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Allstate v. Irwin - Game changing Supreme Court Opinion on Uninsured Motorist Coverage Law

In this episode of Summary Judgment, Josh and Aaron break down the Texas Supreme Court’s recent opinion, Allstate v. Irwin and what it means for uninsured motorist coverage (UIM). Josh is a self proclaimed UIM law nerd, so listen in to hear his take on this game changing opinion.

Listen here or read the transcript below. FVF’s Summary Judgment podcast is available wherever you listen to podcasts including Apple Podcasts, Spotify, iHeart Radio, and more.

Aaron Von Flatern: Alright, welcome back to Summary Judgment. I’m Aaron Von Flatern. I’m here with my co-founding partner, Josh Fogelman. Josh, we are here today to talk about what I think is a blockbuster Supreme Court opinion here in Texas, Allstate v. Irwin. Before we get into the details of that case though, maybe, we could just get some background from you on like what is this case even pertaining to and why should we care?

Josh Fogelman: Yeah, so we’re talking about underinsured motorist coverage here, which is a topic, Aaron, you and I have discussed in some podcasts before. But just kind of as a refresher, underinsured or uninsured motorist coverage is a type of auto insurance coverage that you can purchase on your own auto insurance policy, and the purpose of it is to be another source of recovery in the event that you are harmed by somebody in a motor vehicle crash, or you’re hit while you’re a pedestrian or on a bicycle, anything like that. It’s another source of recovery in the event that the person who harmed you doesn’t have enough insurance to cover all the damage that they’ve done, which we have found to be a very, very common occurrence unfortunately with automobile collisions. And so, the opinion that the Supreme Court issued today was a massive step actually in favor of plaintiffs in leveling what had, prior to this opinion, been a very unequal bargaining field between insureds on one hand and their own insurance companies on the other hand to prevent them or at least slow down some of their abusive tactics in handling uninsured, underinsured motorist coverage claims.

Aaron Von Flatern: Yeah, I think a lot of people are surprised to learn that they probably shouldn’t be talking to their own insurance company right after the crash because there’s a good chance they may become adversarial to that insurance company if the party that hit them doesn’t have enough money. And that’s a pretty common if someone needs surgery, just as an example. Your average person in Texas is carrying about $30,000 in liability coverage, but you can imagine if you needed knee surgery or back surgery, something like that, you’re not going to have enough to even cover your medical bills, and so you got to turn to your own policy and at the moment you do that, your own policy, your own insurance company starts to behave like the other party’s insurance company. They are a substitute to the other party’s insurance company, and they operate under different rules. They’re no longer your friend. They’re no longer your advocate. They are the enemy, so to speak, when it comes to gatekeeping and keeping you from their money. And unfortunately, here in Texas, the law has been tilted, as you pointed out Josh, in so far as it was rewarding insurance companies for delaying payment on what they owed. What did this case stand for and what’s the name of it, and what did it do?

Josh Fogelman: Yeah, so what you said is exactly right Aaron. So insurance companies have been rewarded historically for failure to pay because of some old case law that came out in about 2006, and although that case, it’s called Brainard v. Trinity Universal Insurance Company, was kind of a limited holding, the way that uninsured, underinsured motorist carriers had been interpreting that case and handling claims with their insureds was very abusive, and effectively it dramatically limited the way that insureds could seek to recover funds under their policy and allowed insurance companies, at least how they interpreted it, allowed insurance companies to withhold payment even on crystal clear claims and force the insured to go through a jury trial, and prove what their damages were before the insurance company would even offer to pay a dime. We’ve been seeing it for years the way that insurance companies have been abusing that.

What was great about this opinion that just came out today, it did come out today, which is Allstate v. Irwin, it upheld a San Antonio Court of Appeals case, what it says is, if you end up having to sue your own uninsured, underinsured motorist coverage carrier, and you are successful, then it opens the door to you being able to potentially recover your attorney’s fees that you incurred in prosecuting that claim, which is a massive, massive deal because prior to this decision, insurance companies that were providing uninsured, underinsured motorist coverage to an insured would routinely believe that the maximum amount of money that they would ever pay on an uninsured, underinsured motorist coverage claim or UIM claim, was the policy limits themselves. So kind of going back to what we were talking about earlier, there was no incentive for them to deal fairly with their insureds. So I expect in some ways that this is going to change after the decision that was handed down.

Aaron Von Flatern: Right. And the negotiation with those companies oftentimes was based on practical realities instead of the real value of the case. So they would say to you, “Look, we have a $50,000 policy, but we’re offering you 48.” Why? “Well, because we can.” That was really their answer, is that, “We know that your client doesn’t want to wait for a year to get to trial, get a verdict, even if it’s a million-dollar verdict, we’re never going to have to pay more than our $50,000, so you should take this discount and run.” And unfortunately, a lot of clients did do that because they didn’t really have another option.

Let’s be real clear. A lot of our clients think that one of the things we can sue for in any case is attorney’s fees. They ask us, “Can we sue for attorney’s fees?” The answer in almost every category is no, that’s why this is so special. This is a major incentive change for insurance companies, they now are on notice that if they’re being unreasonable with their own policy holders, there is a potentially massive punishment behind there. You can just imagine a case that, say has a $30,000 limit minimum, and we work it up for trial, we’re talking about maybe hundreds of hours going into that trial, and you multiply that times the lawyers reasonable fee, it can come out to a number that’s larger than the policy limit. So it can be a really big punishment for insurance companies that fail to deal reasonably with their own insureds. That being the case, how do you think this is going to change on both sides, the handling of these cases, both for us and for the insurance companies?

Josh Fogelman: Yeah, I mean on the one hand for us, most of the time, it can be complicated to really figure out what… When you’re prosecuting a claim for someone’s injury, oftentimes you sue both the person who hurt your client as well as their own insurance company, so that you’re not duplicating litigation. And so it can be really difficult to keep track of which of your time is being used on the case against the person who hurt you, versus your time that’s used going after your own underinsured motorist’s coverage carrier, and because of those difficulties oftentimes it wasn’t necessarily worth the extra administrative effort to keep track of your time. But now that we have this clarification from the Texas Supreme Court and we understand that this is finally some fairness that we have in this particular line of litigation. Now, I believe that we’ll start learning better tools and utilizing better tools to monitor that time and determine how to best deploy our resources towards the uninsured, underinsured motorist’s litigation in comparison to the at-fault driver’s litigation in a way that continues to put pressure on these uninsured, underinsured motorist coverage carriers.

Josh Fogelman:: And then I think you know… In response to that, what we should see is finally, after 15 years of these UIM carriers believing they were immune from any sort of penalty for their reprehensible conduct to their own insureds, we might see some fairness coming out of it.

Aaron Von Flatern: Yeah, what I love about this holding is, it was handed down by the Texas Supreme Court, which has in the last few years been downright antagonistic towards plaintiffs and very pro-business, very pro-insurance company, and for them to say this to the insurance company just shows how off-track the insurance industry had gotten. We would fight motions to exclude attorney’s fees in these cases from defense lawyers who would, in their motions, basically deride us for what they called a novel argument. They thought we were making a creative and novel argument to gen up some kind of money where money didn’t belong and they were sort of making fun of us for saying, “Oh, you guys are just coming up with some creative way to get attorney’s fees” and what the Texas Supreme Court just told them was, “Guys, you’ve been drinking the Kool-Aid for too long,” not only is it not a novel idea, it’s been our law this whole time, and you’ve just been abusing your own clients this whole time, and that has to stop.” And so the message, I think is going to have a lot of… It’s a big wake-up call for the insurance company, the insurance companies who have been taking it for granted that they can steamroll plaintiffs in this state.

Josh Fogelman: Yeah, and Aaron you know, I love UIM law, it’s something that I’ve become very passionate about, because I have seen…

Aaron: Weirdly so, yes.

Josh Fogelman: I’ve seen the way that these insurance companies have treated our clients over and over. And one of the philosophies that we’ve taken as a firm, is we won’t stand for. So we’re one of these law firms, of the few law firms, I would say that has really pushed back hard against abusive conduct. We’ve taken multiple UIM cases to a jury trial successfully, and we currently have one up on appeal where we won at trial, and now we’ve sued the insurance company for bad faith, so that’s going to sort of be the next question that will be answered by the Supreme Court. So it’s very exciting to me as a UIM law nerd to see the Texas Supreme Court just interpret the law as it’s written and do the right thing.

Aaron: Right. Well, let me just give a plug here for uninsured motorist coverage, as soon as it comes out of my mouth, I can hear people falling asleep because it just sounds really, really boring. I get that it’s a dry topic but you have to understand that if you or a family member has something catastrophic happen to them, you are going to desperately want this coverage, it is critical that anybody listening to this podcast call their insurance companies and increase that as much as they possibly can to protect their family members, whether they’re in a car, on a bike or walking through a parking lot as a pedestrian, this coverage can be very important and the Supreme Court just gave us some additional tools to make sure that not only can you use the coverage but that it will actually work and get the insurance companies to pay.

So I would say that’s kind of the main piece of advice. The other piece of advice, I would give people listening to this podcast is if you get into a crash, there are things behind the scenes, there’s more than meets the eye to these crashes, including uninsured motorist coverage, including personal injury protection coverage, including whether or not there might be a bar to blame for a drunk driver, there might be other pockets to examine. And so just because you think you’re not the type of person to file a lawsuit, that doesn’t mean you should go around giving statements to insurance companies and making agreements with insurance companies without getting informed, without getting input from lawyers, and I would highly recommend you call FVF because what we offer is a zero pressure experience, if someone calls us, all we want is for them to get informed. And, then if they want to work with us and we want to work with them, we go forward from there, but we really pride ourselves on giving information first.

Josh Fogelman: Absolutely. So if you ever have any questions, need some help, looking for some guidance, just give us a call, you know where to find us.