Texas Supreme Court Hears Oral Argument on Allstate v. Irwin
The Texas Supreme Court heard oral argument on Thursday, January 7, 2021 in Allstate v. Irwin, an underinsured motorist case out of San Antonio addressing the availability of attorneys’ fees in such cases. Plaintiff Daniel Irwin sued Allstate seeking a declaration that he was entitled to recover damages resulting from the wreck under his UM/UIM benefits policy and attorneys’ fees. On appeal, Allstate argued the trial court abused its discretion in awarding Irwin declaratory relief and attorneys’ fees.
Oral argument before the Texas Supreme Court largely focused on how the attorneys’ fees question was addressed in Brainard v. Trinity Universal Ins. Co., 216 S.W.3d 809 (Tex. 2006). Given the unique nature of UM/UIM litigation, the Brainard Court found that the carrier has no contractual duty to pay benefits until the insured obtains a judgment establishing the liability and underinsured status of the liable motorist. Brainard, 216 S.W.3d at 818. Brainard held there was no breach of contract in this context and thus no attorneys’ fees were available and emphasized that “an essential element to recovery of attorneys’ fees under Chapter 38 in a suit based on contract is ‘the existence of a duty or obligation which the opposing party has failed to meet.” Id.
The Irwin Court was particularly interested in the question of how the UM/UIM cause of action should be labeled in light of the fact that these are not “breach of contract” cases. Irwin’s counsel argued the UIM claim in this context is necessarily a declaratory action under Chapter 37 of the Civil Practice & Remedies Code, thus entitling the policyholder to attorneys’ fees. Allstate’s counsel disagreed emphasizing that Chapter 37 is not a “catch all” for causes of action that exist without a statutory or common law label. The Texas Supreme Court will have to wrestle with the question of whether UM/UIM claims can be shoehorned into Chapter 37 despite the absence of the typical disputes between policyholder and carrier about the meaning of policy language. In resolving this question, the Court could simply note the validity of a “Brainard claim” brought as a stand-alone cause of action without any declaratory or breach of contract verbiage. The Brainard claim involves a peculiar hybrid cause of action employing tort concepts in the insurance coverage context, but it is well-established and easily addressed at trial. Probably not going too far out on a limb to recognize that hundreds of such suits have been brought in the past fourteen years asserting “Brainard claims” for UM/UIM benefits without any declaratory label.