Texas Insurance Law Newsbrief - April 30, 2025
THE TEXAS SUPREME COURT DEFERS DISCOVERY FROM INSURER’S CORPORATE REPRESENTATIVE UNTIL AFTER A JUDGMENT DETERMINING LIABILITY IN THE CONTEXT OF UNINSURED MOTORIST COVERAGE
The Texas Supreme Court held that an insurer has the right to defer discovery and litigation costs in instances involving their UIM coverage until after the underlying trial determines liability.
In re State Farm Mut. Auto. Ins. Co., No. 23-0755, 2025 Tex. LEXIS 324 (April 25, 2025). An insured received UIM coverage from their insurer, sued the tortfeasor in a trial to determine liability, and wanted to depose the insurer’s corporate representative as part of that trial. On writ of mandamus, the Court determined that the trial court abused its discretion by denying the insurer’s motions to abate the extracontractual claims and to quash the deposition. “In the distinctive UIM context, a party to the suit may invoke the sever- or bifurcate-and-abate rule described above and is entitled to its application when the insurer has offered to settle the insured’s claim for UIM benefits, the insured has not yet obtained a judgment establishing UIM coverage, and the insured’s extracontractual claims seek damages that are dependent on the right to receive UIM benefits.” The Court conditionally granted the insurer’s petition for writ of mandamus and ordered the trial court to vacate its orders denying the insurer’s motions to abate and quash and grant these motions.
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NORTHERN DISTRICT FINDS NO DUTY TO DEFEND OR INDEMNIFY WHEN THE ALLEGATIONS OF THE UNDERLYING LAWSUIT ARE EXCLUDED UNDER THE POLICY
The Northern District dismissed all claims against an insurer when the allegations fell squarely under the policy’s exclusion.
Mesa Underwriters Specialty Ins. Co. v. W. Dall. Invs., L.P., Civil Action No. 3:24-CV-332-N, 2025 U.S. Dist. LEXIS 76120 (N.D. Tex. 2025). The insurer issued a commercial general liability policy that provides coverage for bodily injury and property damage but specifically excludes any coverage “for bodily injury caused by, arising out of, resulting from, or in any way related to an assault or battery,” as defined by the policy. The lawsuit alleged that an individual was injured by a stray bullet fired into the air by inebriated actors. Insurer has no duty to defend or indemnify insured on the wrongful death lawsuit because the alleged incident falls squarely under the policy’s assault or battery exclusion, and the duty to indemnify is justiciable prior to judgment because no set of facts could be developed in the underlying tort suit that would transform the shooting into a covered event.
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DISPUTE OVER THE SCOPE OF NECESSARY REPAIRS IS INHERENTLY A REASONABLE BASIS FOR DENYING COVERAGE SUCH THAT THERE IS NO BAD FAITH CLAIM AGAINST THE INSURER
The Northern District affirmed that an insurer had a reasonable basis for denying coverage where the parties disagreed over the scope of the necessary repairs.
Smith v. Cent. Mut. Ins. Co., Civil Action No. 4:24-cv-00723-O, 2025 U.S. Dist. LEXIS 76117 (N.D. Tex. 2025). Insured sustained hail damage on property covered by insurer’s policy, but the parties dispute whether the entire roof needs to be replaced or only limited roof tiles. The insured brought claims and the evidence shows a bona fide coverage dispute exists, but no evidence of bad faith by the insurer. “…[A] genuine dispute over the scope of insurance coverage is an inherently reasonable basis for denying coverage.” Insured failed to raise a genuine issue of material fact on the common-law bad faith claim, but there is a fact issue as to which portion of the roof, if any, should be replaced.
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SOUTHERN DISTRICT GRANTS INSURER’S MOTION FOR SUMMARY JUDGMENT AFTER COVERAGE DENIAL FOR CLEARLY EXCLUDED DAMAGE
The Southern District of Texas granted summary judgment in favor of the insurer when the insured’s claims were all based on uncovered damage.
Diaz v. Allstate Vehicle, No. 4:24-cv-1832, 2025 U.S. Dist. LEXIS 78484 (S.D. Tex. 2025). The insurer filed a claim with its insurance company after suffering damage from sewage backup and flooding at his residential home. The insurer issued an insurance policy covering the insured’s residential home, but the policy excluded coverage for sewage backup and the insurer denied coverage based on this exclusion. “Here, [the insured] has failed to raise a genuine issue of material facts [sic] as to whether [the insurer] acted in bad faith. The evidence proffered by [the insurer] demonstrates that the claim was denied in good faith because the damage was excluded from coverage.” The Southern District granted the insurer’s motion for summary judgment on all claims and dismissed the case with prejudice.
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WESTERN DISTRICT DENIES INSURER’S MOTION FOR SUMMARY JUDGMENT AFTER DETERMINING A FACT ISSUE EXISTS REGARDING THE APPLICABILITY OF THE COSMETIC DAMAGE EXCLUSION
The Western District denied an insurer’s motion for summary judgment when the experts had conflicting testimony about the damage to the home.
Boortz v. Allstate Vehicle, No. SA-23-CV-540-OLG, 2025 U.S. Dist. LEXIS 79324 (W.D. Tex. 2025). The insured suffered hailstorm damage at his home, but the parties’ experts do not agree on whether the hail indentations caused water penetration into the home. However, the parties agree that if the hail damage resulted in water penetration, it is a covered event. The Western District “is prohibited from evaluating the credibility of witnesses, weighing evidence, or resolving factual disputes [and] leaves these issues in ‘the jury’s capable hands.’” The Court denied the insurer’s motion for summary judgment.
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