It is well-established Texas law that a policyholder who is in an auto accident must prove he is entitled to recover damages from an adverse driver before he can recover underinsured motorist benefits from his own auto insurer.  Brainard v. Trinity Universal Ins., 216 S.W.3d 809 (Tex. 2006).  However, a Corpus Christi court of appeals recently became the third Texas court to expressly allow that determination to be made in a declaratory judgment action directly against the insurer, rather than a tort suit resulting in a money judgment against the adverse driver.  In Allstate Ins. Co. v. Inclan, 13-19-00026-CV, 2020 WL 373061 (Tex. App.—Corpus Christi Jan. 23, 2020, no pet. h.) (slip op.), a legal scenario played out which has occurred in two previous Allstate cases in San Antonio and Texarkana: rather than proceeding against the adverse driver, the insured files a declaratory judgment against his own auto insurer seeking to declare that his damages recoverable from the other driver are such that he is entitled to UIM benefits from his own carrier.

Twice before, Allstate argued that the plaintiff’s decision to use a declaratory judgment was merely a stratagem to add attorney fees to the final award, which would not be recoverable in a tort suit against the driver but are recoverable under the Texas Declaratory Judgment Act.  And that a declaratory judgment is not a proper vehicle to try what is essentially an auto accident case involving issues of the alleged tortfeasor’s liability and the plaintiff’s damages.

These arguments failed in Texarkana and San Antonio, and last week they also failed in Corpus Christi. The court expressly relied on the two prior cases and observed that while Brainard sets out the prerequisites for recovery of UIM benefits, it does not specify how the insured must arrive at them.  The court agreed with the prior two appellate courts who that thought a declaratory judgment establishing the amount of recoverable damages is as good as a money judgment against the adverse driver, for purposes of complying with Brainard and establishing the right to UIM benefits. The court also enforced the Texas Declaratory Judgment Act’s fee provision, affirming the award of attorney fees.

Editor’s Note: This result, which has now occurred in three appellate courts across the state, likely signals the beginning of a trend of declaratory judgment suits to recover UIM benefits with added attorney fees.  It remains to be seen whether other Texas appellate courts, or the Supreme Court of Texas, will ultimately agree with this novel approach to UIM claims.

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