Uninsured/Underinsured Motorist Claims in Texas

Too many Texans do not have auto liability insurance. State law requires it. Many people cannot afford to buy and maintain auto insurance. They buy auto insurance when it’s time to renew their driver’s license or their vehicle registration, and then the policy soon lapses when the buyer stops paying the monthly insurance premium.

What if you’re in a wreck with an uninsured driver? The first question you must answer is, do you have Uninsured Motorist coverage on your auto insurance policy? Uninsured Motorist (“UM”) coverage is insurance you buy to protect yourself in case you’re in a wreck with an uninsured driver. Be aware that experienced personal injury lawyers can often locate insurance policies that are unknown at first.

If you do have UM coverage, a claim must be set up with your own insurance company. Your personal injury attorney will generally want to handle that for you to minimize your direct contact with the insurance adjuster. Your insurance company will assign a claim number and they will assign an insurance adjuster to handle the claim. Of course, the insurance company is going to try to put one over on you most of the time, but at least there’s insurance coverage.

If you don’t believe you have UM coverage, don’t be so sure. It often occurs that the auto insurance company fails to properly exclude UM coverage from your policy. Texas law requires that every auto insurance policy must automatically include UM coverage unless the buyer rejects that coverage in writing. That means the insurance company must provide UM coverage if they fail to get you to sign a rejection of UM coverage. Insurance agents frequently neglect to present insurance buyers with the proper rejection form.

It is important to keep in mind, that even if you’re dealing with your own insurance company on a UM claim, you are still dealing with an insurance company. They are not going to treat you any better just because you are their customer. The insurance industry bought and paid for their “tort reform” laws that knocked the teeth out of Texas insurance law, by eliminating the penalties and fines that used to be imposed on insurance companies who did not play fair.

Brainard Rule

In 2006, the Texas Supreme Court gave a gift to Texas auto insurers when it decided Brainard v. Trinity Universal Insurance Company. This case completely shook up the litigation of uninsured/underinsured (UM/UIM) motorist cases.

In a normal car wreck case, the plaintiff sues the driver of the other car. A plaintiff may make a UM/UIM claim against his own insurance company (assuming coverage was purchased) when the other driver either doesn’t have any liability insurance or the other driver doesn’t have enough insurance to cover all of the plaintiff’s damages.

Before Brainard, plaintiffs making claims in UM/UIM cases had two advantages over traditional car wreck cases. First, Texas law provides that a plaintiff who prevails in a breach of contract case may recover attorneys’ fees. Second, UM/UIM insurance carriers have statutory and common-law obligations to try and settle claims in good faith. These two advantages made UM/UIM cases much easier to resolve.

But Brainard changed all that. The case specifically addressed when attorneys’ fees were recoverable in a UM/UIM case. Before Brainard, it was widely (though not uniformly) accepted that the proper way to resolve a dispute with a UM/UIM carrier was for the plaintiff to file a breach of contract and a bad faith suit against the insurance company. If the plaintiff prevailed, then the plaintiff could recover his actual damages and attorneys’ fees. And if the jury found bad faith, then the plaintiff could recover those additional damages. This same procedure was followed in all claims against insurance companies regardless of the type of claim in dispute (eg homeowner’s policy, commercial policy, etc.).

In the Brainard decision, the Supreme Court said that a UM/UIM case is different;  the UM/UIM insurer is not contractually obligated to pay anything under the UM/UIM policy until the plaintiff has a judicial determination of the amount of the plaintiff’s damages. Thus, to recover attorneys’ fees, the plaintiff must have a first suit to determine damages, and if the insurance company doesn’t pay the amount determined in this first suit, then the plaintiff can file a second claim and recover attorneys’ fees for the UM/UIM carrier’s breach of contract.

This decision leads to several problems. First, our traditional cause of action in UM/UIM claims was a breach of contract claim. The Court has likely said those are not valid claims unless there is some prior suit establishing liability. Of course, the Court never says what vehicle it thinks is proper in the first suit to determine liability.

Second, taking away the risk of attorneys’ fees for breach of contract claims makes it much more difficult to resolve UM/UIM claims.

Third, after Brainard, insurance carriers are now (wrongly, I think) arguing that if insurance companies can’t breach the contract until the underlying damages are set, then insurance companies can’t be liable for violating statutory and common-law duties to settle the claims until the damages are set. (I think these arguments are wrong because the statutory and common law duties to try and settle in good faith are separate from any contractual duties to pay a claim.)

So this decision has ultimately made UM/UIM claims much more contentious, protracted, and difficult to settle.

The opinion from the Brainard v. Trinity Universal Insurance Company case has not been reversed. There have been attempts to reverse the decision through legislation; for instance, legislation challenging the Brainard rule in uninsured/underinsured (UM/UIM) cases has been filed for the third consecutive session as of 2023. However, there is no indication that any such legislative efforts have successfully resulted in a reversal of the Brainard decision up to this point.

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