Texas Supreme Court Victory for UM/UIM Insurers Faces Possible Reversal
In April, the Texas Supreme Court set a favorable precedent for Uninsured and Underinsured (UM/UIM) insurers when it held that an insured seeking to recover UM/UIM benefits must secure a judgment to establish the UM/UIM third-party’s liability and underinsured status before it is entitled to discovery on extracontractual claims. See In re State Farm Mut. Auto. Ins. Co., 23-0755 (Tex. Apr 25, 2025). That said, a four-justice concurrence in this decision hinted that the 2006 Brainard precedent justifying this position may be in jeopardy, meaning UM/UIM carriers should keep a close eye on Texas Supreme Court opinions in the UM/UIM space.
Sever-or-Bifurcate-and-Abate Rule
In State Farm, the Texas Supreme Court first held that a court must abate an insured’s extracontractual claims based on a UM/UIM insurer’s coverage denial when the insured has not yet prevailed on its predicate declaratory judgment claim to establish coverage. This expands similar rulings where courts have held that when an insured raises extracontractual claims along with a breach-of-contract claim based on an insurer’s UM/UIM coverage denial, the insured must prevail on the breach-of-contract claim first. See In re State Farm Mutual Automobile Insurance Co., 629 S.W.3d 866 (Tex. 2021); In re USAA Gen. Indem. Co. (USAA I), 629 S.W.3d 878, 887 (Tex. 2021).
The court further clarified that while a trial court has the discretion to sever a UM/UIM insured’s contract-based claims against its insurer from its extracontractual claims raised in the same lawsuit, the predicate tort litigation and extracontractual claims must be tried to separate juries in separate trials.