In Re State Farm Requires Resolution of the “Car Crash” Case Before Consideration of any “Bad Faith” Claims

March 30th, 2021 By David L. Plaut

On March 19, 2021, the Texas Supreme Court issued an Opinion by Justice Blacklock reaffirming the continuing importance of its Brainard decision in the uninsured/underinsured (“UM/UIM”) motorist context. See In re State Farm Mutual Auto Ins. Co. et al. Without dissent, the Court held that UM/UIM claimants “must first obtain determinations of the third-party drivers’ liability and the amount of damages” in order to establish coverage. Slip Op. at *10. Because there was no judgment establishing the liability of the tortfeasor and the amount of damages, bifurcation of the plaintiffs’ Insurance Code claims was required before the trial court proceeded with the “initial ‘car crash’ trial.” Id. at *2, 11 (noting “[t]he insureds’ statutory claims need not be considered at all if [the carrier] has no duty to pay under their polic[y]”). Simply put, plaintiffs could not get around the Brainard requirement that they litigate the “car crash” phase of trial first before pursuing Insurance Code claims even when those were the only claims they pled.
In re State Farm rejects the view that Brainard is somehow in conflict with the Court’s articulation of insurance “bad faith” standards in USAA Texas Lloyds v. Menchaca, 545 S.W.3d 479 (Tex. 2018). See Slip Op. at *9 n. 2 (noting that under Menchaca, claimants “cannot simply allege statutory claims under the Insurance Code and thereby bypass the requirement that they establish their rights to receive benefits under their policies”). Bifurcation and/or severance of “bad faith” claims is now clearly required in all UM/UIM cases. See id at *13 (noting that requiring the carrier “to litigate its liability for UIM policy benefits alongside its liability for extracontractual claims would unduly prejudice the insurer and amounts to an abuse of discretion by the trial court”).