Bad Faith Insurance Claims And Trial

A claim against an insurance company generally speaking, will involve at least two distinct claims.  One for a breach of the insurance contract and a second claim for the insurance company acting in “bad faith” in their handling of the claim.  This issue was discussed in a 2022 opinion from the Northern District of Texas, Dallas Division.  The case is styled, Claire Garcia v. Allstate Vehicle and Property Insurance Company.

Allstate had filed a Motion to Sever and Abate the contract claim from the bad faith claims alleged to be violations of the Texas Insurance Code, Sections 541.060 and 542.060, plus violations of the Texas Deceptive Trade Practices Act and fraud.

Garcia experienced hail damage to her home and filed a claim for coverage through her home insurer, Allstate.  Allstate sent an adjuster to Garcia’s home who calculated an estimate of $843.68.  Later, another agent calculated an estimate of $1,166.84.  After applying deductibles, Garcia was not receiving any monies for the claim.

Garcia hired a third-party inspector who found hail damages in the amount of $18,016.94.  When an impasse was reached, Garcia filed suit against Allstate for the causes of action mentioned above, plus others.

The court treats this motion to sever as a motion for separate trials under Federal Rule of Civil Procedure 42(b).  Whether to grant such a motion is within the sound discretion of the trial court.

Allstate claims that severing the claims will save time and money for the Court and the parties in the event that Allstate is absolved of contractual liability.  Allstate further claims that the extra-contractual claims “must necessarily be abated” since they cannot be tried until after the contract claim is resolved.  For these reasons, Allstate asserts that granting its motion is necessary to “do justice and avoid prejudice.”

Garcia responds that Allstate’s motion should not be granted, for four reasons:

1) the contractual and extra-contractual claims are so interwoven with each other
that they involve the same facts and issues; 2) severing and/or abating the claims
would not promote justice or promote economy for any participant, including
litigants, jurors or the Court; 3) Allstate has failed to prove that they would be
prejudiced should severance or abatement not be granted; and 4) Allstate’s request for severance runs counter to recent guidance offered by the Texas Supreme Court.

Garcia further argues that Allstate has not carried its burden of showing prejudice
if the claims are tried together and that severing the claims would not “promote prompt, efficient, and cost-effective resolution” of this dispute but “would do just the opposite.”

This Court denied Allstate’s motion stating:

First, because “an insured’s claim for breach of an insurance contract is ‘distinct’ and ‘independent’ from claims that the insurer violated its extra-contractual common-law and statutory duties,” it is not clear that some of Garcia’s extra-contractual claims would not survive an adverse ruling on her contractual claim.

Second, because the contractual and extra-contractual claims are factually intertwined, severing these claims would only serve judicial efficiency if the contractual claim is resolved against Plaintiff and does dispose of the remaining claims.  If the contractual claim is instead resolved against Allstate, or proves not to dispose of any extra-contractual claim, granting this motion would mean:

The discovery process would have to be reopened for Plaintiff’s extra-contractual
claims. Further, another jury would have to be empaneled to decide claims that could have been presented to the previous jury, causing unnecessary inconvenience to the members of the public chosen for that second jury panel.  Finally, the Court and the Parties would have to undertake the expense of preparing for a second trial.  Such potential costs far outweigh any speculative savings from severance.

Finally, Allstate has not shown that it will be prejudiced if the contractual and extra-contractual claims proceed together and no abatement is granted.  As Garcia points out, attorney-client and work-product privileged documents are generally not discoverable, and a protective order can appropriately limit disclosure of any trade secrets.

Accordingly, the Court finds that severance and abatement is unwarranted.


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