Underinsured Motorist Claims In Texas

If you live in Grand Prairie, Aledo, Arlington, Mansfield, Fort Worth, Azle, Weatherford, or anywhere else in Texas and you have car insurance, you were given the chance to purchase underinsured motorist coverage on your automobile. So, how does it work?
An example of how some of it works is explained in the case, Lilith Brainard, et al. v. Trinity Universal Insurance Company. This is a 2006, Texas Supreme Court case.
This case had three main issues: (1) whether underinsured motorist (UIM) insurance covers prejudgment interest on monies the wrongdoer owes; (2) if so, how to apply settlement credit to the calculation; and (3) how does the insured recover attorneys fees.
In this case, Edward H. Brainard was killed in a head-on collision with a rig owned by Premier Well Service, Inc. This occurred on July 1, 1999. His widow and children filed suit against Premier and sought UIM benefits against their own insurer, Trinity Universal Insurance Company. Trinity paid $5,000 in PIP benefits under the policy but wanted more information before paying UIM benefits.
On December 7, 2000, Brainard settled with Premier for policy limits of $1,000,000. Brainard then demanded the policy limits under the Trinity policy of $1,000,000, which Trinity refused to pay. The case went to trial and a jury awarded Brainard $1,010,000. The jury also awarded $100,000 for attorney’s fees.
The court applied a credit for Trinity for the $1,000,000 Premier had paid, plus a credit of $5,000 paid by Trinity under the PIP benefit. The court also awarded the attorney’s fees but no money for prejudgment interest.
As to the prejudgment interest issue –
Texas Insurance Code, Section 1952.106, mandates that Texas motorists be offered UIM coverage to:
provide for payment to the insured of all sums which he shall be legally entitled to recover as damages from owners or operators of underinsured motor vehicles because of bodily injury or property damage in an amount up to the limit specified in the policy, reduced by the amount recovered or recoverable from the insurer of the underinsured motor vehicle.
Trinity did not dispute that it owed interest on the $5,000 above the credit it received ($1,000,000 on Premier’s payment and $5,000 on the PIP payment) but said it did not owe on the entire amount. In stating the law, the court said, prejudgment interest is awarded to fully compensate the injured party, not to punish the defendant. By statute, a judgment in a wrongful death, personal injury, or property damage case earns prejudgment interest. Texas Finance Code, Section 304.102.
After a couple of pages of interesting and informative discussion the court held that UIM insurance covers prejudgment interest that the underinsured motorist would owe the insured.
As to the calculation of prejudgment interest issue –
According to Texas Finance Code, Section 304.104, prejudgment interest began to commence when the lawsuit was filed on January 19, 2000, when Brainard filed suit and continued til the day of judgment, January 15, 2003.
After much discussion the court ruled that Brainard was entitled to prejudgment interest but not for the $5,000 PIP payment previously made. Plus the amount owed is reduced by the interest that would have accrued on the $1,000,000 Premier paid, on the date it was paid. The remaining $5,000 of the judgment would have interest owed on it until paid. The Supreme Court remanded this issue to the trial court to calculate dates to fully determine the amount owed. The explanation is involved but not that complicated.
As to the attorney’s fees issue –
Chapter 38 of the Texas Civil Practice & Remedies Code allows for recovery of attorney’s fees in breach of contract cases. The court stated that, “an essential element to recovery of attorney’s fees under Chapter 38 in a suit based on contract is the existence of a duty or obligation which the opposing party failed to meet.” The court went on to say that a UIM insurer is under no contractual duty to pay benefits until the insured obtains a judgment establishing the liability and underinsured status of the other motorist. So, until the UIM insurer refuses to pay after the liabilty and underinsured status has been established, they have not breached their contract and thus do not owe attorney’s fees.
This is a case that is a big victory in the courts for insurance companies. What is important to realize is this is only applicable to underinsured and uninsured motorist cases. Almost all other insurance cases where the insurance company does not properly handle the claim, they are going to be liable for the attorney’s fees.