Texas Supreme Court Holds Attorneys’ Fees May Be Recovered in UM/UIM Cases
In a long-awaited decision, the Texas Supreme Court decided Cause No. 19-0885, Allstate Insurance Co. v. Daniel Irwin (Tex. May 21, 2021) and the hotly-contested issue of whether attorneys’ fees are available in UM/UIM cases. In a 5-4 decision authored by Justice John Devine, the Court’s majority held “a declaratory judgment action is the appropriate remedy for determining the underlying tort issues that control the validity of the insured’s [UM/UIM] claim against his insurer.” Slip op. at *2, 5, and 14 (reasoning that “[b]ecause Chapter 37 provides for the award of attorney’s fees, and the UDJA has not been invoked simply to replicate issues already before the court that might implicate Chapter 38, the award here is not erroneous; nor does Allstate claim it to be an abuse of discretion”). Justices Lehrmann, Boyd, Blacklock, and Busby joined in the majority opinion, which emphasized that the Court’s previous Brainard decision “does not explain what form this litigation should take.” Id. at *5. Justices Guzman, Bland, and Huddle joined the dissent of Chief Justice Hecht.
In permitting the recovery of attorneys’ fees, Irwin notes that the Declaratory Judgment Act “does not require an award of attorney’s fees to anyone; rather, it ‘entrusts attorney fee awards to the trial court’s sound discretion.’” Slip op. at *13 (citing Bocquet v. Herring, 972 S.W.2d 19, 21 (Tex. 1998)). Nothing in Irwin changes the rule in Texas that the trial court may – but is not required to – award reasonable and necessary attorneys’ fees as are “equitable and just.” See Wells Fargo Bank, N.A. v. Murphy, 458 S.W.3d 912, 919 (Tex. 2015); Tex. Civ. Prac. & Rem. Code § 37.009. The Act “entrusts attorney fee awards to the trial court’s sound discretion, subject to the requirements that any fees awarded be reasonable and necessary, which are matters of fact, and to the additional requirements that fees be equitable and just, which are matters of law.” Bocquet, 972 S.W.2d at 21. Texas trial courts can, but need not, award attorneys’ fees to prevailing declaratory litigants when there’s a bona fide dispute as to coverage.
In light of the fact that attorneys’ fees are discretionary under the Declaratory Act, the issue of attorneys’ fees issue should be taken up at entry of judgment as was the case in Irwin. Slip op. at *3 (noting the issue of attorneys’ fees was not tried to a jury but was determined by the court on entry of judgment). This approach is entirely consistent with the Supreme Court’s recent decision – Cause No. 19-0791, In re State Farm Mutual Auto Ins. Co. et al (Tex. March 19, 2021) – which required that Texas trial courts proceed with the “initial ‘car crash’ trial” before doing anything else. See In re State Farm at *2, 11. Under Irwin and In re State Farm, plaintiffs must litigate the “car crash” phase of trial first before pursuing other claims including attorneys’ fees.