Insurance Company Fighting Technicalities

Fort Worth insurance lawyers and those in Benbrook, Crowley, Burleson, and other parts of Tarrant County need to know the ways insurance companies fight.
The Austin Court of Appeals issued an opinion in December 2012, that illustrates some of this. The case is styled, In re Old American County Mutual Fire Insurance Company.
Old American filed a petition for writ of mandamus complaining of the trial court’s order denying their plea in abatement. This Court denied the writ of mandamus.
Real party in interest Sherry Shook was a passenger in a car that was involved in a car accident with Jimmy Jarrett, one of Old American’s insureds. Shook made a demand on Old American through Old American’s agent, but a settlement was never reached. Shook sued Jarrett and won, and Jarrett assigned his rights against Old American to Shook. One week later, Old American filed suit in federal court seeking a declaration that Shook’s demand was not a proper Stowers demand.
Old American relied on diversity for federal jurisdiction. Five days later, before she was served in the federal suit, Shook sued Old American in Travis County, seeking a declaration construing her rights under Jarrett’s insurance contract and alleging claims for breach of contract, negligence, and violations of the Insurance Code and the Deceptive Trade Practices Act. Old American filed a plea in abatement in the state suit, arguing that the doctrine of dominant jurisdiction required that the suit be abated. The trial court denied the plea, and Old American filed this petition for writ of mandamus.
The doctrine of dominant jurisdiction provides that “when cases involving the same subject matter are brought in different courts, the court with the first-filed case has dominant jurisdiction and should proceed, and the other case should be abated.” However, dominant jurisdiction does not apply to suits filed in other states because every state is entirely sovereign and unrestricted in its powers. Similarly, when suits are filed in federal court and state court, dominant jurisdiction does not apply.
Instead, the proper course of action is for the first-filing party to seek a stay, rather than seeking relief through a plea in abatement.
To show its entitlement to a stay, the party must generally show that the two suits involve the same cause of action, concern the same subject matter, involve the same issues, and seek the same relief, but the court may also consider additional factors, such as which action was filed first, whether the parties are the same, and the effect of a judgment in the later action on any order or judgment entered in the prior action.
Old American’s plea in abatement was the improper means to seek to halt the state proceeding in favor of the federal suit. However, even if the Court viewed Old American’s filing as seeking a stay instead of as a plea in abatement, it could not conclude that the trial court abused its discretion in refusing to grant a stay.
In Old American’s federal suit, it named only Shook as a defendant and sought only declarations that (1) Jarrett was not entitled to coverage under his insurance policy because of misrepresentations he allegedly made when he obtained the insurance, (2) Jarrett’s vehicle was not covered by his personal policy, and (3) Shook had not made and could not make a valid Stowers claim. In Shook’s suit, she named herself as “assignee of Jimmy Anderson Jarrett” and asks for relief to which she or Jarrett “may show themselves justly entitled.” Shook seeks a declaration “construing the contract of insurance and declaring the rights of Sherry Shook under the contract,” specifically seeking a declaration that she is entitled to recover $25,080 from Old American under Jarrett’s policy. She seeks further damages from Old American for breach of contract for its failure to indemnify and defend Jarrett, negligence for its failure to “reasonably and prudently protect” Jarrett from “an excess judgment” due to its refusal to accept her settlement offer, and violations of the Insurance Code and the Deceptive Trade Practices Act. Shook’s suit seeks broader relief that goes beyond Old American’s pleadings and looks to state law as grounds for her claims. Looking at the pleadings and parties involved in the two causes, it did not appear the trial court abused its discretion in declining to stay its proceeding in favor of the federal suit.
This case serves as a very good example to illustrate why an experienced Insurance Law Attorney is needed to fight with an insurance company.