Advocating for attorney’s fees on behalf of clients is crucial as it compels and incentivizes insurance carriers to honor valid claims. As of 2021, if an individual files an uninsured/underinsured (UM/UIM) case as a declaratory judgment action under Texas law, they are now eligible to plead and collect attorney’s fees as an additional avenue of recovery.
How to obtain attorney’s fees in a UM/UIM motorist case
In a 2021 decision, the Texas Supreme Court held that an insured may recover attorney’s fees when a UM/UIM case is filed as a declaratory judgment action. See Allstate Ins. v. Irwin, 627 S.W.3d 263, 269 (Tex. 2021) (“The Uniform Declaratory Judgments Act empowers Texas courts ‘to declare rights, status, and other legal relations whether or not further relief is or could be claimed.'” (quoting Tex. Civ. Prac. & Rem. Code Ann. § 37.003(a)).
The Court further held that a declaratory judgment action is the appropriate remedy for determining the underlying tort issues that control the validity of the insured’s UM/UIM claim against his insurer. Slip op. at *2, 5, and 14. Importantly, the recovery of attorney’s fees is solely in the trial court’s discretion.
Avoiding the Brainard argument against attorney’s fees
To apply the Irwin decision, it is important to address a common defense argument that suggests the law disallows the collection of attorney’s fees. Previously, the Texas Supreme Court held that in UIM/UM cases, insurance companies are not obligated to pay UIM benefits until the insured obtains a judgment establishing the liability and underinsured status of the other motorist. Brainard v. Trinity Universal Insurance Co. 216 S.W.3d 809, 818 (Tex. 2006).
In Brainard, the Court ruled attorney fees were unavailable under Chapter 38 in UM/UIM cases because a breach of contract claim was involved. Id. See also, Tex. Civ. Prac. & Rem. Code Ann § 38. However, if plead properly as has been allowed in recent historical past, Brainard and Chapter 38 are not applicable and should not be the basis for disallowing the insured’s claim to attorney’s fees. This ultimately leads to the obvious rule of thumb, which is to file a UM/UIM action as a declaratory judgment action under the Uniform Declaratory Judgment Act.
Are attorney’s fees collectable above the policy?
The simple answer is, absolutely. Plaintiffs should be informed about when UIM attorney fees are applicable, considering the new recovery avenue that Irwin has opened.
The current law does not permit additional recovery above the limit stated in the policy, but attorney’s fees are not subject to the same treatment. Tex. Ins. Code § 1952.106. Attorney’s fees can be collected above the policy, and a plaintiff can be awarded attorney’s fees as an additional avenue of recovery. See Tex. Civ. Prac. & Rem. Code Ann § 37.009.
When should you start billing for attorney’s fees?
Currently, the law is unsettled as to when the timeclock begins for billing attorney’s fees, which is likely to change in upcoming years given this shift in the law under Irwin. However, that does not mean an argument cannot be made that billing begins from the inception of when the claim has been presented for payment.
The duty to pay may arise when the plaintiff presents the claim. Petrello v. Prucka, 415 S.W.3d 420, 432 (Tex. App.—Houston [1st Dist.] 2013, no pet.) (internal citations omitted). This becomes unclear when there is another policy involved. However, in the same year Brainard was decided, the Texas Supreme Court also decided Tony Gullo Motors, Inc. v. Chapa in regards to the segregation of attorney’s fees. 212 S.W.3d 299, 311 (Tex. 2006). If parties are seeking attorney’s fees, they must separate the fees from claims that are eligible for recovery from the claims that are not eligible. Chapa at 311 (Tex. 2006).
However, when recoverable and unrecoverable claims are intertwined, legal services do not need to be separated. Prucka at 432. It is recommended to bill attorney’s fees once it is apparent that the underlying policy is exhausted by the claimed damages.
What does it all mean?
Irwin has opened the door for insureds to receive attorney’s fees in an UM/UIM claim under Tex. Civ. Prac. & Rem. Code Ann. 37.009. This is an important development in Texas law because it allows attorneys to more effectively advocate on behalf of their clients and ensure that they are properly compensated for services provided.
It also serves as a reminder that insurance carriers must honor valid claims and cannot rely on Brainard and Chapter 38 to avoid paying collectable, UIM benefits. This includes making the argument that an insured’s premiums pre-pay legal representation should the need arise against their own insurance company. With these considerations in mind, attorneys should be equipped to navigate the complexities associated with recovering attorney’s fees while filing a UM/UIM claim.
– Myranda Vaughn, Esq., Attorney Team Captain