Underinsured Motorist Claim

Most insurance lawyers know this – – that a first party uninsured motorist claim cannot litigate bad faith until there has been a resolution to the uninsured motorist (UM) part of the claim.  This is illustrated in the February 2017, opinion from the 14th Court of Appeals styled, In Re Allstate County Mutual Insurance Company.

Allstate was sued for UM benefits and at the same time sued for extra-contractual bad faith claims.  The Judge in the case would not sever and abate the extra-contractual causes of action from the UM claim and this mandamus action resulted.

The real party in interest, Alexa St. Julian was involved in an automobile accident with an uninsured driver.  Alexa was unable to reach a settlement with Allstate, who had made a settlement offer, and the lawsuit resulted.  Allstate sought for the UM claim to severed and abated from the extra-contractual claims.

Generally, the law requires an insured to prevail on her breach of the UM claim before she can prevail on her bad faith claims against an insurer.  When contractual and extra-contractual claims are being pursued simultaneously, courts have repeatedly held that extra-contractual claims must be severed and abated when the insurer has made a settlement offer on the contract claim, which is what happened in this case.  Abatement of the bad faith claim necessarily accompanies severance because the scope of permissible discovery differs in the two types of claims and without abatement the parties will be put to the effort and expense of conducting discovery on claims that may be disposed of in a previous trial.

Alexa served discovery on Allstate, which included a number of requests related to Allstate’s handling of Alexa’s claim that are not relevant to her contractual claim.  Therefore, the trial court abused its discretion by failing to abate Alexa’s extra-contractual claims.

Having concluded that the trial court abused its discretion by not abating Alexa’s extra-contractual claims and Allstate does not have an adequate remedy by appeal, the court held that Allstate established that it is entitled to mandamus relief.

Accordingly, Allstate’s petition for writ of mandamus was granted and the trial court was directed to vacate its order and conditionally grant Allstate’s motion to abate the extra-contractual claims.