allstate failed to properly investigate their contractual claim. proceeding); In re United Fire Lloyds, 327 S.W.3d 250, 254 (Tex.App.-San Antonio 2010, orig. proceeding). “But, *4 [4] [5] [6] An insurer generally cannot be liable for in most circumstances, an insured may not prevail on a bad failing to settle or investigate a claim that it has no contractual faith claim without first showing that the insurer breached duty to pay. See Progressive Cnty. Mut. Ins. Co. v. Boyd, 177 the contract.” Akin, 927 S.W.2d at 629; see also In re S.W.3d 919, 922 (Tex. 2005); Akin, 927 S.W.2d at 629 (“But, Progressive Cnty. Mut. Ins. Co., 439 S.W.3d 422, 426– in most circumstances, an insured may not prevail on a bad (Tex.App.-Houston [1st Dist.] 2014, orig. proceeding) faith claim without first showing that the insurer breached (stating that “extra-contractual liability could only accrue if the contract.”); In re Old Am. Cnty. Mut. Fire Ins. Co., 2013 [insurer] is found liable on the contract”); In re Old Am. WL 398866, at *4; In re State Farm Mut. Auto. Ins. Co., Cnty. Mut. Fire Ins. Co., No. 13–12–00700–CV, 2013 WL 395 S.W.3d at 237–38; In re Am. Nat'l Cnty. Mut. Ins. Co., 398866, at *4 (Tex.App.-Corpus Christi Jan. 30, 2013, orig. 384 S.W.3d at 437–38; In re United Fire Lloyds, 327 S.W.3d proceeding) (“[T]o prevail on their extra-contractual claims at 256; In re Miller, 202 S.W.3d 922, 925 (Tex.App.-Tyler against Old American, plaintiffs must first demonstrate that 2006, orig. proceeding); Millard, 847 S.W.2d at 673. In the Old American was contractually obligated to pay their context of underinsured motorist coverage, an insurer is under uninsured motorist claim.”); In re State Farm Mut. Auto. Ins. no contractual duty to pay underinsured motorist benefits Co., 395 S.W.3d 229, 238 (Tex.App.-El Paso 2012, orig. until the insured proves that the insured has underinsured proceeding) (quoting Smith v. Allstate Ins., No. H–03–0651, motorist coverage, that the underinsured motorist negligently 2007 WL 677992, at *5 (S.D.Tex. Feb. 27, 2007)) (“Texas caused the accident that resulted in the covered damages, the insurance law generally conditions recovery for bad faith amount of the insured's damages, and that the underinsured and extracontractual claims on a recovery for breach of the motorist's insurance coverage is deficient. See Brainard v. insurance contract itself”). And, in insurance cases involving Trinity Universal Ins. Co., 216 S.W.3d 809, 818 (Tex. 2006); bad faith claims, the Texas Supreme Court has recognized In re Old Am. Cnty. Mut. Fire Ins. Co., 2013 WL 398866, that severance may be necessary if the “insurer has made a at *4; In re United Fire Lloyds, 327 S.W.3d at 255. Thus, settlement offer on the disputed contract claim” or if there are an insured generally must first establish that the insurer is “other compelling circumstances.” Akin, 927 S.W.2d at 630. liable on the contract before the insured can recover on extra- contractual causes of action against an insurer for failing There is no evidence in the record that Allstate made a to promptly pay, failing to settle, or failing to investigate settlement offer to the Briers. Nevertheless, Allstate argues an underinsured motorist insurance claim. See Akin, 927 that there are “other compelling circumstances” requiring S.W.2d at 629; In re Progressive Cnty. Mut. Ins. Co., 439 severance of the extra-contractual claims in this case, namely, S.W.3d at 426–27; In re Old Am. Cnty. Mut. Fire Ins. Co., the time, effort, costs, and judicial resources associated with 2013 WL 398866, at *4; In re State Farm Mut. Auto. Ins. litigating and preparing for trial on extra-contractual claims Co., 395 S.W.3d at 238 (quoting Smith, 2007 WL 677992, that have not yet accrued because the Briers have not yet at *5); see also In re Am. Nat'lCnty. Mut. Ins. Co., 384 established a contractual right to recovery on the breach of S.W.3d at 437–38 (holding that “any duty by an insurer to its contract claim. insured, common-law or statutory, necessarily arises from the contractual relationship between the parties,” and that insurer has no duty to settle claim that it is not contractually obligated

© 2014 Thomson Reuters. No claim to original U.S. Government Works. 4 In re Allstate County Mut. Ins. Co., --- S.W.3d ---- (2014) 2014 WL 5285850 to pay, insurer cannot be liable on bad faith claims arising 398866, at *4; In re State Farm Mut. Auto. Ins. Co., 395 from failure to investigate claim that it has no duty to pay, and S.W.3d at 237–39; In re Am. Nat'l Cnty. Mut. Ins. Co., 384 insurer cannot be liable for insurance code violations related S.W.3d at 437–39; In re United Fire Lloyds, 327 S.W.3d at to delays in making offer on claims it has no duty to pay). 256; Millard, 847 S.W.2d at 673. Further, allowing the Briers As a result, “Texas case law establishes that severance and to conduct broad discovery into Allstate's claims handling abatement of extra-contractual claims is required in many history regarding unrelated accidents and then allowing the instances in which an insured asserts a claim to uninsured or introduction of such information at the trial of the Briers' underinsured motorist benefits.”In re Old Am. Cnty. Mut. Fire breach of contract claim would be manifestly unjust. 3 See In Ins. Co., 2013 WL 398866, at *4; see also In re Progressive re Progressive Cnty. Mut. Ins. Co., 439 S.W.3d at 426–27; Cnty. Mut. Ins. Co., 439 S.W.3d at 426–28; In re Am. Nat'l In re Old Am. Cnty. Mut. Fire Ins. Co., 2013 WL 398866, Cnty. Mut. Ins. Co., 384 S.W.3d at 438–39; In re United Fire at *4. Finally, severance of the Briers' settlement claims Lloyds, 327 S.W.3d at 255–56. from the breach of contract claim would not prejudice the parties' rights. Accordingly, we conclude that severance of the [7] In this case, the Briers allege that Allstate failed to settle settlement claims was required. See Boyd, 177 S.W.3d at 922; their claim, failed to make a good faith settlement offer to Womack, 291 S.W.2d at 683; In re Progressive Cnty. Mut. them, and failed to properly investigate, evaluate, and pay Ins. Co., 439 S.W.3d at 426–28; In re Old Am. Cnty. Mut. Fire their claim. To prevail on these claims, the Briers must first Ins. Co., 2013 WL 398866, at *4; In re State Farm Mut. Auto. establish that Allstate is liable under the insurance contract 2 Ins. Co., 395 S.W.3d at 237–39; In re Am. Nat'l Cnty. Mut. by proving: (1) they were covered by the insurance policy Ins. Co., 384 S.W.3d at 437–39; In re United Fire Lloyds, 327 Allstate issued to T & R Pipeline; (2) Williams negligently S.W.3d at 256; Millard, 847 S.W.2d at 673. caused the automobile collision that resulted in Grant's death; (3) the amount of their damages; and (4) Williams was either uninsured or underinsured. See In re Old Am. Cnty. Mut. Fire Severance of the Misrepresentation Claims Is Not Ins. Co., 2013 WL 398866, at *4; In re State Farm Mut. Auto. Mandatory Ins. Co., 395 S.W.3d at 237–38. There is no evidence in the [8] The Briers alleged the misrepresentation claims as record showing that the Briers have established that Allstate alternatives to their breach of contract claim. Unlike the is liable under the insurance contract. As a result, the Briers' settlement claims, the misrepresentation claims do not allege settlement claims would be negated by a determination in the that Allstate failed to act in good faith to comply with breach of contract claim that Allstate is not liable. See Boyd, duties imposed by the insurance contract, but instead allege 177 S.W.3d at 922; In re Progressive Cnty. Mut. Ins. Co., that the Briers are entitled to damages even if they are S.W.3d at 426–27 (stating that “extra-contractual liability not covered by the insurance contract. In these claims, the could only accrue if [insurer] is found liable on the contract”); Briers alleged that Allstate, Insurance Network of Texas, In re Old Am. Cnty. Mut. Fire Ins. Co., 2013 WL 398866, Eddie Croix Insurance Agency, Inc., and Randy Croix made at *4 (“[T]o prevail on their extra-contractual claims against material misrepresentations and misstatements of law related Old American, plaintiffs must first demonstrate that Old to the insurance policy issued by Allstate to T & R Pipeline American was contractually obligated to pay their uninsured that the Briers relied on to their detriment. SeeTEX. BUS. motorist claim.”); In re State Farm Mut. Auto. Ins. Co., 395 & COMM.CODE ANN. § 17.46(b)(5), (b)(12) (West 2011); S.W.3d at 239; In re Am. Nat'l Cnty. Mut. Ins. Co., 384 TEX. INS.CODE ANN. §§ 541.061, 541.151 (West 2009); S.W.3d at 438; In re United Fire Lloyds, 327 S.W.3d at 256; Celtic Life Ins. Co. v. Coats, 885 S.W.2d 96, 97–100 Millard, 847 S.W.2d at 675. (Tex. 1994); Brown & Brown of Tex., Inc. v. Omni Metals, Inc., 317 S.W.3d 361, 381 (Tex.App.-Houston [1st Dist.] *5 Because the Briers' settlement claims would be negated 2010, pet. denied). by a determination that they lacked coverage under the insurance contract, requiring Allstate to prepare for and The Briers sued Insurance Network of Texas, Eddie Croix litigate the settlement claims, which may have not yet accrued Insurance Agency, Inc., and Randy Croix as agents of Allstate and may be rendered moot by the breach of contract claim, and allege that the insurance policy at issue was sold by would not do justice, avoid prejudice, or further convenience. Randy Croix, as an agent for Allstate. Therefore, if Allstate is See In re Progressive Cnty. Mut. Ins. Co., 439 S.W.3d at liable for the allegations in the misrepresentation claims, the 426–28; In re Old Am. Cnty. Mut. Fire Ins. Co., 2013 WL liability would be based on Randy Croix's actions as Allstate's

© 2014 Thomson Reuters. No claim to original U.S. Government Works. 5 In re Allstate County Mut. Ins. Co., --- S.W.3d ---- (2014) 2014 WL 5285850 agent. See, e.g., Coats, 885 S.W.2d at 98 (“An insurance Accordingly, we conclude that the trial court acted within its company is generally liable for any misconduct by an agent discretion when it denied Allstate's motion to sever insofar as that is within the actual or apparent scope of the agent's Allstate requested severance of the misrepresentation claims authority.”); Omni Metals, Inc., 317 S.W.3d at 377–78, 381. from the breach of contract claim. See Duenez, 237 S.W.3d In its motion requesting severance, Allstate sought severance at 693; Morgan, 675 S.W.2d at 734; Womack, 291 S.W.2d at of the misrepresentation claims alleged against Allstate from 683. the Briers' breach of contract claim. But the record before the Court reflects neither that the other defendants filed a similar motion nor that Allstate sought severance of the Briers' claims Adequate Remedy by Appeal asserted against it from the claims asserted against the other defendants. As a result, the Briers' misrepresentation claims If the Briers' settlement claims are tried with the breach of against Allstate involve the same facts and issues as, and contract claim, the trial court and the parties will be required are interwoven with, the misrepresentation claims against to conduct discovery, prepare for trial, and conduct voir dire Insurance Network of Texas, Eddie Croix Insurance Agency, on claims that may have not yet accrued and that could be Inc., and Randy Croix, which claims would remain pending rendered moot by the portion of the trial relating to breach in the underlying lawsuit regardless of any severance of of contract for underinsured motorist benefits. See In re these claims against Allstate. See Guar. Fed. Sav. Bank, 793 Progressive Cnty. Mut. Ins. Co., 439 S.W.3d at 427–28; In S.W.2d at 658. re Old Am. Cnty. Mut. Fire Ins. Co., 2013 WL 398866, at *4; In re Am. Nat'l Cnty. Mut. Ins. Co., 384 S.W.3d at 439; *6 Further, the misrepresentation claims are not bad Millard, 847 S.W.2d at 675–76. Accordingly, we conclude faith claims, are not dependent upon a determination that Allstate has no adequate remedy by appeal. See In re that Allstate has a contractual duty to pay underinsured Progressive Cnty. Mut. Ins. Co., 439 S.W.3d at 427–28; In re motorist benefits to the Briers, and will not be rendered Old Am. Cnty. Mut. Fire Ins. Co., 2013 WL 398866, at *4; moot if Allstate prevails on the breach of contract claim. In re State Farm Mut. Auto. Ins. Co., 395 S.W.3d at 239; In SeeTEX. BUS. & COMM.CODE ANN. § 17.46(b)(5), (b) re Am. Nat'l Cnty. Mut. Ins. Co., 384 S.W.3d at 439; In re (12); TEX. INS.CODE ANN. § 541.061(3), (4), (5). The United Fire Lloyds, 327 S.W.3d at 256; Millard, 847 S.W.2d misrepresentation claims, like promissory estoppel claims, at 675–76. are asserted as alternative causes of action to the breach of contract claim, alleging that Allstate, Insurance Network of Texas, Eddie Croix Insurance Agency, Inc., and Randy Croix are liable for the Briers' damages even if the Briers Conclusion are not covered by the insurance policy. CompareTEX. Based on our review of the record, we conclude that the BUS. & COMM.CODE ANN. § 17.46(b)(5), (b)(12); TEX. Briers' settlement claims are severable from the breach of INS.CODE ANN. §§ 541.061(3), (4), (5), 541.151, with contract claim, the facts and circumstances of the case require Miller v. Raytheon Aircraft Co., 229 S.W.3d 358, 378– a severance to prevent manifest injustice, and the legal rights (Tex.App.-Houston [1st Dist.] 2007, no pet.)(stating of the parties will not be prejudiced thereby. See Womack, elements of promissory estoppel claim). Therefore, unlike 291 S.W.2d at 683. The trial court, therefore, abused its the Briers' settlement claims, requiring Allstate to litigate discretion in refusing to sever the Briers' settlement claims the misrepresentation claims at the same time as the breach from the breach of contract claim and abate the settlement of contract claim would promote convenience and judicial claims pending the determination of Allstate's liability for economy. the breach of contract claim. See In re Am. Nat'l Cnty. Mut.

Ins. Co., 384 S.W.3d at 439; In re Reynolds, 369 S.W.3d Finally, Allstate has not offered evidence to demonstrate how 638, 650–55 (Tex.App.-Tyler 2012, orig. proceeding); In re it will be prejudiced if it has to prepare for and litigate the United Fire Lloyds, 327 S.W.3d at 257; see also In re Old Am. misrepresentation claims in conjunction with the breach of Cnty. Mut. Fire Ins. Co., 2013 WL 398866, at *4–5. contract claim. See Allstate Ins. Co. v. Hunter, 865 S.W.2d 189, 194 (Tex.App.-Corpus Christi 1993, orig. proceeding). *7 We further conclude, however, that the facts and circumstances of the case do not require severance of the Briers' misrepresentation claims from their breach of contract

© 2014 Thomson Reuters. No claim to original U.S. Government Works. 6 In re Allstate County Mut. Ins. Co., --- S.W.3d ---- (2014) 2014 WL 5285850 Nevertheless, because the trial court did not abuse its claim and that the trial court properly exercised its discretion discretion when it determined that the “Misrepresentation of in determining that the misrepresentation claims should be the Insurance Policy” claim and the “Violations of the DTPA” tried with the breach of contract claim. claim should remain pending with the breach of contract claim, we deny Allstate's petition for writ of mandamus Accordingly, we conditionally grant Allstate's petition for insofar as it requests an order compelling the trial court writ of mandamus in part and order the trial court to (1) to sever and abate the Briers' “Misrepresentation of the vacate the portion of the December 10, 2013 order that Insurance Policy” and “Violations of the DTPA” causes of denies severance and abatement of the “Bad Faith,” “Unfair action.

Settlement Practices,” and “Failure to Promptly Pay Claims” causes of action, (2) grant Allstate's motion to sever as to We are confident that the trial court will promptly comply, those causes of action, and (3) abate those causes of action and our writ will issue only if it does not. until the Briers' breach of contract claim is resolved.

Footnotes 1 The underlying case is Raymond Briers, Jr. and Stacy Briers, Individually, and as Representatives of the Estate of Grant Briers, Deceased v. Allstate County Mutual Insurance Company, Insurance Network of Texas, Ed die Croix Insurance Agency, Inc., and Randy S. Croix, cause number 12–DCV–198995, pending in the 240th District Court of Fort Bend County, Texas, the Hon. Pedro Ruiz presiding.

2 The Supreme Court has “left open the possibility that an insurer's denial of a claim it was not obliged to pay might nevertheless be in bad faith if its conduct was extreme and produced damages unrelated to and independent of the policy claim.”Progressive Cnty. Mut.

Ins. Co. v. Boyd, 177 S.W.3d 919, 922 (Tex. 2005). The Briers have not, however, alleged that Allstate engaged in any “extreme” conduct that “produced damages unrelated to and independent of the policy claim.”Id.; see In re Am. Nat'l Cnty. Mut. Ins. Co., 384 S.W.3d 429, 438 (Tex.App.-Austin 2012, orig. proceeding). The Briers allege only that Allstate improperly denied their claim and failed to fairly investigate their claim. See Boyd, 177 S.W.3d at 922; In re Am. Nat'l Cnty. Mut. Ins. Co., 384 S.W.3d at 438.

3 In discovery, the Briers seek production of all documents related to lawsuits and claims against Allstate regarding the denial of claims under business automobile policies. Examples of these requests include: Request No. 33: Please produce all documents, communications or other tangible items evidencing the denial of any claim or attempt to deny a claim by ALLSTATE under any Business Automobile policy, from 2000—present, for a claim asserted by one insured based on another insured's status.

Request No. 42: Please produce your claims denial journal and any related documents for the past 10 years, relating to the denial of any claim asserted pursuant to an ALLSTATE Business Automobile policy in Texas.

End of Document © 2014 Thomson Reuters. No claim to original U.S. Government Works.

© 2014 Thomson Reuters. No claim to original U.S. Government Works. 7