Under-Insured Motorist Claim And Contract

The Western District of Texas, San Antonio Division, issued an opinion on July 1, 2019, discussing the handling of under-insured motorist (UIM) claims and how they are handled by the courts.  The case is styled, Laura Lee Green v. Allstate Fire And Casualty Insurance Company.

Green sued Allstate for UIM benefits under breach of contract theories of law among other causes of action and Allstate filed a motion to dismiss.

Green was involved in an accident with Shana Dorsey who was alleged to be under-insured and Green then made a claim against Allstate for UIM benefits.  It is alleged that Allstate failed to make an offer of settlement, failed to provide a reasonable explanation of the basis for denying Green’s claim, refused to affirm or deny coverage within a reasonable time, refused to pay Green’s claim without conducting a proper investigation, and refusing to pay the claim after liability had become reasonably clear.

For Green to recover for breach of contract, she must show (1) that she has UIM coverage, (2) that the UIM driver negligently caused the accident resulting in damages (3) the amount of her damages and (4) that the UIM’s insurance coverage is deficient.

Different from first-party insurance contracts, tort law is used to determine the contractual obligation to pay damages for UIM insurance rather than the policy alone.  Filing suit and demanding benefits is insufficient to determine contractual obligations to pay damages for UIM coverage.  Allstate’s duty does not arise until the liability of the third party and damages are determined.

The Texas Supreme Court has stated “the insured is not required to obtain a judgment against the tortfeasor” and “the insured may settle with the tortfeasor … and then litigate UIM coverage with the insurer.”  This indicates that an insured can litigate the issue of UIM coverage with the insurer without first obtaining a judgment against the tortfeasor.  How the issue of UIM coverage is litigated is not clear.

The court then discusses how other courts have handled this issue.  Ultimately, this court refused to dismiss the breach of contract claim.