Many in Texas insurance law have been following House Bill 1739, which was passed late last week by the Texas House of Representatives, and is on its way to a vote in the Texas Senate. Currently, Texas auto insurance law requires a claimant seeking uninsured/underinsured motorist (UIM) benefits to demonstrate the tortfeasor’s liability and uninsured or underinsured status by obtaining a judgment before being legally able to pursue benefits from her own UIM coverage. This rule was exemplified in Brainard v. Trinity Universal Ins. Co., 216 S.W.3d 809 (Tex. 2006),  in which the Supreme Court of Texas held, “…the 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.”

HB 1739, if passed, will abrogate Brainard and allow a UIM claimant to present a claim to the UIM insurer, and to sue the UIM insurer under Texas Insurance Code Chapter 541, without first obtaining a judgment against the tortfeasor that establishes legal entitlement to recover damages from the tortfeasor in excess of the tortfeasor’s own liability insurance limits.

Editor’s Note: It remains unclear how this law will affect a UIM insurer’s ultimate liability for a claim, considering the typical UIM coverage requires the insured to be “legally entitled to recover” the claimed damages, and that private contractual requirement is not altered by this legislation.  It likely means that in questionable cases, the issue of the insured’s legal entitlement to recover the claimed damages will be determined by a “trial within a trial” in the lawsuit against the insurance company.  It also leaves lingering questions as to what it means for liability to become “reasonably clear” within the meaning of Chapter 541. If the contract requires the insured to demonstrate legal entitlement to recover damages from the tortfeasor, and the insured does not establish that entitlement until after suing the UIM insurer, it begs the question of how and when liability for the UIM claim could have become reasonably clear at any time before suit.

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