Dallas Fort Worth Insurance Lawyer Blog

Most insureds in Grand Prairie, Arlington, Fort Worth, Dallas, and other places in the Dallas - Fort Worth metroplex do not have much understanding how Underinsured Motorist (UIM) protection works. Here is a case that helps to explain a little of it.
The case is styled, Salvador Olivas v. State Farm Mutual Automobile Insurance Company and Dan McDowell. The opinion was issued in 1993, by the El Paso Court of Appeals. Here is some background.
Salvador Olivas, while driving an automobile belonging to Dan McDowell, had an accident with a vehicle driven by Alex Harrison IV. Harrison's liability insurance policy had coverage limits of $25,000 for one person. Olivas settled his tort claim against Harrison for $15,000. This lawsuit was then filed in which it was alleged that Olivas's damages exceeded $25,000 and recovery was sought on McDowells' and Olivas's UIM policies, both of which were issued by State Farm.
Both State Farm and McDowell filed special exceptions which were sustained and when Olivas failed to amend, the case was dismissed with prejudice.
The issue here was: Does the settlement of a third-party tort claim for less than the full amount of the liability coverage carried by the tortfeasor bar a claim for UIM coverage for the injured party?
The conclusion by this court was, "An injured party may settle a third-party claim for less than the full amount of the tortfeasor's liability coverage and still claim underinsured motorist coverage, but recovery may be had only for damages sustained in an amount in excess of the total amount of the tortfeasor's liability coverage."
So, what does this mean?
In this case, Harrison had liability coverage for $25,000. Olivas settled his claim with Harrison for $15,000. Olivas may recover on any underinsured motorist coverage only to the extent that his damages exceed $25,000. This means that if Olivas obtains a judgment for $48,000 then State Farm would get a credit for the amount of the Harrison policy, which was $25,000. Which means Olivas would be able to collect only $23,000 from State Farm.
In the court's discussion of this case they pointed out Texas Insurance Code, Section 1952.103 which provides for UIM coverage, that says the term "underinsured motor vehicle" means an insured motor vehicle on which there is collectable liability insurance coverage with limits of liability for the owner or operator that were originally lower than, or have been reduced by payment of claims arising from the same accident to, an amount less than the limit of liability stated in the underinsured coverage of the insured's policy. Section 1952.106 says UIM shall apply to "... all sums which he is shall be legally entitled to recover as damages ... and reduced by the amount recovered or recoverable from the insurer of the underinsured motor vehicle."
This appeals court pointed out that the trial court having sustained special exceptions, the allegations of damages in excess of the amount of Harrison's coverage of $25,000, must be true. Thus, at the time of settlement, Harrison was an underinsured motorist. To hold as State Farm urged, that Olivas's settlement constitutes a judicial admission that Harrison's liability insurance was more than sufficient to compensate for all damages would discourage not encourage settlement of claims.
The court then said, "Where, as here, the claim greatly exceeds the available coverage, we find no reason to require that payment be delayed while awaiting payment by the liability carrier."
There are pitfalls to doing what was done in this case that did not exist at the time this case arose. Changes in the law regarding UIM coverage have to be taken into account. There are also other strategies for maximizing the chance for a favorable outcome. it is important to see an experienced Insurance Law Attorney in these types of claims.

Most insureds in Grand Prairie, Fort Worth, Dallas, Mansfield, Arlington, and other areas in the Dallas - Fort Worth metroplex have no idea how the uninsured motorist protection coverage on their automobile policies works. All they know is that their insurance agent told them that they should have it in case they have a wreck with someone who does not have insurance.
The Texas Insurance Code, Section 1952.101 requires that all automobile policies issued in the State of Texas contain uninsured motorist UM protection unless the UM protection is rejected in writing. Section 1952.108, allows for the insurance carrier to pursue the uninsured driver for any amounts paid out by the insurance company. As a result of Section 1952.108, allowing the insurance company to pursue the uninsured driver, almost all insurance policies require that their insured obtain written permission from their insurance company before reaching a settlement with the uninsured driver. Most people do not realize this. As a result, what happens if permission to settle is not obtained before settlement with the uninsured driver?
The answer to the above question is partially answered in the 1977, Texas Supreme Court case, Robert William Ford, Jr., et al. v State Farm Mutual Automobile Insurance Company. The principle question in this case was whether State Farm's unconditional denial of liability constituted a waiver of its right to consent before its insured subsequently settled with another insurance carrier.
Here are some of the facts.
On October 18, 1969, Mrs. Ford was a passenger in an automobile driven by Mrs. Harvey when the Harvey auto was in a collision with a vehicle driven by Jeffrey Whittten. The collision resulted in Ford's death and damages in excess of $20,000. Ford was survived by her husband and children. Whitten, whose negligence caused the collision, was an uninsured motorist.
On July 21, 1970, suit was filed by Mr. Ford, for recovery under the UM of a State Farm policy and a Gulf Insurance Company policy. On October 23, 1970, State Farm filed an answer denying any liability. On April 20, 1971, State Farm filed its first amended answer with pleas in bar "to Plaintiff's action in its entirety." Later, Ford settled with Gulf. One of these pleas by State Farm, alleged that plaintiff's action was barred and that State Farm was in no event liable to pay anything under its policy.
State Farm later filed a second amended answer in which it set up the defense that plaintiff's claim was barred because a settlement reached with another insurance carrier had not received the written consent of State Farm. This written consent was a requirement of the policy Ford had with State Farm.
In discussing this case, the court pointed out that this was a case of first impression for Texas courts.
In deciding for plaintiffs the court stated, "State Farm neither paid not pursued any of its affirmative steps for determination of what, if anything, it was due to pay plaintiff. Instead, it unconditionally denied all liability under the policy. This intentional conduct was inconsistent with claiming the right under the policy to consent before its insured settled with a third party. Such conduct constituted a waiver of that right. Waiver has been frequently defined as an intentional relinquishment of a known right or intentional conduct inconsistent with claiming it."
The court further said, "If State Farm had been correct in unconditionally denying coverage and liability, it would have lost nothing by plaintiff's settlement with Gulf. Since State Farm was incorrect it its denial, it has lost only the inconsistent right to assert the exclusionary clause as a grounds for forfeiture of plaintiff's entire coverage. It has not lost its right of subrogation. When it pays the amount adjudged to plaintiff by the trial court, State Farm will still have its right to institute proceedings in the name of plaintiff against the uninsured motorist or any other person responsible for the accident. It is true that State Farm will have to share subrogation rights with Gulf Insurance which may, by reason of earlier settlement, have a call on the first $10,000 recovered by plaintiff from any person responsible for the accident. The relative status of the subrogation rights of the two companies, as between themselves, is a question which is not before us, and we express no opinion thereon."
If you are not confused by the above, then you must be pretty experienced with these types of situations. But, it is still confusing and serves as an example why an experienced Insurance Law Attorney needs to be involved.

People in Grand Prairie, Fort Worth, Arlington, Irving, Dallas, and other places in Texas, who have underinsured motorist (UIM) coverage will hope they never have to use that coverage. But what if they do have to use it? What are the rules?
One rule focused on here, is that in order to make the UIM claim, the claimant must first get written permission from their UIM insurance carrier to settle the case with the underinsured driver who caused injuries. If there is a settlement with the underinsured driver without getting written permission from the UIM carrier, the UIM carrier can refuse benefits. Here is a case where this played out.
The case is a Texas Supreme Court case decided in 1994. The style of the case is Ruben and Anita Hernandez v. Gulf Group Lloyd's.
In this case, the court had to consider whether an insurer may deny a UIM claim on the basis of a "settlement without consent" exclusion clause absent any showing that the settlement prejudiced the insurer. The court held that an insurer may escape liability on the basis of a settlement-without-consent exclusion only when the insurer is actually prejudiced by the insured's settlement with the tortfeasor.
This case was tried on the following stipulated facts. On November 21, 1987, Elizabeth Hernandez was killed when the car in which she was a passenger flipped over. The driver of the car, Charles McCullough, Jr., was the sole cause of the accident. McCullough was nineteen years old and his only asset was a $25,000 liability policy with State Farm. Elizabeth was covered by her parents' insurance policy with Gulf Group and that policy provided UIM benefits of $100,000. The damages suffered by Elizabeth and her parents exceeded $125,000.
Six weeks after the accident, the Hernandezes, without the consent of Gulf, entered into a settlement with McCullough for the limits of the State Farm policy. The Hernandezes then sought UIM coverage from Gulf. Gulf denied the claim based on the Hernandezes' failure to obtain its consent in writing before settling with McCullough.
In its appeal of the Gulf decision, the Hernandezes did not dispute the validity of the settlement-without-consent exclusion in the Gulf policy. They argued, however, that such an exclusion is unenforceable absent a showing by Gulf that it has been prejudiced by Hernandezes' failure to obtain consent before settling with an underinsured motorist.
In discussing this case, the court said, "Insurance policies are contracts, and as such are subject to rules applicable to contracts generally." "A fundamental principle of contract law is that when one party to a contract commits a material breach of that contract, the other party is discharged or excused from any obligation to perform." Citing from the RESTATEMENT (SECOND) OF CONTRACTS, Section 241(a), the court said, "In determining the materiality of a breach, courts will consider, among other things, the extent to which the nonbreaching party will be deprived of the benefit that it could have reasonably anticipated from full performance." The less the non-breaching party is deprived of the expected benefit, the less the material the breach.
In the context of an UIM claim, there may be instances when an insured's settlement without the insurer's consent prevents the insurer from receiving the anticipated benefit from the insurance contract; specifically, the settlement may extinguish a valuable subrogation right. In other instances, however, the insurer may not be deprived of the contract's expected benefit, because any extinguished subrogation right has no value. In the latter situation -- where the insurer is not prejudiced by the settlement -- the insured's breach is not material. The court concluded, therefore, "that an insurer who is not prejudiced by an insured's settlement may not deny coverage under an uninsured/underinsured motorist policy that contains a settlement-without-consent clause.
In the case, the parties stipulated that McCullough had no assets other than the $25,000 State Farm policy, and that he did not believe his financial situation would change in the foreseeable future; and Gulf further stipulated that it "has not incurred any financial losses ... with regard to its subrogation rights by the failure of the [Hernandezes] to obtain [its] consent before settling with McCullough and releasing him from all liability." Gulf, therefore, remained in the same position it would have occupied had the Hernandezes complied with the settlement-without-consent clause. Since Gulf had not been prejudiced by the Hernandezes' breach, the breach was not material, and Gulf therefore is not excused from its obligation to perform under the contract.

People in Grand Prairie, Arlington, Mansfield, Fort Worth, Dallas, or anywhere else in Texas will often times try to settle a claim they have without the assistance of an experienced Insurance Law Attorney. The problem with doing this is that there are multiple ways a person can be making a big mistake. Here is just one of them.
The Dallas Court of Appeals, decided a case in 1992, styled, "Rochelle Traylor v. Cascade Insurance Company, Formerly Known as Bonneville Texas Insurance Company, Successor in Interest to Victoria Lloyds Insurance Company."
Here is some factual background:
Traylor was riding in a car driven by Glynnis Penny when they were involved in an accident caused by Khoron Page. Traylor was seriously injured in the accident. Page's liability insurance was limited to $25,000 per person. Traylor settled with Page for the full policy amount of $25,000 and released Page from further liability without the consent of Cascade Insurance Company, Penny's insurer. Because Traylor's damages exceeded $25,000, she sued Cascade for its underinsured motorist (UM) protection of $20,000 per person. Cascade denied coverage and moved for summary judgment contending that coverage was excluded under Section A.2 of the policy's exclusions, which provides:
A. We do not provide Uninsured/Underinsured Motorists Coverage for any person:
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2. If that person or the legal representative settles the claim without our consent.
Traylor argued in response that the exclusion violates Texas Insurance Code, Section 1952.108. The trial court disagreed and granted Cascade's motion.
Traylor argued that the consent-to-settlement clause in the insurance policy violated the statutory purposes of underinsured motorist coverage expressed in the Texas Insurance Code. Pointed out was that the Texas Supreme Court has stated that the purpose of underinsured motorist coverage is "the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured or underinsured motor vehicles ...." Thus, the purpose of this court is to determine whether the consent-to-settlement clause is inconsistent with and fails to further the purpose of the Texas Insurance Code UM statutes.
This court then discussed the results of other cases dealing with this subject. After that discussion this court said that the consent-to-settlement clauses are a valid way for an insurance company to protect its right to subrogation against the UM motorist or any other person legally responsible for the insured's injuries. The court said that by permitting the insurance company to recover from the at-fault party some or all of the insurance proceeds paid to the insured, the right of subrogation defrays the cost and expands the availability of underinsured motorist coverage. When the insured settles with the at-fault party and releases that party from all future liability, even when the release is in exchange for the entire sum for which that party is insured, the insured cuts off the insurance company's right to recover its liability from the at-fault party. The consent-to-settlement clause preserves that right. Because the consent-to-settlement clause furthers the insurance company's right to subrogation under the Texas Insurance Code, the clause furthers the purpose of the Insurance Code. Accordingly, the exclusion under the policy for failure to obtain the insurer's consent to settlement is valid.
Traylor further argued that the enforcement of consent-to-settlement clause would encourage insurance companies to deny consent to an injured claimant to settle with a negligent motorist, thereby frustrating the attempts of the claimant to recover any insurance proceeds. In response, this court pointed out that the law provides heavy penalties against insurance companies that delay or refuse settlement of claims in bad faith.
There are exceptions to the law expressed in this opinion.

People with auto insurance policies in Grand Prairie, Arlington, Fort Worth, Dallas, Hurst, Euless, Bedford, and other places through out the DFW metroplex usually do not have a very good understanding of how their auto insurance policies work. All they know is that if they get into a wreck the insurance is suppose to help them.
There are many things an auto insurance policy can provide. The vast majority of people get the bare minimum that is required by state law. But there are many things that can be purchased. The minimum is liability coverage. Beyond liability coverage, a person can purchase coverage for damages to their vehicle, towing, auto rental, life insurance, medical payments, personal injury protection, uninsured and underinsured coverage, and a few other types of coverage.
All of these coverages work a little different from each other. Personal Injury Protection (PIP), and Uninsured / Underinsured (UM) coverage is required coverage on any auto policy sold in the State of Texas, unless these coverages are rejected in writing.
The requirement for PIP coverage is found in the Texas Insurance Code, Section 1952.152. The requirement for UM coverage is found in the Texas Insurance Code, Section 1952.101.
One aspect of these coverages was discussed in a 2004, Texas Supreme Court case styled, Old American County Mutual Fire Insurance Company v. Zeferino Sanchez. The question in this case was whether the insured spouse of the person listed as the "named insured" in the declarations page of a policy may reject those coverages. The case got to the Supreme Court as the result of a summary judgment ruling. This Supreme Court ruled that the spouse falls within the class of persons statutorily entitled to reject UM and PIP coverages under the policy.
Here is the factual background:
This case was presented on stipulated facts. On January 8, 1998, Margarita Sanchez, wife of Zeferino Sanchez, applied for and purchased an insurance policy from Old American for two of the couple's vehicles. Ms. Sanchez rejected UM and PIP coverages on the insurance application, and Old American never assessed premiums for the coverages. In applying for the policy, Ms. Sanchez affirmed that the rejections of UM and PIP coverages would apply to the 1998 policy and to all future renewals of that policy. The Sanchezes renewed their existing policy in 1999. Neither Mr. or Mrs. Sanchez requested PIP or UM coverages at that time.
Although Ms. Sanchez's name appeared on the 1998 policy application, she was not listed as a "named insured" on the declarations page. The policy, however, defined "you" and "your" to include the "named insured" as well as "the spouse if a resident of the same household." Mr. Sanchez fell within the policy definitions of "you" and "your" because she and Mr. Sanchez lived in the same house at all pertinent times. To that end, the parties stipulated that both Mr. and Mrs. Sanchez were insured under the policy. The parties disagreed, however, about the extent of the policy's coverage. Specifically, the parties disputed whether Mr. Sanchez was entitled to UM and PIP benefits to cover damages arising from a 1999 accident.
On April 11, 1999, Mr. Sanchez's pickup was parked on the shoulder of the road. A vehicle driven by an uninsured motorist struck Mr. Sanchez's truck as he was lying beneath it repairing a broken fuel hose. The impact caused the pickup to collapse on Mr. Sanchez and sever his spinal cord. The policy's UM and PIP provisions excluded coverage for injuries sustained while "occupying" or when "struck by" any vehicle owned by an insured that was not insured under the policy.
After the accident, Mr. Sanchez filed a claim with Old American for UM and PIP benefits under the policy. Old American filed suit seeking a declaratory judgment absolving it of any obligation to pay those benefits.
This court got into a multi page discussion about the purpose of the UM and PIP statutes and the wording of those statutes and then compared that discussion to the wording of the Old American policy.
The Texas Supreme Court ultimately held that the phrase "insured named in the policy" was synonymous with "named insured" in the UM and PIP statutes. In so holding it was ruled that Ms. Sanchez's signed reject of UM and PIP coverages, also excluded those coverages for Mr. Sanchez.

There are times for someone in Grand Prairie, Arlington, Fort Worth, Dallas, De Soto, Duncanville, Cedar Hill, Crowley, Mansfield, and other places in Texas to get with an Insurance Law Attorney to understand how certain aspects of insurance claims are to be handled.
In 1999, the Court of Appeals, Fourteenth District, Houston, had a case of "first impression," meaning they were presented with an argument for the first time. The case dealt with an argument for offset and settlement credit against uninsured motorist coverage by a negligent third party. The dispute arose out of a multi-car accident.
The style of the case is, "Ann M. Bartley a/k/a Anne Marie Tadlock v. Martell Rae Guillot." Here are some facts:
Guillot originally sued Ward, Bustos (uninsured), and Bartley (insured). Before trial, Guillot settled with Allstate, her uninsured motorist carrier, for $20,000 for the injuries she sustained in the accident caused by Bustos. The settlement agreement limited Allstate's subrogation rights to any damages recovered from Bustos or any other uninsured motorist. Bustos was dismissed and Ward was nonsuited. Thus, Guillot proceeded against Bartley only and recovered $30,000. Bartley moved the court for a set-off in the amount of $20,000, the amount Guillot received from Allstate. This request was made pursuant to Texas Civil Practices & Remedy Code, Section 33.012. The trial court refused, and Bartley perfected this appeal.
The issue before the court was whether a negligent driver is entitled to receive credit from an independent insurance policy procured by the injured party. This is what made this a case of "first impression" in Texas. An insurance company who pays under contract for a loss or injury for the wrong of another is subrogated to the rights of the creditor or injured person against the wrongdoer. The insurer's right to subrogation derives from the rights of the insured.
Here, Allstate paid Guillot, the insured, pursuant to Guillot's uninsured motorist policy for the multi-car collision. This entitled Allstate to stand in the shoes of Guillot and assert any claims that Guilot was entitled to assert. However, Allstate decided not to exercise its subrogation rights. Thus, Allstate allowed Guillot to receive more money than the damages awarded by the jury because it did not attempt to collect from Bustos. (A total of $50,000).
In discussing this case, the court pointed out that what Bartley really seeks is reimbursement or contribution from Bustos via Allstate's payment to Guillot under her uninsured motorist policy. However, Allstate stands in the shoes of Guillot not the shoe's of the joint tortfeasor. Bustos, the uninsured alleged joint tortfeasor, was not a party to the suit. To prevent what has occurred, Bartley could have joined Bustos in a cross action as a third party defendant creating an opportunity for the jury to adjudicate Bustos's liability, if any. This would have allowed Bartley to seek contribution or reimbursement from Bustos for any damages attributable to Bustos. To offset the $30,000 Bartley owed as damages by Allstate's $20,000 settlement, would allow Bartley to receive contribution from the plaintiff and not a codefendant. Allstate's liability arose from the fault, if any, of the uninsured motorist Bustos, not that of the insured driver, Bartley.
As stated, this was a case of first impression for the court and as such is not the type of situation that is going to happen very often.

A natural question for someone in Weatherford, Mineral Wells, Aledo, Hudson Oaks, Willow Park, Millsap, Brock, or anywhere else in Parker County to ask is; What is the value of my claim?
When the claim is a personal injury claim, there is no easy answer. One general principle in this regard is that there are laws against making a "double recovery." A double recovery would be where you collect money from more than one source for an injury. The most likely place for this to be seen is where a person is injured in an auto accident caused by another. The injured person goes to the hospital and pays for the hospital bills with their personal health insurance. Then later on, the injured person makes a claim against the person who caused the accident and injuries and the insurance company for that person pays the injured person again, for the same hospital bills. Technically, this is illegal.
Another example is where the injured person makes a claim against two other people who may be responsible for the injuries and both pay all the bills.
In the second example above the Texas Civil Practices & Remedies Code, Section 33.012(b) says, "If the claimant has settled with one or more persons, the court shall further reduce the amount of damages to be recovered by the claimant with respect to a cause of action by the sum of the dollar amounts of all settlements."
What Section 33.012(b) means is that if a person has a claim that is worth $1,000, then he cannot collect $1,000 from both people he is making the claim against. So, if one pays $100, then he still has a claim against the other for $900.
In the first example above, where the injured person has had the hospital bills paid by his insurance company, then the hospital has a subrogation interest in any amounts the injured person receives from the person who caused the injuries. The amount of the subrogation amount would be an amount up to what his health insurance has paid. So, if the injured person has a claim worth $1,000 but only $500 is paid by the health insurance company and if the injured person collects $1,000 from the person who caused the injury, then $500 has to be paid back to the health insurance company and the injured person can do as they wish with the other $500.
An experienced Insurance Law Attorney knows how to use other laws and legal principles to increase the total amount of the recovery and or lessen the amount of money that has to be paid back as a subrogation interest. - One thing to know, is it can be very confusing.
One place where a double recovery is allowed and fully legal is in auto injury claims where the injured person has Personal Injury Protection (PIP) benefits. The Texas Insurance Code, Section 1952.155(a) and (b).
Section 1952.155(a) says, "The benefits under coverage required by this subchapter are payable without regard to: (2) any collateral source of medical, hospital, or wage continuation benefits." This means that the injured person can collect his PIP benefits and then still make a claim against some other personal insurance he has for the same losses such as medical bills or lost wages. The caveat here is that there are exceptions to this and is again, a situation where an experienced Insurance Law Attorney needs to be involved to stay out of trouble.
Section 1952.155(b) says, "Except as provided by Subsection (c), an insurer paying benefits under coverage required by this subchapter does not have a right of subrogation or claim against any other person or insurer to recover any benefits by reason of the alleged fault of the other person in causing or contributing to the accident." This means that the PIP insurance company cannot subrogate against the insurance company of the person who caused the injuries. There is only one exception to this statute which is in Subsection (c), and this writer does not know where it has ever come into play.
The lesson to be taken from this posting is that the value of a claim has to take into account the rules discussed above.