Brainard Rule Under Attack in Texas House of Representatives

April 28th, 2019 By Sheila Tan

Uninsured and underinsured (“UM/UIM”) motorist insurance coverage continues to be a hotly debated topic, as attorneys representing insureds seek ways to recover attorneys’ fees in this hybrid cause of action. As we recently reported, the Texas Supreme Court recently turned back one attempt when it denied review in the case of Weber v. Progressive. Currently, the long-established Brainard rule is under legislative “attack” from H.B. 1739.

H.B. 1739 seeks to do what Weber could not: eliminate the requirement that she secure a judgment against either the tortfeasor or directly against the UM/UIM carrier to prove the liability of the tortfeasor and amount of her damages, as required under current Texas law.

There are several key items that the bill seeks to change regarding the law with respect to UM/UIM coverage. For one, it establishes a written notice requirement that “reasonably informs the insurer of the facts of the claim.”
But far more significantly, it proposes to do away with the requirement for a judgment or a “legal determination” establishing the other motorist’s liability and the extent of the claimant’s damages before UM/UIM coverage is triggered. In addition, the proposed amendment to the Texas Insurance Code would place a duty on the carrier to make a good faith attempt to settle once liability and damages are “reasonably clear.”

By far, the biggest advantage of the Brainard rule is in its simplicity and lack of ambiguity. It recognizes the unique nature of UM/UIM claims in which the entitlement to benefits is premised on the liability of a third party. Contrary to the arguments made by Plaintiffs’ attorneys and suggested by the authors of HB 1739, requiring a claimant to establish the liability of  third-party tortfeasors has not resulted in undue burdens on insureds. We’ve seen very few cases in which carriers have refused to attempt to settle UM/UIM claims prior to judgment against the tortfeasor. The claims that end of up in litigation are generally valuation disputes.

The Brainard rule has, however, prevented recovery attorney’s fees and that seems to be the primary motivation behind attempts to change it. The proposed bill challenges the established ban on recovery of attorney’s fees in UM/UIM cases, since the existence of a contractual duty to pay benefits by the carrier will now be determined when liability and damages are “reasonably clear.” Shifting the focus of the jury on the liability of the third-party tortfeasor and on to the alleged unreasonable investigation of the insurance carrier will likely inflate damages awards as well. This proposed legislation appears poised to deliver plenty of confusion to a settled area of the law.

At this point, the bill has been reported out of committee, but time may be running out as we near the end of the Texas legislative session. You can see the text of the bill and follow its progress here.