Proof Required of Liability and Underinsured Nature of Defendant Before Suit Against Insurer
Barry Zalma
See the full video at https://rumble.com/v1rzphc-no-need-for-fiduciary-relationship-between-agent-and-insured.html and at
In the case In Re United Financial Casualty Company, Relator, No. 14-22-00502-CV the Court of Appeals of Texas, Fourteenth District (November 3, 2022) ordered the issuance of a writ of mandate if the trial court refuses to follow its instructions to abate a premature extra contractual claims against the insurer.
BACKGROUND
United Financial Casualty Company (“United Financial”) filed a petition for writ of mandamus asking the Court of Appeals to compel the Honorable Lauren Reeder, presiding judge of the 234th District Court of Harris County, to vacate the trial court’s June 6, 2022 order denying United Financial’s motion to abate the real party in interest Elizabeth Echeverria’s (“Echeverria”) extra-contractual claims in an uninsured/underinsured motorist coverage suit.
Echeverria was involved in a motor vehicle accident as a passenger in a vehicle operated by Uber driver Samir Tachbaroute (“Tachbaroute”). Carlos Lanausse-Ramos (“Lanausse-Ramos”) allegedly rear-ended Tachbaroute’s vehicle. Echeverria alleges that she sustained physical injuries as a result of this accident.
At the time of the accident, United Financial insured Tachbaroute under a commercial auto policy with uninsured/underinsured (“UM/UIM”) coverage. Echeverria made uninsured bodily injury claims under this policy. Before Echeverria and United Financial resolved the claim, Echeverria filed suit against United Financial.
In the lawsuit, Echeverria seeks declaratory relief to establish entitlement to UIM motorist benefits and for alleged violations of Insurance Code chapters 541 and 542; breach of the duty of good faith and fair dealing; violations of the Texas Deceptive Trade Practices-Consumer Protection Act (“DTPA”); and fraud.
Although Echeverria has not yet obtained a legal determination that Lanausse-Ramos is liable for the accident and is underinsured, Echeverria sued United Financial for the alleged violations.
The trial court denied the motion to abate Echeverria’s extra-contractual claims.
In this original proceeding, United Financial asserts that the trial court abused its discretion by denying United Financial’s motion to abate Echeverria’s extra-contractual claims. The Court of Appeal requested that Echeverria file a response to the petition for writ of mandamus; however, no response was filed.
MANDAMUS STANDARD OF REVIEW
Ordinarily, to be entitled to a writ of mandamus, the relator (the insurer) must show that the trial court clearly abused its discretion, and that the relator lacks an adequate remedy by appeal. Most such applications are refused because of the high requirement of proving abuse of discretion. However, if a trial court abuses its discretion if it acts arbitrarily, unreasonably, or without regard to guiding legal principles. The trial court’s failure to analyze or apply the law correctly constitutes an abuse of discretion.
Relator also must demonstrate that it does not have an adequate remedy at law, such as a remedy by an appeal. The Court of Appeal determines the adequacy of an appellate remedy by balancing the benefits of mandamus review against the detriments. Mandamus relief is appropriate when a trial court abuses its discretion in denying a motion to abate extra-contractual claims in an UIM case.
ABATEMENT OF EXTRA-CONTRACTUAL CLAIMS
Abatement of Echeverria’s extra-contractual claims is required until the declaratory judgment action and breach-of-contract claim have been decided. An insured’s claim for breach of an insurance contract is distinct and independent from claims that the insurer violated its extra-contractual common law and statutory duties.
UIM claims and bad-faith claims have been recognized as separate and distinct claims, which might each constitute a complete lawsuit within itself. A UIM insurer has no contractual duty to pay benefits until the liability of the other driver and the amount of damages sustained by the insured are determined. To recover benefits under a UIM policy, a policy beneficiary must show:
1 the insured has UIM coverage;
2 the other driver negligently caused the accident that resulted in the covered damages;
3 the amount of the insured’s damages; and
4 the other driver’s insurance coverage is deficient.
An insured first must establish that the insurer is liable on the contract before the insured can recover on extra-contractual claims against an insurer for failure to pay or settle a UIM insurance claim. Texas insurance law generally conditions recovery for bad faith and extracontractual claims on a recovery for breach of the insurance contract itself.
ABUSE OF DISCRETION
Echeverria alleged that, pursuant to the policy, United Financial was obligated to pay Echeverria UIM benefits for bodily injury caused by Lanausse-Ramos and Tachbaroute. Echeverria further alleged that, although she gave notice that she was seeking UIM benefits under the policy, United Financial failed to provide coverage. Yet, United Financial has no contractual obligation to pay Echeverria UIM benefits until Echeverria establishes the liability and underinsured status of Lanausse-Ramos.
The introduction of information on Echeverria’s extra-contractual claims during the trial on Echeverria’s breach-of-contract claim would be manifestly unjust. Requiring United Financial to try the extra-contractual claims with the breach-of-contract claim would not do justice, avoid prejudice, or further convenience. Therefore, the court of appeals concluded that the trial court abused its discretion by not abating Echeverria’s extra-contractual claims from her breach-of-contract claim.
NO ADEQUATE APPELLATE REMEDY
United Financial will lose the important right to have Echeverria’s extra-contractual claims tried with her breach-of-contract claim. An appellate court may consider whether mandamus will preserve important substantive and procedural rights from impairment or loss in determining whether the relator has adequate remedy by appeal.
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.
The Court of Appeal concluded that the trial court abused its discretion by denying United Financial’s motion to abate Echeverria’s extra-contractual claims and that United Financial does not have an adequate remedy by appeal. Accordingly, the Court of Appeal determined that United Financial is entitled to the requested relief and order the trial court to vacate its June 6, 2022 order denying United Financial’s motion to abate Echeverria’s extra-contractual claims and grant United Financial’s motion to abate the extra-contractual claims.
ZALMA OPINION
When a person brings a tort action against a person who allegedly rear-ended the car in which she was riding and claims underinsured motorist benefits before proving the defendant was underinsured it was manifestly unjust to claim bad faith when she failed to prove the other driver was underinsured. Bad faith claims do not belong in a trial seeking tort damages from a third party.
(c) 2022 Barry Zalma & ClaimSchool, Inc.
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and [email protected] and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome.
Write to Mr. Zalma at [email protected]; http://www.zalma.com; http://zalma.com/blog; daily articles are published at
Zalma on Insurance
Insurance, insurance claims, insurance law, and insurance fraud .
By Barry Zalma
Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-libra
Notice of Claim Later than 60 Days After Expiration is Too Late
Post 5089
Injury at Massage Causes Suit Against Therapist
Read the full article at https://lnkd.in/gziRzFV8, see the full video at https://lnkd.in/gF4aYrQ2 and at https://lnkd.in/gqShuGs9, and at https://zalma.com/blog plus more than 5050 posts.
Hiscox Insurance Company (“Hiscox”) moved the USDC to Dismiss a suit for failure to state a claim because the insured reported its claim more than 60 days after expiration of the policy.
In Mluxe Williamsburg, LLC v. Hiscox Insurance Company, Inc., et al., No. 4:25-cv-00002, United States District Court, E.D. Missouri, Eastern Division (May 22, 2025) the trial court’s judgment was affirmed.
FACTUAL BACKGROUND
Plaintiff, the operator of a massage spa franchise, entered into a commercial insurance agreement with Hiscox that provided liability insurance coverage from July 25, 2019, to July 25, 2020. On or about June 03, 2019, a customer alleged that one of Plaintiff’s employees engaged in tortious ...
ZIFL – Volume 29, Issue 11
The Source for the Insurance Fraud Professional
Posted on June 2, 2025 by Barry Zalma
Post 5087
See the full video at and at
Read the full article and the full issue of ZIFL June 1, 2025 at https://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-06-01-2025.pdf
Zalma’s Insurance Fraud Letter – June 1, 2025
See the full video at https://lnkd.in/gw-Hgww9 and at https://lnkd.in/gF8QAq4d, and at https://zalma.com/blog plus more than 5050 posts.
ZIFL – Volume 29, Issue 11
The Source for the Insurance Fraud Professional
Read the full article and the full issue of ZIFL June 1, 2025 at https://lnkd.in/gTWZUnnF
Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at ...
No Coverage if Home Vacant for More Than 60 Days
Failure to Respond To Counterclaim is an Admission of All Allegations
Post 5085
See the full video at https://lnkd.in/gbWPjHub and at https://lnkd.in/gZ9ztA-P, and at https://zalma.com/blog plus more than 5050 posts.
In Nationwide Mutual Insurance Company v. Rebecca Massey, Civil Action No. 2:25-cv-00124, United States District Court, S.D. West Virginia, Charleston Division (May 22, 2025) Defendant Nationwide Mutual Insurance Company's (“Nationwide”) motion for Default Judgment against Plaintiff Rebecca Massey (“Plaintiff”) for failure to respond to a counterclaim and because the claim was excluded by the policy.
BACKGROUND
On February 26, 2022, Plaintiff's home was destroyed by a fire. At the time of this accident, Plaintiff had a home insurance policy with Nationwide. Plaintiff reported the fire loss to Nationwide, which refused to pay for the damages under the policy because the home had been vacant for more than 60 days.
Plaintiff filed suit ...
ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional
See the full video at https://lnkd.in/gK_P4-BK and at https://lnkd.in/g2Q7BHBu, and at https://zalma.com/blog and at https://lnkd.in/gjyMWHff.
Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
This issue contains the following articles about insurance fraud:
Health Care Fraud Trial Results in Murder for Hire of Witness
To Avoid Conviction for Insurance Fraud Defendants Murder Witness
In United States of America v. Louis Age, Jr.; Stanton Guillory; Louis Age, III; Ronald Wilson, Jr., No. 22-30656, United States Court of Appeals, Fifth Circuit (April 25, 2025) the Fifth Circuit dealt with the ...
Professional Health Care Services Exclusion Effective
Post 5073
See the full video at https://lnkd.in/g-f6Tjm5 and at https://lnkd.in/gx3agRzi, and at https://zalma.com/blog plus more than 5050 posts.
This opinion is the recommendation of a Magistrate Judge to the District Court Judge and involves Travelers Casualty Insurance Company and its duty to defend the New Mexico Bone and Joint Institute (NMBJI) and its physicians in a medical negligence lawsuit brought by Tervon Dorsey.
In Travelers Casualty Insurance Company Of America v. New Mexico Bone And Joint Institute, P.C.; American Foundation Of Lower Extremity Surgery And Research, Inc., a New Mexico Corporation; Riley Rampton, DPM; Loren K. Spencer, DPM; Tervon Dorsey, individually; Kimberly Dorsey, individually; and Kate Ferlic as Guardian Ad Litem for K.D. and J.D., minors, No. 2:24-cv-0027 MV/DLM, United States District Court, D. New Mexico (May 8, 2025) the Magistrate Judge Recommended:
Insurance Coverage Dispute:
Travelers issued a Commercial General Liability ...
A Heads I Win, Tails You Lose Story
Post 5062
Posted on April 30, 2025 by Barry Zalma
"This is a Fictionalized True Crime Story of Insurance Fraud that explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is designed to help everyone to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the Perpetrators than any Other Crime."
Immigrant Criminals Attempt to Profit From Insurance Fraud
People who commit insurance fraud as a profession do so because it is easy. It requires no capital investment. The risk is low and the profits are high. The ease with which large amounts of money can be made from insurance fraud removes whatever moral hesitation might stop the perpetrator from committing the crime.
The temptation to do everything outside the law was the downfall of the brothers Karamazov. The brothers had escaped prison in the old Soviet Union by immigrating to the United...