How a Declaratory Judgment Action Impacts UM/UIM Cases in Texas

In a recent Texas Supreme Court decision involving the case Allstate v. Irwin, the court ruled that attorney’s fees are recoverable in UM/UIM (uninsured motorist/underinsured motorist) cases if the plaintiff files a declaratory judgment action.

The issue stems from an April 6, 2016, car accident involving Daniel Irwin. Irwin sued Allstate, his insurance carrier, after the company offered $500 instead of the $50,000 that Irwin sought for his UIM policy limits. His lawsuit invoked the Uniform Declaratory Judgments Act (UDJA) and asked for a determination of damages from the accident, as well as a declaratory judgment allowing him to recover his UIM policy benefits plus attorney’s fees.

Irwin won his case in the trial court, with the jury awarding $498,960 in damages, including attorney’s fees. Allstate appealed, and the appeals court affirmed the trial court’s decision, claiming the UDJA was properly invoked.

In an appeal to the Texas Supreme Court, Allstate argued that Irwin was not entitled to attorney’s fees, because his use of the UDJA circumvented the decision in the Brainard case. In that decision, the Texas Supreme Court reversed the trial court’s decision in awarding attorney’s fees and determined that the insurance carrier did not have to pay those benefits until the insurer received a judgment that established the other motorist’s liability and underinsured status.

Allstate also argued that Irwin was not entitled to attorney’s fees based on the court’s decision in the MBM Financial case, in which the court determined a person could not tack a declaratory judgment onto a breach-of-contract claim and recover attorney’s fees.

The Texas Supreme Court rejected Allstate’s arguments, saying the circumstances did not match the Brainard and MBM Financial cases, because Irwin sought a declaration of rights prior to any breach-of-contract claim or attorney’s-fees claim, and Irwin did not request to add a declaratory judgment to a breach-of-contract claim.

The court also determined that a trial court can enter a declaratory judgment if it serves a purpose and ends the controversy between both sides.

The Texas Supreme Court ruled that the UDJA served its purpose in this case, as the litigation was about the insurance contract and not about a breach of contract.

The case is Allstate Insurance Company v. Daniel Wes Irwin, No.19-0885, IN THE SUPREME COURT OF TEXAS.