Dallas insurance attorneys have to understand one important provision in most auto insurance policies that provide uninsured and underinsured (UM) protection.
That important provision is the requirement that the insured party obtain written permission from the UM provider before the insured party settles with a responsible third party. This requirement to obtain written permission was upheld in the 1993, Houston Court of Appeals [1 Dist.] case, United States Fire Insurance Company v. Millard.
This case is a writ of mandamus.
The underlying lawsuit arises from a motor vehicle accident that occurred November 7, 1986, between Carthie O. Williams and Evelyn Williams (the plaintiffs) and Rhoyal Pickersgill, an uninsured motorist. The defendant was the plaintiffs’ insurer and carried their uninsured motorist coverage. There were many issues presented but on the one regarding “written permission to settle” is discussed.
When the plaintiffs filed suit against Pickersgill, the uninsured motorist, they did so without the defendant’s written consent. The insurance policy specifically provided, “Any judgment for damages arising out of a suit brought without our written consent is not binding on us.” Such policy provisions are valid pursuant to Texas case law. An insured seeking the benefits of uninsured motorist insurance coverage has several options. The insured may sue the insurance company directly, without suing the uninsured motorist. If the insured obtains the written consent of the insurance company, he may sue the uninsured motorist alone; any judgment obtained would bind the insurance company. The insured may proceed against the uninsured motorist without the insurance carrier’s consent, but any judgment obtained against the uninsured motorist will not be binding on the insurance carrier. Liability and damages will have to be relitigated against the insurance company. In the case before the court, the plaintiffs chose the latter option; they sued Pickersgill without the defendant’s written consent. Thus, the default judgment the plaintiffs obtained against Pickersgill did not bind the defendant. The fact that the defendant had notice of the plaintiffs’ suit against Pickersgill is of no importance. An insurer’s knowledge that a suit has been filed is not equivalent to “written consent” and will not bind an insurer to a judgment obtained in a suit brought against an uninsured motorist.
The court ultimately held that the facts and circumstances of this case extinguished Judge Millard’s discretion in this matter and that his refusal to grant separate trials and to abate the bad faith action was an abuse of discretion and a violation of a plain legal duty.
More recent Texas case law draws a distinction between this fact situation and other fact situations that may be presented in a case. For this reason, it is important to seek the advise of an experienced Insurance Law Attorney when pursuing a claim for UM benefits.
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