CONDITIONALLY GRANT and Opinion Filed April 15, 2021
S In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-20-00815-CV
IN RE STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY
AND GIAP DANG, Relators
Original Proceeding from the County Court at Law No. 3
Dallas County, Texas
Trial Court Cause No. CC-19-02214-C
OPINION
Before Justices Osborne, Reichek, and Smith
Opinion by Justice Smith
State Farm Mutual Automobile Insurance Company and Giap Dang filed a
petition for writ of mandamus contending the trial court abused its discretion by
denying their motion for separate trials and abatement of real party in interest Willer
Dimanche, Jr.’s claims concerning underinsured motorist (UIM) insurance. In light
of the Supreme Court of Texas’s opinion in In re State Farm Mutual Automobile
Insurance Co., No. 19-0791, 2021 WL 1045651 (Tex. Mar. 19, 2021) (orig.
proceeding),1 we conclude the trial court abused its discretion, and relators do not
1
In re State Farm involved two separate petitions for mandamus, cause numbers 19-0791 and 19-0792.
The supreme court considered them together and issued one opinion.
have an adequate remedy by appeal. Therefore, we conditionally grant the writ of
mandamus.
Background
On April 7, 2018, Dimanche was in an automobile accident with a third party.
Dimanche sued the third party and asserted damages for past medical expenses of
$23,573.23 and future medical expenses up to $60,300.00, as well as damages for
past and future pain and suffering, physical impairment, loss of earning capacity,
and loss of enjoyment of life. Dimanche settled with the third party.
Dimanche sought UIM benefits from State Farm, his insurance carrier. Dang,
a State Farm insurance adjuster, sent Dimanche a letter offering $3,650 to settle his
claim. According to Dimanche, “Dang failed to provide any explanation as to the
facts or basis for Defendants’ decision or evaluation of Plaintiff’s UIM claim.”
Dimanche then sued State Farm for various violations of the Texas Insurance
Code. 2 Dimanche alleged, in part, that relators failed to settle his claim fairly after
a reasonable investigation and failed to provide an explanation for the UIM
2
Specifically, Dimanche alleged violations under the following sections of the Insurance Code:
541.060(a)(2) (failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement of a
claim with respect to which the insurer’s liability has become reasonably clear); 541.060(a)(3) (failing to
promptly provide to a policyholder a reasonable explanation of the basis in the policy, in relation to the
facts or applicable law, for the insurer’s denial of a claim); 541.060(a)(7) (refusing to pay a claim without
conducting a reasonable investigation with respect to the claim); 542.003(b)(3) (failed to adopt and/or
implement reasonable standards for the prompt investigation of claims arising under the insurer’s policies);
542.003(b)(4) (failing to attempt in good faith to effect a prompt, fair, and equitable settlement of a claim
in which liability has become reasonably clear); 542.003(b)(5) (compelling a policyholder to institute a suit
to recover an amount due under a policy by offering substantially less than the amount ultimately recovered
in a suit brought by the policyholder); and 542.057(a) (notified Dimanche that relator would pay part of
Dimanche’s claim but failed to do so on or before the fifth business day after the notification).
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settlement offer. Dimanche demanded the amount of the UIM policy limits, treble
damages under the Insurance Code, and attorney’s fees. Dimanche did not allege
that State Farm breached the UIM provisions of the insurance policy.
Relators filed a motion for separate trials and abatement pursuant to Texas
Rule of Civil Procedure 174(b). They argued the trial court should hold a separate
car crash portion of the case and abate Dimanche’s premature extra-contractual
claims until he obtains a judicial determination that he is “legally entitled to recover”
from an underinsured motorist. Dimanche argued that because he brought only
statutory claims, and there are no breach-of-contract claims to sever and first
adjudicate, bifurcation of the trial was not required. The trial court denied Relators’
motion.
Relators then brought this petition for writ of mandamus asserting that the trial
court abused its discretion by denying the motion for separate trials and abatement
and that they had no adequate remedy by appeal. Relators also noted that two similar
petitions involving the same legal issue were pending before the Texas Supreme
Court and requested this Court stay proceedings and “await guidance from the Texas
Supreme Court on the merits of this mandamus petition.” We stayed the proceedings
in the trial court and requested Dimanche file a response. He filed a response, and
relators filed a reply.
The supreme court has now issued its decision in In re State Farm, which
controls our disposition of this mandamus.
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Standard of Review
To be entitled to mandamus relief, a relator must demonstrate that the trial
court clearly abused its discretion, and the relator has no adequate remedy by appeal.
In re Lee, 411 S.W.3d 445, 463 (Tex. 2013) (orig. proceeding); 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
amount to a clear and prejudicial error of law’ or if it clearly fails to correctly analyze
or apply the law.” In re Cerberus Capital Mgmt. L.P., 164 S.W.3d 379, 382 (Tex.
2005) (orig. proceeding) (per curiam) (quoting Walker v. Packer, 827 S.W.2d 833,
840 (Tex. 1985)).
In re State Farm
The real parties in the In re State Farm cases, Nicastro and Dodds, were
injured in separate automobile accidents with third parties. In re State Farm, 2021
WL 1045651, at *1–2. They both settled with the third parties’ insurers for the
policy limits and then made claims with State Farm for the policy limits of their UIM
coverage, $100,000 in Nicastro’s case and $50,000 in Dodds’ case. Id. State Farm
denied Nicastro’s UIM claim. Id. at *1. State Farm paid Dodds $18,190.41, but it
did not explain the reason for the discrepancy between the amount paid and the
amount requested. Id. at *2.
Nicastro and Dodds sued State Farm and the adjusters alleging that they
violated the Insurance Code by failing “to attempt in good faith to effectuate a
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prompt, fair, and equitable settlement of a claim with respect to which the insurer’s
liability has become reasonably clear,” and failing to “promptly provide to a
policyholder a reasonable explanation of the basis in the policy, in relation to the
facts or applicable law, for the insurer’s denial of a claim or offer of a compromise
settlement of a claim.” Id. (quoting TEX. INS. CODE ANN. § 541.060(a)(2)(A),
(a)(3)). Neither Nicastro nor Dodds sued State Farm for breach of the UIM policies.
Id.
State Farm moved in each case to abate the plaintiffs’ claims and to bifurcate
the case to hold a separate trial to determine the liability and underinsured status of
the third parties. Id. The trial courts denied the motions. Id. The parties sought
mandamus relief first in this Court (we denied the petitions for writ of mandamus
without substantive explanation) and then in the supreme court. Id. The supreme
court stayed the underlying proceedings and granted State Farm’s petitions for writ
of mandamus. Id.
Typically, plaintiffs in UIM suits bring claims for breach of their insurance
policies as well as statutory, extra-contractual claims authorized by the Insurance
Code. “The common practice has been to sever and abate the Insurance Code claims
while an initial trial is conducted on the breach-of-contract claim to determine
whether the underinsured motorist was liable for the accident and, if so, the amount
of damages suffered by the insured.” Id. at *1. If the plaintiff succeeds in the first
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phase, then he may proceed to litigate the Insurance Code claims in light of the result
of the initial trial. Id.
The “wrinkle” the supreme court decided in these petitions is whether
bifurcation is required when parties bring only extra-contractual claims. The
supreme court concluded bifurcation is required.
The supreme court explained there are two paths an insured may take to
establish damages from an insurer’s violation of the Insurance Code. The insured
must establish either (1) “a right to receive benefits under the policy” or (2) “an
injury independent of a right to benefits.” Id. at *3 (quoting USAA Tex. Lloyds Co.
v. Menchaca, 545 S.W.3d 479, 500 (Tex. 2018)). Nicastro and Dodds relied on the
second path, asserting State Farm caused them injuries independent of their right to
benefits because of the violations of the Insurance Code. Id. at *4. The supreme
court explained that Nicastro and Dodds failed to allege an independent injury:
[T]he only damages claimed by Nicastro and Dodds are predicated on
State Farm’s obligation to pay them under their UIM policies. Said
otherwise, the insureds’ theory of damages is that if State Farm had
followed the Insurance Code, it would have paid more in UIM benefits
than it did. These are not “damages [that] are truly independent of the
[ ] right to receive policy benefits.” Menchaca, 545 S.W.3d at 499–
500. To the contrary, the insureds’ entitlement to these damages is
entirely predicated on their entitlement to policy benefits. They assert
no injuries independent of the denial or underpayment of benefits.
Their statutory claims are merely a means to recoup damages in the
amount of a reasonable settlement offer under the policies; they are not
“truly independent” of Nicastro’s and Dodds’ rights to receive policy
benefits. See id. at 499–500. As a result, the insureds cannot recover
for State Farm’s alleged Insurance Code violations under an
“independent-injury” theory.
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Id. at *5. The supreme court reasoned that when the insured does not allege an
independent injury, the appropriate procedure is to hold a bifurcated trial that first
determines whether the insurer breached the UIM policy and then, if the insurer
breached the policy, determine whether there was a violation of the Insurance Code.
Id. at *6–7.
The supreme court concluded the trial courts abused their discretion by
denying State Farm’s’ motions for bifurcated trials and determined State Farm did
not have an adequate appellate remedy for the trial courts’ failure to grant the
motions. Id. at *7–8 (“When a bifurcated trial is denied in these circumstances, the
insurer lacks an adequate appellate remedy for the ‘time and money utterly wasted
enduring eventual reversal of improperly conducted proceedings.’”) (quoting In re
Prudential Ins. Co. of Am., 148 S.W.3d at 136). The supreme court granted the
petitions for writ of mandamus and directed the trial courts to bifurcate the trials of
the Insurance Code claims. Id. at *8.
Application of In re State Farm
The procedural and substantive facts of this case are nearly identical to those
in the In re State Farm cases; therefore, we are bound by the supreme court’s
decision. Here, as in In re State Farm, Dimanche asserted various violations of the
Insurance Code, but did not assert a breach-of-contract claim. Nevertheless, his
claim for damages is predicated on State Farm’s obligation to pay him under his
UIM policy. These are not damages “truly independent of the right to receive policy
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benefits.” Id. at *5. Such statutory claims are “merely a means to recoup damages
in the amount of a reasonable settlement offer under the polic[y].” Id.
Applying In re State Farm, we must conclude Dimanche has not alleged an
injury independent of a right to policy benefits. Id. at *3. Therefore, the trial court
was required to bifurcate the proceeding and first determine whether Dimanche was
entitled to UIM policy benefits before determining whether he can recover those
amounts as damages for violations of the Insurance Code. See id. at *1, 6–7. The
trial court abused its discretion by denying Relators’ motion for separate trials and
abatement, and Relators’ lacks an adequate remedy by appeal. See id. at *7–8.
Conclusion
We conditionally grant relators’ petition for writ of mandamus. We order the
trial court to vacate its August 20, 2020 order denying relators’ motion for separate
trials and abatement and direct the trial court to bifurcate the trials of the Insurance
Code claims. We are confident the trial court will comply, and the writ will issue
only if the trial court fails to do so.
/Craig Smith/
CRAIG SMITH
JUSTICE
200815F.P05
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