In Re: Allstate Insurance Company--Appeal from of County

In The

Court of Appeals

Sixth Appellate District of Texas at Texarkana

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No. 06-05-00051-CV

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IN RE: ALLSTATE INSURANCE COMPANY

Original Mandamus Proceeding

Before Morriss, C.J., Ross and Carter, JJ.

Memorandum Opinion by Chief Justice Morriss

MEMORANDUM OPINION

Connie Young sued Allstate Insurance Company on the underinsured motorist (UIM) coverage Allstate issued to Young, alleging Allstate (a) owed her on the UIM coverage, (b) breached her insurance contract, (c) violated Texas Insurance Code Article 21.21, (d) violated the Texas Deceptive Trade Practices Act, and (e) handled her claim in bad faith. The trial court overruled Allstate's motion for severance of the coverage claim from the others and abatement of the others items (b), (c), (d), and (e) instead ordering the trial bifurcated, so the coverage claim would be tried first, then the others, if Young succeeded on her coverage claim. Allstate petitions this Court for a writ of mandamus to require the trial court to grant Allstate's motion to sever and abate. We decline.

Allstate argues that, because they tendered an offer of settlement to Young, severance is mandated by Texas caselaw. Allstate contends that, if the matters are not severed, Young will be able to present the jury with evidence of Allstate's proffer of settlement, unfairly prejudicing Allstate.

Trial courts have broad discretion in deciding whether to sever claims into separate cases. Guar. Fed. Sav. Bank v. Horseshoe Operating Co., 793 S.W.2d 652, 658 (Tex. 1990) (op. on reh'g.); In re Koehn, 86 S.W.3d 363, 366 (Tex. App. Texarkana 2002, orig. proceeding). Tex. R. Civ. P. 41 grants the trial court "broad discretion in the matter of consolidation and severance of causes." McGuire v. Commercial Union Ins. Co., 431 S.W.2d 347, 351 (Tex. 1968). Severance is proper when (1) the controversy involves more than one cause of action, (2) the severed claim is one that would be the proper subject of a lawsuit if independently asserted, and (3) the severed claim is not so interwoven with the remaining action that it involves the same facts and issues. Id. The controlling reasons for a severance are to do justice, to avoid prejudice, and to further convenience. Tex. R. Civ. P. 174(b); Guar. Fed. Sav. Bank, 793 S.W.2d at 658.

Mandamus will lie only to correct a clear abuse of discretion. Walker v. Packer, 827 S.W.2d 833, 840 (Tex. 1992) (orig. proceeding). Further, there must be no adequate remedy at law. Id. An appellate court will not interfere with a trial court's exercise of discretion except in rare circumstances. For mandamus relief to be appropriate, the trial court must have clearly abused its discretion, issuing a decision without basis or guiding principle in law. Cf. Johnson v. Fourth Court of Appeals, 700 S.W.2d 916, 917 (Tex. 1985) (orig. proceeding). The relator, seeking mandamus, must establish that the trial court could reasonably have reached only one decision. Walker, 827 S.W.2d at 839 40.

We will reverse a trial court's determination regarding severance only if we find an abuse of discretion. Nevertheless, when all the facts and circumstances of the case unquestionably require a severance to prevent manifest injustice, there is no fact or circumstance supporting or tending to support a contrary conclusion, and the legal rights of the parties will not be prejudiced, there is no room for the exercise of discretion. In that situation, the trial court has a duty to order a severance.

Koene, 86 S.W.3d at 366 (citations omitted). "[C]lear failure by the trial court to analyze or apply the law correctly will constitute an abuse of discretion, and may result in appellate reversal by extraordinary writ." Walker, 827 S.W.2d at 840.

Allstate argues that Liberty Nat. Fire Ins. Co. v. Akin, 927 S.W.2d 627 (Tex. 1996), requires severance of Young's claims, and therefore the trial court abused its discretion in denying Allstate's motion. In Akin, the insurer tendered payment on the part of the insured's claims which were not in dispute. The insurance company then moved the trial court to sever the insured's coverage claim from the bad faith claim. Id. at 628.

Akin does not require severance in each case in which a settlement offer is tendered. In fact, Akin denies severance. Writing for the majority, Justice Cornyn acknowledged that there may be bad faith cases in which severance is required, such as cases in which the insurer has made a settlement offer on a disputed contract claim. It is true, as Allstate points out, that the court agreed with certain intermediate appellate courts ordering severance. We conclude, however, that neither those cases, nor Akin, mandate severance in this case.

Allstate directs us to State Farm Mut. Auto. Ins. Co. v. Wilborn, 835 S.W.2d 260 (Tex. App. Houston [14th Dist.] 1992, orig. proceeding). In Wilborn, the insured sued, alleging State Farm denied coverage under the policy and acted in bad faith. See id. at 260 61. In that case, there was specific evidence before the trial court about the amount of the settlement offer; and the plaintiff-insured testified regarding why she alleged the insurer was in bad faith. Id. The record in the case before us lacks such evidence.

Allstate also directs us to United States Fire Ins. v. Mallard, 847 S.W.2d 668 (Tex. App. Houston [1st Dist.] 1993, orig. proceeding). In Mallard, the insurance company had made several offers of settlement, before and after suit was filed. The court followed Wilborn's reasoning in finding the particular facts before the trial court left no legal option but severance. Id. at 673. The Mallard court, however, had those particular facts in its record.

After reviewing the cases cited by Allstate and the record before us, we find the trial court acted within its discretion. Allstate has not provided this Court with evidence of what settlement offer was tendered, if any. Instead, Allstate directs us to a section of its motion to sever. The only factual allegation therein is as follows: "Plaintiff will undoubtedly offer evidence of the settlement demands, post-litigation settlement offers, if any, reserves and evaluations as proof of Allstate's alleged bad faith." Allstate simply provides no evidence to this Court of what specific settlement offers, if any, were actually tendered, nor their nature, nor whether the plaintiff rejected them. // The conclusory allegations in Allstate's petition for mandamus relief and pleadings below do not demonstrate that the trial court acted contrary to the only rational decision that court could have made. Cf. Walker, 827 S.W.2d at 839 40. As the Akin court noted, "evidence of this sort [in the cases cited by the insurance company] simply does not exist in this case. In the absence of a settlement offer on the entire contract claim, or other compelling circumstances, severance is not required." Akin, 927 S.W.2d at 630. // Akin's reasoning addresses concerns that the insurer not be prejudiced by admission of evidence of settlement offers, unless and until such evidence would become relevant and admissible, i.e., on a finding of coverage under the insurance policy and a subsequent trial on the other claims. Here, bifurcating the issues into two trials allows for the necessary protections for each party within the trial court's discretion. //

Finding no abuse of discretion in the trial court's ruling, we deny Allstate's petition for writ of mandamus.

Josh R. Morriss, III

Chief Justice

Date Submitted: May 11, 2005

Date Decided: May 12, 2005