NUMBER 13-11-00412-CV
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI - EDINBURG
IN RE OLD AMERICAN COUNTY MUTUAL
FIRE INSURANCE COMPANY, ET AL.
On Petition for Writ of Mandamus.
MEMORANDUM OPINION
Before Justices Benavides, Vela, and Perkes
Memorandum Opinion by Justice Vela1
Relators, Old American County Mutual Fire Insurance Company, Pronto General
Agency, Beatrice Jimenez, and Raquel Hinojosa (collectively "Old American"),2 filed a
petition for writ of mandamus on July 6, 2011, seeking to compel the trial court to vacate
its April 29, 2011 "Order Denying Defendants' Motion to Sever and Abate Extra-
1
See TEX. R. APP. P. 52.8(d) ("When granting relief, the court must hand down an opinion as in
any other case," but when "denying relief, the court may hand down an opinion but is not required to do
so."); TEX. R. APP. P. 47.4 (distinguishing opinions and memorandum opinions).
2
Pronto General Agency is the authorized claims representative of Old American. Beatrice
Jimenez and Raquel Hinojosa are two individual adjusters who were employed by Pronto General
Agency during the course of the underlying proceedings.
Contractual Claims" and to compel the trial court to sever and abate the extra-
contractual claims. We conditionally grant mandamus relief.
I. BACKGROUND
Old American's petition for writ of mandamus alleges that the underlying suit
arose from a motor vehicle accident involving plaintiffs Dina Montemayor, Krystal
Montemayor, Lizette Garza, and the driver of another vehicle, Pasqual I. Vasquez.
Vasquez is not a party to these proceedings. Plaintiffs asserted in their pleading that
Dina Montemayor's vehicle was stopped behind a long line of vehicles at the Progreso
Port of Entry to Mexico in Progreso, Texas, when Vasquez rear-ended her car. Krystal
Montemayor and Lizette Garza were passengers in Dina's vehicle at the time of the
collision. According to plaintiffs' pleadings, they received personal injuries in the
collision. Plaintiffs further asserted that Vasquez did not have insurance, thus the
plaintiffs brought a claim against Old American for uninsured/underinsured motorist
("UM/UIM") benefits pursuant to a standard automobile policy issued by Old American
to Dina Montemayor. The plaintiffs' urged that their medical expenses totaled
$11,049.69 for Dina Montemayor, $15,938.49 for Krystal Montemayor, and $8,698.10
for Lizette Garza. Old American offered to settle Dina's claims for $1,000.00, offered to
settle Krystal's claims for $1,250.00, and offered nothing to settle Lizette's claims. In
Plaintiffs' First Amended Response to Defendants' Motion to Sever and Abate Extra-
Contractual Claims, they acknowledge that there had been no settlement with the third
party tortfeasor.
The plaintiffs brought suit against Old American for breach of contract to pay
UM/UIM benefits, breach of the duty of good faith and fair dealing for its refusal to pay
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the claims when liability was "reasonably clear," violations of the Texas Insurance Code,
and violations of the Texas Business and Commerce Code. Old American filed a
motion to sever and abate the plaintiffs' extra-contractual claims from the underlying
claim for UM/UIM benefits. According to Old American's motion, the plaintiffs cannot
bring an extra-contractual damage claim until Old American's contractual liability has
been determined and these separate and distinct causes of action must be severed.
Old American argued in its petition that severance and abatement is mandatory to
prevent prejudice, unnecessary litigation, and discovery quagmires. Old American also
asserted that a severance was necessary because the introduction of evidence
pertaining to the settlement offers, the policy limits, and the facts concerning its handling
of the claims, as they relate to the bad faith claims, would prejudice Old American in the
trial of the UM/UIM claim, and would confuse, complicate, and considerably lengthen
the trial.
The plaintiffs filed a response and an amended response to the motion to sever.
The plaintiffs contended that they were not obligated to obtain a judgment against the
uninsured motorist and Old American's offers of settlement, which were unreasonably
low or nonexistent, were not made in good faith. The plaintiffs also alleged that their
claims were interwoven and thus could not be severed and Old American would not
suffer injustice or prejudice if the claims were not severed. In the alternative, the
plaintiffs sought a bifurcated trial or severance without abatement.
The trial court ultimately denied the motion to sever and abate. The record does
not reflect a ruling on the plaintiffs' request for bifurcation. This original proceeding
ensued.
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By one issue, Old American contends that the trial court abused its discretion in
refusing to sever and abate the plaintiffs' extra-contractual claims from the underlying
contractual UM/UIM claims. Citing Brainard v. Trinity Universal Insurance Company,
Old American contends that it has no contractual duty to pay benefits until the plaintiffs
obtain a judgment establishing the liability and the underinsured status of the other
motorist. 216 S.W.3d 809, 818 (Tex. 2006). Old American asserts that plaintiffs have
not obtained such a judgment, and therefore, Old American currently has no contractual
duty to pay their UIM/UM claims. Old American argues that severance is required for
these unripe claims because the trial court lacks jurisdiction over them and further,
because manifest injustice would occur if the contractual and extra-contractual claims
were tried together. Old American also asserts that the extra contractual claims "are at
best premature, and the resources of the parties and the trial court should not be
expended on claims that may never become viable, or which may become moot based
on the outcome of the trial of the UM/UIM claim." The Court requested and received a
response to the petition for writ of mandamus from plaintiffs as the real parties in
interest, and Old American filed a reply to this response.
II. STANDARD OF REVIEW
To be entitled to the extraordinary relief of a writ of mandamus, Old American
must show that the trial court abused its discretion and that there is no adequate
remedy by appeal. In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 135–36 (Tex.
2004) (orig. proceeding). A trial court abuses its discretion if it reaches a decision so
arbitrary and unreasonable as to constitute a clear and prejudicial error of law or if it
clearly fails to correctly analyze or apply the law. In re Cerberus Capital Mgmt., LP, 164
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S.W.3d 379, 382 (Tex. 2005) (per curiam) (orig. proceeding); Walker v. Packer, 827
S.W.2d 833, 839 (Tex. 1992) (orig. proceeding). "To satisfy the clear abuse of
discretion standard, the relator must show 'that the trial court could reasonably have
reached only one decision.'" Liberty Nat'l First Ins. Co. v. Akin, 927 S.W.2d 627, 630
(Tex. 1996) (orig. proceeding) (quoting Walker, 827 S.W.2d at 840).
In determining whether appeal is an adequate remedy, we consider whether the
benefits outweigh the detriments of mandamus review. In re BP Prods. N. Am., Inc.,
244 S.W.3d 840, 845 (Tex. 2008) (orig. proceeding). Appeal is an inadequate remedy
when a trial court's failure to sever contractual and extra-contractual claims constitutes
an abuse of discretion. In re Allstate Ins. Co., 232 S.W.3d 340, 342 (Tex. App.—Tyler
2007, orig. proceeding); see In re Prudential Ins. Co. of Am., 148 S.W.3d at 136; In re
Allstate Tex. Lloyds, 202 S.W.3d 895, 896 (Tex. App.—Corpus Christi 2006, orig.
proceeding).
III. SEVERANCE OF CONTRACTUAL AND EXTRA-CONTRACTUAL CLAIMS
Severance is governed by Texas Rule of Civil Procedure 41. See TEX. R. CIV. P.
41. Rule 41 provides, in part, that "[a]ctions which have been improperly joined may be
severed . . . on such terms as are just. Any claim against a party may be severed and
proceeded with separately." See id. Claims are properly severable if: (1) the
controversy involves more than one cause of action; (2) the severed claim is one that
would be the proper subject of a lawsuit if independently asserted; and (3) the severed
claim is not so interwoven with the remaining action that it involves the same facts and
issues. Guar. Fed. Sav. Bank v. Horseshoe Operating Co., 793 S.W.2d 652, 658 (Tex.
1990). The controlling reasons for a severance are to do justice, avoid prejudice, and
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promote convenience. F.F.P. Op. Partners, L.P. v. Duenez, 237 S.W.3d 680, 693 (Tex.
2007).
The trial court has "broad" discretion in the severance of causes of action.
Morgan v. Compugraphic Corp., 675 S.W.2d 729, 734 (Tex. 1984); Black v. Smith, 956
S.W.2d 72, 75 (Tex. App.—Houston [14th Dist.] 1997, orig. proceeding). However, that
discretion is not unlimited. See In re Gen. Agents Ins. Co. of Am., Inc., 254 S.W.3d
670, 673–74 (Tex. App.—Houston [14th Dist.] 2008, orig. proceeding). The trial court
has a duty to order severance when "all of the facts and circumstances of the case
unquestionably require a separate trial to prevent manifest injustice, and there is no fact
or circumstance supporting or tending to support a contrary conclusion, and the legal
rights of the parties will not be prejudiced thereby." Womack v. Berry, 291 S.W.2d 677,
682–83 (Tex. 1956) (orig. proceeding).
Our analysis of the issue herein is controlled by Liberty National Fire Insurance
Company v. Akin, the leading Texas Supreme Court case involving the severance of
contractual and extra-contractual claims. See generally 927 S.W.2d at 627. In Akin,
the Texas Supreme Court considered whether or not severance was required in a case
involving breach of contract and extra-contractual claims against an insurer. Id. at 628.
The supreme court analyzed the contractual and extra-contractual claims presented by
the plaintiff and held the trial court did not abuse its discretion in denying the insurance
company's motions for severance and abatement. Id. at 630. While refusing to grant
mandamus relief, the supreme court rejected "an inflexible rule that would deny the trial
court all discretion and . . . require severance in every case [involving bad-faith
insurance claims], regardless of the likelihood of prejudice." See id. Ultimately, the
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court concluded that the contractual and extra-contractual claims were interwoven, with
most evidence admissible on both claims, and that any prejudicial effect could be
ameliorated by appropriate limiting instructions. Id.
A severance may nevertheless be necessary in some bad faith
cases. A trial court will undoubtedly confront instances in which evidence
admissible only on the bad faith claim would prejudice the insurer to such
an extent that a fair trial on the contract claim would become unlikely.
One example would be when the insurer has made a settlement offer on
the disputed contract claim. As we have noted, some courts have
concluded that the insurer would be unfairly prejudiced by having to
defend the contract claim at the same time and before the same jury that
would consider evidence that the insurer had offered to settle the entire
dispute. While we concur with these decisions, we hasten to add that
evidence of this sort simply does not exist in this case. In the absence of
a settlement offer on the entire contract claim, or other compelling
circumstances, severance is not required.
Id. (internal citations omitted).
Following Akin, numerous intermediate courts of appeals have considered
whether it is an abuse of discretion for a trial court to refuse to order a severance of
contractual claims from bad faith claims when a settlement offer has been made. See,
e.g., In re Miller, 202 S.W.3d 922, 925–26 (Tex. App.—Tyler 2006, orig. proceeding
[mand. denied]); In re Trinity Universal Ins. Co., 64 S.W.3d 463, 468 (Tex. App.—
Amarillo 2001, orig. proceeding). In some instances, parties sought bifurcation of the
contractual claims from the bad faith claims as an alternative to severance. See In re
Travelers Lloyds of Tex. Ins. Co., 273 S.W.3d 368, 373–75 (Tex. App.—San Antonio
2008, orig. proceeding); In re Allstate County Mut. Ins. Co., 209 S.W.3d 742, 746–47
(Tex. App.—Tyler 2006, orig. proceeding); In re Allstate Tex. Lloyds, 202 S.W.3d at
900.
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The San Antonio Court of Appeals recently considered the issues of severance
and abatement in the context of a UM/UIM case. See In re United Fire Lloyds, 327
S.W.3d 250, 257 (Tex. App.—San Antonio 2010, orig. proceeding). Utilizing the Texas
Supreme Court's decision in Brainard v. Trinity Universal Ins. Co., the court granted
mandamus relief to compel severance and abatement of a UIM claim from related bad
faith claims:
[We] hold that United Fire is under no contractual duty to pay UIM benefits
until Garcia establishes the liability and underinsured status of the other
motorist. Therefore, United Fire should not be required to put forth the
effort and expense of conducting discovery, preparing for a trial, and
conducting voir dire on bad faith claims that could be rendered moot by
the portion of the trial relating to UIM benefits. To require such would not
do justice, avoid prejudice, and further convenience. Under these
circumstances, we conclude the trial court abused its discretion in
bifurcating the case instead of severing and abating the UIM claim from
the bad faith claims.
See id.3 The court concluded that United Fire did not have an adequate remedy by
appeal because if mandamus were not granted, it stood to lose substantial rights by
being required to prepare for claims that may be rendered moot and may have not even
yet accrued. See id. (citing U.S. Fire Ins. Co. v. Millard, 847 S.W.2d. 668, 675 (Tex.
App—Houston [1st Dist.] 1993, orig. proceeding); In re Trinity Universal Ins. Co., 64
S.W.3d at 468). As stated by the Amarillo Court of Appeals, "Texas case law
establishes that abatement of extra-contractual claims is required in most instances in
which an insured asserts a claim to UIM benefits." In re Farmers Tex. Cty. Mut. Ins.
3
In so holding, the San Antonio Court of Appeals acknowledged that Brainard involved the
determination as to when presentment of a contract claim was made in order to determine whether a
party was entitled to attorney's fees in accordance with Chapter 38 of the Texas Civil Practice and
Remedies Code rather than severance and abatement in the context of a UIM claim. See In re United
Fire Lloyds, 327 S.W.3d 250, 257 (Tex. App.—San Antonio 2010, orig. proceeding) (discussing Brainard
v. Trinity Universal Ins. Co., 216 SW.3d 809, 818 (Tex. 2006)).
8
Co., No. 07-11-00396-CV, 2011 Tex. App. LEXIS 8190, *2–3 (Tex. App.—Amarillo Oct.
17, 2011, orig. proceeding) (op.).
Here, Old American is under no contractual duty to pay UM/UIM benefits until the
plaintiffs establish the liability and underinsured status of the other motorist. The
pleadings filed by plaintiffs, in response to the motion to sever, admit that there has
been no settlement or judgment entered against the uninsured motorist. It is undisputed
that Old American offered $1,000 and $1,250 to settle the claims of Dina Montemayor
and Krystal Montemayor. Plaintiffs pleadings are unequivocal assertions of fact, and
thus constitute a judicial admission that there has been no judgment against the
uninsured motorist. See Horizon/CMS Healthcare Corp. v. Auld, 34 S.W.3d 887, 905
(Tex. 2000). Therefore, Old American should not be required to put forth the effort and
expense of conducting discovery, preparing for a trial, and conducting voir dire on bad
faith claims that could be rendered moot by the portion of the trial relating to UM/UIM
benefits. To require such would not do justice, avoid prejudice, and further
convenience. Under these circumstances, we conclude the trial court abused its
discretion in refusing to sever the UM/UIM claims from the bad faith claims and abate
the bad faith and exemplary damage claims pending the determination of Old
American's liability for the UM/UIM damages under the policy.
IV. CONCLUSION
We conclude the trial court abused its discretion in denying Old American's
motion to sever and abate the plaintiffs' extra-contractual claims. Accordingly, we
conditionally grant the petition for writ of mandamus. The trial court is ordered to vacate
the April 29, 2011 "Order Denying Defendants' Motion to Sever and Abate Extra-
9
Contractual Claims," and to grant "Defendants' Motion to Sever and Abate Extra-
Contractual Claims." The writ will issue only if the trial court fails to comply.
ROSE VELA
JUSTICE
Delivered and filed the
16th day of February, 2012.
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