Allstate v Irwin: Insurance companies have to put their money where their defense is

At the end of last month, the Texas Supreme Court added some clarity and fairness to cases when a person who has paid for uninsured/underinsured (UM/UIM) motorist coverage needs to receive the coverage they paid for. In a 5-4 ruling the Supreme Court required Allstate Insurance Co. to pay $45,540 in attorneys fees on top of the $50,000 policy limits it owed in UM/UIM benefits to an insured. Allstate argued that the trial and intermediate appellate courts were wrong when they decided and agreed that under the Uniform Declaratory Judgments Act, judges have the discretion to award plaintiffs the cost of their attorney fees if they prevail on their claims brought under the Act. This decision has added some consequences for insurance companies who refuse to honor the agreements they make with their clients.

Declaratory judgments are often used to resolve contractual disputes and Texas law allows someone bringing a claim under the Uniform Declaratory Judgments Act to recover the attorney’s fees incurred for having to take the dispute to court. The presiding judge has discretion on whether to award fees and how much attorney’s fees are fair. The case before the Supreme Court stemmed from a dispute between Allstate and one of its customers as to whether or not Allstate should pay its customer for the services the customer contracted for.

Allstate did not believe the customer was entitled to receive any of the benefits the customer contracted and paid for and so the customer had to file a lawsuit to get Allstate to honor their commitment. The customer, Irwin, incurred medical bills of $53,240.66 from a crash caused by another driver and that driver’s insurance paid the $30,000 limit of their policy. Irwin then attempted to utilize the UM/UIM coverage he purchased from Allstate. Allstate only offered Irwin $500 and refused to pay Irwin the remaining outstanding balance for the medical bills and didn’t even consider covering any other injuries and damages suffered by Irwin. Irwin had to sue under the Declaratory Judgment Act to have a court determine the contractual dispute.

At trial, the jury determined Irwin suffered nearly $500,000 in damages and Allstate paid the $50,000 policy limit (the total extent of their liability under the policy) and the court costs but the judge at trial also determined that Allstate owed Irwin’s attorney’s fees under the Declaratory Judgment Act. Allstate did not think they owed the attorney’s fees and that the judge was wrong, so they appealed the decision. The appellate court agreed with the trial judge and determined Allstate did owe the attorney’s fees. Still believing that the trial and appellate judges were wrong Allstate appealed to the Supreme Court of Texas.

A majority of the judges on the Supreme Court agreed with the prior judges that Allstate owed the attorney’s fees. Prior to this decision insurance companies could sit back and fight any claim for UM/UIM coverage without having to risk any bad faith claims or any liability other than the policy limits a customer contracted for. Basically, an insurance company could refuse to pay its contractually obligated coverage and force a client to go all the way to trial with no consequences. This predictably has led to years of insurance companies abusing this process.

Last month’s decision has helped add at least some consequences when insurance companies refuse to honor their word regarding UM/UIM coverage. Now insurance clients who must fight tooth and nail for the coverage they have paid for will have the ability to recover the attorney’s fees they incur to while forcing an insurance company to keep their word. It is too soon to tell if this will result in more insurance companies acting more honestly but it is a step in the right direction.

If you or a loved one has been injured or killed by the negligence of another, call the law firm of Abraham Watkins today. It is imperative that you find a law firm to manage your claim as soon as possible following an injury or death of a family member and who knows how to navigate the legal landscape and prevent your insurer from taking advantage of you.

The law firm of Abraham, Watkins, Nichols, Agosto, Aziz & Stogner is the longest standing personal injury firm in Texas, and our attorneys are standing by to assist with your claim. Call us today at 713-396-3964 or 1-800-594-4884 for your free consultation.