Texas Insurance Law Newsbrief - November 18, 2025
INSURERS ELECTION TO ACCEPT LIABILITY EVISCERATES CLAIM AGAINST AGENT
A Texas court of appeals conditionally granted mandamus relief in favor of an insurer, finding that the trial court abused its discretion in striking the insurer’s plea in intervention and in denying a motion to enforce a Chapter 542A election.
In re Southern Vanguard Ins. Co., No. 13-25-00451-CV, 2025 LX 510069 (Tex. App.- Corpus Christi Nov. 12, 2025, no pet. h.), arose out of a property damage claim under a policy issued by Southern Vanguard Insurance Company. Southern assigned Compass Adjusting Services, Inc., and adjuster Timothy Cox to investigate and adjust the claim. The claim was eventually submitted to the appraisal process and Southern paid the appraisal award, plus interest. The insured then filed suit against Compass and Cox, alleging that they failed to properly investigate and adjust her claim. The insured asserted, among other things, bad faith claims and violations of the Texas Insurance Code. Southern filed a plea in intervention, wherein Southern elected to accept responsibility for Compass and Cox under Chapter 542A of the Texas Insurance Code and moved to dismiss the insured’s request for attorney’s fees. The trial court struck Southern’s plea in intervention, denied a motion filed by Compass to enforce Southern’s Chapter 542A election, and denied Southern’s motion regarding attorney’s fees. This petition for writ of mandamus followed.
The court of appeals first found that the trial court abused its discretion in denying Southern’s plea in intervention. The court found that insurers possess a justiciable interest in such lawsuits because (a) a judgment in favor of an insured would likely lead to an action against the insurers because of the insurer’s election to accept their agent’s liability; (b) agents, as non-parties to the insurance contract, cannot invoke appraisal which might defeat an insured’s claim; and (c) the insured’s claims are factually premised on their insurance policies and the insurer’s rejection of their claims. In this case, the fact that appraisal had already taken place did not change the result in finding a justiciable interest.
As to Southern’s election under Chapter 542A to accept Compass and Cox’s liability, the court reaffirmed that such election eviscerates any claim against an agent. The election created a mandatory duty on the trial court to dismiss the action against Compass and Cox. As such, the court of appeals here directed the trial court to vacate its order denying Compass’ motion to enforce the Chapter 542A election. As to the attorney’s fees, the court found that the failure of an insured to provide pre-suit notice precludes an award of attorney’s fees. But the burden of proof was on Southern, and the record presented did not support Southern’s claim that notice was not provided. Accordingly, the court conditionally granted the petition for writ of mandamus directing the trial court to vacate its orders: (1) striking Southern's plea in intervention; and (2) denying Compass's motion to enforce the Chapter 542A election and remanded the case to the trial court for further proceedings.
Editor’s Note: Martin, Disiere, Jefferson & Wisdom had the privilege of representing Southern Vanguard Insurance Company in this case and we take this opportunity to congratulate them and our law partners Jamie Cooper and Kevin Cain on this significant win.
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CLAIMS AGAINST AGENTS DISMISSED AFTER INSURERS ACCEPT THEIR LIABILITY UNDER CHAPTER 542A OF TEXAS INSURANCE CODE
The Northern District of Texas and Southern District of Texas also reaffirmed Texas precedent regarding an insurer’s election to accept its agent’s liability under Chapter 542A of the Texas Insurance Code.
In Halfmann v. Nationwide Agribusiness Ins. Co., No. 2:25-CV-212-Z-BR, 2025 LX 507546 (N.D. Tex. 2025), Nationwide elected to accept the liability of its agents, Duane Collins and Nanci Haak, who Nationwide assigned to handle its insureds’ claims. The insureds filed a claim for wind and hail damage to their properties and later filed suit against Collins and Haak for allegedly undervaluing the storm damage and failing to pay for the repair of the damages alleged.
Similarly, Beaty v. Travelers Pers. Ins. Co., Civil Action No. H-25-4713, 2025 LX 597007 (S.D. Tex. 2025) also involves claims by an insured for property damage from a weather event. The insured filed suit against Travelers and Brent Dauzat, alleging, among other things, underpayment of insurance benefits, and asserted claims against Dauzat under the Texas Insurance Code. Travelers moved to dismiss Dauzat from the case, pursuant to Chapter 542A of the Texas Insurance Code.
The courts in these cases dismissed the agents with prejudice. Under the Texas Insurance Code, an “agent” is defined as “an employee, agent, representative, or adjuster who performs any act on behalf of an insurer.” Chapter 542A provides that an insurer may elect to accept its “agent’s” liability to a claimant for the agent’s acts or omissions related to a claim, by providing written notice to the claimant. If an insurer makes this election, the action must be dismissed against the agent. Here, both Nationwide and Travelers provided the required notice of election. As such, in accordance with the Texas Insurance Code, both the Northern District of Texas and Southern District of Texas granted Travelers and Nationwide’s motions and dismissed the agents.
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TRIAL COURT ERRED IN AWARDING PREJUDGMENT INTEREST IN UIM SUIT
A court of appeals found that a trial court erred in awarding prejudgment interest and that an insured’s request for attorney’s fees was properly denied.
In State Farm Mut. Auto. Ins. Co. v. Bellis, No. 14-24-00468-CV, 2025 LX 543142 (Tex. App.—Houston [14th Dist.] Nov. 13, 2025, no pet. h.), an insured sought uninsured motorist benefits under a policy issued by State Farm, for a claim that arose out of a motor vehicle accident. The insured brought suit against the driver of the other vehicle and also asserted claims against State Farm for bad faith and violations of the Texas Insurance Code and Deceptive Trade Practices Act. The insured settled with the driver and proceeded to trial with State Farm. The jury determined that the driver was at fault, and the trial court ordered State Farm to pay $100,000, plus an unspecified amount of prejudgment and post-judgment interest at an interest rate of 5.5%. State Farm appealed. First, State Farm challenged the sufficiency of evidence supporting the jury’s awards for past and future lost earnings capacity and past medical expenses. The court, however, found that that the evidence was legally sufficient to support the jury’s causation determination and damages.
State Farm also challenged the award of prejudgment interest in excess of the UIM policy limits of $100,000. Under Texas law, there are two types of prejudgment interest available in a UIM case: (1) Cavenar-type; and (2) Henson-type. Cavenar-type is interest based on the tortfeasor’s obligations, and an insured can recover the prejudgment interest that the uninsured motorist would owe under the Texas Finance Code, up to UIM policy limits. This type of prejudgment interest is inapplicable if the jury’s award exceeds UIM policy limits because UIM coverage only obligates an insurer to pay damages caused by the tortfeasor that are greater than the tortfeasor’s policy limits but within UIM limits. In contrast, Henson-type is interest based on the insurance company’s obligations and is outside the UIM policy limits. This interest begins running from the date the tortfeasor’s liability is established and is only owed if an insurer withheld UIM benefits in breach of the insurance contract. In this case, the jury award was in excess of UIM limits and, thus, the only available prejudgment interest was Henson-type. However, the court of appeals here concluded that the record did not support the trial court's award of prejudgment interest.
The insured challenged the trial court’s denial of his request for attorney’s fees, but this issue was overruled. The issue of attorney fees is a question of fact for the jury and here, State Farm and the insured agreed not to submit the issue until a later period. The court of appeals found that, because the attorney’s fees question was not submitted to the jury, the trial court did not abuse its discretion in denying the insured’s request for attorney’s fees.
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UIM SUIT ABATED UNTIL PERSONAL INJURY SUIT IS RESOLVED
A court of appeals ruled in favor of an insurer, finding that the trial court abused its discretion in denying its motion to abate a UIM suit until the personal injury suit was resolved.
In re Liberty Cty. Mut. Ins. Co., No. 11-25-00257-CV, 2025 LX 506774 (Tex. App.- Eastland Nov. 14, 2025, no pet. h.), involves an underinsured motorist (UIM) suit filed against Liberty following a motor vehicle accident. The insured first filed a UIM suit seeking a declaration as to the benefits owed to her under her policies with Liberty. Liberty filed a third-party petition against the driver, and his employer, of the vehicle that collided with the insured. The insured then added, and later non-suited these defendants. In a separate action, the insured filed a personal injury suit against the driver and his employer, to which Liberty filed a petition in intervention. As a result of the personal injury suit, Liberty moved to abate the UIM suit until the resolution of the personal injury suit. The trial court denied Liberty’s motion and Liberty filed a petition for writ of mandamus seeking to compel the trial court to abate the UIM lawsuit.
The court of appeals observed that Texas law requires a judgment establishing an alleged tortfeasor’s liability as a condition precedent to a seek breach of contract damages under a UIM provision. In UIM suits against the insurer solely, there must be some form of resolution of the personal injury claim, demonstrating the need for the UIM suit. Here, there was no indication that the tortfeasors were underinsured. Rather, the record indicated that the tortfeasors potentially had $3,000,000 in insurance coverage, and there was no indication that the insured’s damages were likely to exceed that amount. Thus, the insured was required to resolve her personal injury suit before pursuing the UIM suit against Liberty. The court of appeals conditionally granted the writ of mandamus and directed the trial court to vacate its order denying Liberty’s motion to abate, and to instead enter an order granting the abatement.
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