See T EX
. R. A PP
. P . 4 7 .4 (d i s ti n g u i s h i n g o p i n i o n s a n d m e m o ra n d u m o p i n i o n s ). 1 

### NU M BER 13- 08- 0014 9-C V



## COURT OF A PP EA LS T H I R T E E N T H D I S T R I C T O F T E X AS CORPUS CHRI ST I - E DI NBURG
IN RE: TRINITYUNIVERSA L INSURA NCE COM PA NY

On Petit ion fo r Writ of M an da mus . 

### MEM ORA NDU M OPI NI ON Be fo re Ju stice s Y añ ez, R od rigu ez, an d Vela M emo rand um Opin ion b y Ju stice Ya ñe z 1 Rel ator , Tr ini ty

U niv ersal Ins ur ance Compan y ( “Tr ini ty”), f il ed a peti ti on for w ri t of mandamus in the abov e cause on Mar ch 24, 2008, throug h w hic h i t c ontends thatthe tr ial
cour t abu sed it s dis creti on in deny ing rela tor ’s moti on to se v er and abate extra- cont ra ctu al cl aims from t he unde rl y ing breach of contractca se. W e c ondi ti onal ly g ra nt t he pet it ion for
w ri t of mandamus as st ated her ein

. I. Bac kg ro und Rea l par ty i n i nterest , Su sanna Nic hol s d/b/a No Na m Bouti q ue ( “N ic hol s” ), ow ned a bout iq ue w hic h s ust ain ed roof and w ater damag e from a tropi cal st or m in 2002.2

Ni chol s’ s c ontract ors s tated thatthe onl y w ay to re pai r the bouti q ue’ s d amag ed roof w as to repla ce it in its ent irety ; howev er, T rinity ref used to repla ce the ent ire roof and paid only for repai rs and patc hes to t he ex is ti ng roof. Ni chol s’ s ins ur er , Tri nity , pai d the “u ndi sput ed” por ti on of her

cl aim, $5,3 96.60, on Oct o b e r 1 1 , 2 0 0 2 , b u t r e fu s e d t o p a y h e r e n t i r e c l a i m. N i c h o l s ’ s ro o f c o n t i nued t o l eak dur ing su bse q uent ra ins tor ms, caus ing addi ti onal damag es to t he bout iq ue and it s cont ents

. On O cto ber

9, 2003, Ni chol s b ro ug ht s uitag ain st Tri nity f o r cont ra ctu al and
extra- cont ra ctu al cl aims , i ncl udi ng fraud and mi srepr esent ati on, v iol ati ons of t he c ommon law duty of g ood fait h and fair deal ing , t he Tex as Insu ra nce Cod e, an d the Tex as Decep tiv e T rade Practices Act. On Octob er 10, 2 0 0 5 , T ri n it y of fered to settle Nichols’s extra-contractu a l claims for $50 0.0 0. Follow ing a court-ordered app raisal, T rinity paid Nichols an ad dition al $7, 307 .73 on Decem ber 8, 2 006 . Trinity of fered to settle Nicols’s cont ra ctu al and extra- cont ra ctu al cl aims for $ 20,000. 00 on Aug ust17, 2007. Tr i ni ty mo v ed t o s ev er

a nd a bat e N i c ho l s ’ s s ta tu to r y a nd e xtra- c on trac tu al c l ai ms pendi ng resol uti on of her insu ra nce cont ra ct cl aims

. Tri nity contends that s ev er ance and abatementof Ni chol s’ s e xtra- cont ra ctu al cl aims i s req uired becaus e it made a s ettl ement off er on a di sput ed c lai m, and ev ide nce re g ardin g its set tl ement offer i s a dmis si ble to re but Nichols’s extra-cont ractua l claims, bu t is not adm issible w ith respe ct to he r contract claim s. Tri nity thus al leg es that itw il l be unfair ly and undul y

preju dic ed i f a jur

y hears ev ide nce of it s s ettl ement offers dur ing the tr ial on t he breach of contractcl aim. The tr ial co urt den ied Trin it y’s moti on, a nd th is or ig ina l proceed ing ens ued. The Cou rt re q uest ed and re cei v ed a re spons e from N ic hol s a nd furt her recei v ed a re ply

br ief from Tri nity .3 II. St andard of Re v iew Ma ndamus re li ef is an “ extraordin a ry” re m edy

. In r e Sw. Bel

l Tel. C o. , L. P., 235 S.W .3d 6 19, 6 23 ( Tex . 200 7) ( or ig . proceed ing ); see In r e T eamR ock

et, L.P. , 256 S.W .3d 257, 2 5 9 ( Tex . 200 8) ( or ig . proceed ing ). I n order to obtai n mandamus reli ef, the rela tor must show that the tr ial cour t cl ear ly abuse d it s dis creti on and that the re lat or ha s no ade quate rem edy by

app eal. In re Pru de n t ia l In s . Co

. o f

A m. , 148 S. W .3d 124, 13 5- 36 (T e x. 20 0 4 ) (ci ti n g W

alk er v. Packer

, 827 S.W .2d 833 , 840 (Tex. 1992 ) ( orig. proceed ing)) ; see In re McAllen Med. Ctr ., Inc. , No. 05- 0892, 51 T ex . Su p. C t. J. 1302, 2008 Tex . LE X IS 759, at * 6 ( Tex . Au g . 29, 2008) (o ri g . proceed ing ). To sat is fy the c lea r abuse of dis creti on stan d a rd , t h e r elato r must sho w thatthe trial court cou ld “reason ably hav e reach ed o nly
one decision .” Libe rty Nat'l Fire Ins. Co. v. Akin , 927 S.W .2d 6 27, 6 30 ( Tex . 199 6) ( q uoti ng W alk er , 827 S.W .2d at 840). The re v iew ing courtcannot dis tur b the tri al cour t’ s d eci si on unl ess i t i s s how n to be ar bit ra ry and unr eason abl e. W alk er , 827 S.W .2d a t 840

. W e may n o t substi tute our j udg ment for that of the tr ial co urt w it h respec t t o the
re sol uti on of factual i ss ues or matte rs w it hin the tr ial co urt’ s d is creti on. Id. at 839- 40. W it h
re spec t t o the tr ial co urt’ s d eci si on on leg al is sues , our re v iew i s muc h l ess deferen ti al. Id. at 84 0. A tr ial co urt has no d is creti on i n det er mini ng w hat t he l aw i s or appl y ing the law

to the fact s. Id. Th us, a clea r fa ilure by the trial court to ana lyz e or app ly t h e law correctly
w il l cons ti tute an abus e of di sc re ti on. Id

. Ma ndamus w il l not is sue unl ess the re lat or demonstrates a cl ear

rig ht t o the reli ef soug ht. Cob ra Oi

l & Gas. Co. v. Sadl

er , 447 S.W .2d 887 , 895 (Tex. 1968 ) ( op. on reh'g); In r e C a s t le T ex. Prod . Ltd . P'ship , 1 8 9 S. W .3 d 40 0 , 4 0 3 (T e x. Ap p .– T yler 20 0 6 , o rig. proceed ing ). The pa rty se eki ng mandamus reli ef has t he burden to prov ide thi s C our t w it h a suff ic ien t rec ord to est abl is h hi s r ig ht t o reli ef. W alk er , 827 S.W .2d a t 837 ; In r e Gal lar do ,4

269 S.W .3d 6 43, 6 45 ( Tex . Ap p.–San Ant oni o 2008, or ig . proceed ing ); see T EX
. R. A PP
. P. 5 2.3( k) , 52. 7( a)

. Appeal i s a n i nadeq uate re medy w hen a tr ial co urt’ s fai lure to sev er co ntract ual and
extra- cont ra ctu al cl aims co nst it utes an a buse of dis creti on. In r e Al ls ta te Ins . C o. , 232 S.W .3d 3 40, 3 42 (T e x. App.–Ty ler 2007, or ig . proceed ing ); see In r e Pr udenti al Ins . C o. o f A m. , 148 S.W .3d 124, 136 (Tex

. 2004) ( or ig . proceed ing ); In re All sta te T exas Lloyds , 202 S.W .3d 895 , 896 (Tex. App. –Corpu s Christi 200 6, orig. proceed ing).

II I. S ev eran c e of C on trac tu al a nd E xtra- C on trac tu al C l ai ms Sev er ance is g ov er ned by ru le 41 of t he Tex as Rul es of C iv il Procedu re . See T EX
. R. C IV
. P. 4 1. Rul e 41 prov ide s, in part, that “[a] cti ons w hic h hav e been improper ly j oin ed maybe s ev er ed .

. . on suc h terms as are j ust

. Any cl aim ag ain st a par

ty may be s ev er ed
an d proc ee de d w i th s ep arate ly .” See id. C lai ms are proper ly se v er abl e i f: ( 1) the cont ro v ersy

i nv olv es more than one c ause of a ction; ( 2) the sev er ed c lai m is one that
w oul d be the p ro per

su bje ct of a la w sui t i f inde p e n d e n tl y as ser ted; and ( 3) the sev er ed cl aim is not so int er

w ov en w it h the remaini ng ac ti on th at i t i nv olv es the s ame facts and issues. G uar

. F ed. S av. Bank

v. Hor ses hoe O

per ati ng C o. , 7 9 3 S

. W

. 2 d 6 5 2 , 6 5 8 ( T e x. 1990) . The c ontroll ing reason s for a s ev erance ar e to do j u st ic e, av oid preju dic e, an d promote c onv eni ence. F. F. P. Op. Par tner s, L.P. v. D uenez , 2 3 7 S

. W

. 3 d 6 8 0 , 6 9 3 (T e x. 2007)

. The tr ial co urt has “ broad” di sc re ti on i n the sev er ance of caus es of acti on. Mor gan v. Com pug raph ic Corp ., 675 S. W .2d 7 29, 7 34 ( Tex . 198 4) ; Bl ack v. Sm it h , 956 S.W .2d 7 2, 75 ( Tex . Ap p.–H oust on [1 4th D is t.] 1997, or ig . proceed ing ). How ev er , that dis creti on i s n ot unl imi ted. See In r

e Gen . Ag ents

Ins . C o. of

Am ., Inc

. , 2 5 4 S

. W

. 3 d 6 7 0 , 6 7 3 -7 4 (T e x. App.–H oust on [1 4th D is t.] 2008, or ig . proceed ing ). The tr ia l cour t has a du ty

to order5

sev er ance w hen “ all of the fact s a nd c ircums tanc es of the cas e unq uest ion abl y req uire a separate t ri al to prev ent mani fest i nju sti ce, and there is no fact or ci rc umstan ce suppo rt ing
or tend ing to suppo rta c ontrar y co ncl usi on, a nd th e l eg al ri g hts of the p arti es w il l not b e prejud iced th ereb y .” W om ack v. Berry , 1 5 6 T e x. 44 , 29 1 S. W .2 d 6 7 7 , 68 2 -8 3 (19 5 6 ) (o rig. proce edin g)

. T h e p a rt ie s a g r e e t h a t o u r a n a lys is o f t h e is s u e h e re in is co n t ro ll e d b y Lib er ty Nation al Fire Insuran ce Compan y v. Akin , t he l eadi ng Tex as Supreme Cou rtca se inv olv ing the sev er ance of contract ual and extra- cont ra ctu al cl aims

. See gen erally 927 S. W .2d 6 27 (Tex . 199 6) ( or ig . proceed ing ). The p a rtie s d is ag re e, ho w ev er , as to the e ff ectof that opi nio n on the i nst ant d is pute. In Akin , t he Tex as Supreme C our t c o n sidered w hether

or not sev er ance w as re q uired i n a c ase inv olv ing breach of contractand extra- cont ra ctua l cla im s ag ain st an ins ur er . Id. at 628. The s upr eme co u rt a n a lyzed the cont ra ctu al and extra- cont ra ctu al claims pre sent ed b y

the pla intif

f and held t h e t ri a l c ourt did not ab use its discretio n in deny ing the ins ur ance company 's moti ons for sev er ance and aba tement. Id. at 630 . W hile ref using to grantman dam us relief , the suprem e cou rt rejected “an inf lexi ble rule th at w ould deny the tr ial co urt al l dis creti on a n d

. . . req uire s ev er ance in ev er y ca se [i nv olv ing bad -faith insu rance claims], regardless of t he likelihood o f

p rejudice .” See i

d. Ul t im a t e ly, the c our t conc lud ed that the cont ra ctu al and extra- cont ra ctu al cl aims w er e int er w ov en, w it h most ev ide nce admis si ble on b oth c lai ms, and t hat a ny prejud ici al eff ectco uld be ameli or ated by

appropr iat e l imi ti ng i nst ru cti ons. Id. A s ev er ance maynev erthel ess be n eces sar y i n s ome bad faith cas es. A t ri al court wi ll un dou bte dly conf ront instan ces in w hich evidence adm issible only on th e ba d faith claim w ould prejud ice the insurer to such an extent th at a fair tr ial on t he c ontractcl aim w oul d bec ome unl ik ely

. One ex ample w oul d be w he n th e i ns urer

h as ma de a s et tl em en t offer o n th e di s pu te d c on trac t c l ai m. As w e hav e not ed, s ome co urts hav e c oncl uded th a t the i nsurer w oul d be6

un fai r l y p r ej ud i c ed b y

h av i ng t o de fen d th e c on trac t c l ai m att he s am e ti me and befor e the same jur y that w oul d consi der

ev ide nce that the ins ur er had o f fe re d t o se t t le t h e e n t ir e d is p u t e . W h il e we co n c u r wi t h t h e s e d e c is io n s , we hast en to add that ev ide nce of this so rtsi mply does not ex is t i n thi s c ase. I n th e a b s e n c e o f a s e t t l e me n to ffe r o n t h e e n t i r e c o n t r a c tc l a i m, o r o ther compel li ng ci rc umstan ces , s ev er ance is not re q uired. Id. ( int er nal ci tati ons omit ted)

. In th e i n s t a n t case, the con tractu al and extra-cont ractua l claims are factu ally int er w ov en. Tri nity

“ does not c ontes t” that N ic hol s h ad a cov er ed l oss , and thus , t he dis pute at i ss ue l arg ely ce nters o n the damag es sus tai ned by N ic hol s. Ac cordin g ly , t he trial court ma y

have reason ably conclude d tha t a trial o n Nichols’s breach of contractclaim
w ou l d no t el i mi na te t he n ee d for a t r i al o n he r

e xtra- c on trac tu al c l ai ms . In re Tr avele rs Lloyds of Tex. Ins. C o. , 2 7 3 S. W .3 d 36 8 , 3 7 5 (T e x. A p p . – S a n A n t o n io 20 0 8 , o rig. proce edin g) ; se e Progre ssive Cty. Mut. Ins. Co. v. Boyd , 177 S.W .3d 9 19, 9 22 ( Tex . 200 5) (recog niz ing bad f a it h c laims ar e g enerall y neg ated by

a l ack of cov er ag e under

the ins ur ance pol ic y ); Akin , 927 S.W .2d a t 630 -3 1 ( re cog niz ing that a jud g ment for the i nsurer on th e coverage claim proh ibits recovery prem ised on ly

on the bad faith d enia l of a claim and doe s n ot ne cessar il y bar al l cl aims for b ad fait h)

. Thus, one of the jus ti ficat ion s for
sev er ance, thati s, av oid ing the effort and ex pense of condu cti ng di sc ov er y on cl aims that maybe rendered moot in a prev iou s t ri al, i s n ot presentin t h e i n st a n t cas e bec ause the dispo sition of

Nichols’s contractu al claim m ay notrende r moo t he r e xtra-con tractu al claims. T he fa ctua l und erpinn ings for Nichols’s cont ractua l and extra-cont ractua l claims are int er w ov en; h ow ev er , the ev ide nce per ti nent to these cl aims is not simi lar ly admiss ibl e for both ty pes o f cla ims

. The set tl ement offer, w hic h nor mall y w oul d be ina dmis si ble i n the tr ial of N ic hol s’ s br each of contractcl aim, w oul d ordin ar il y be a dmis si ble i n the tr ial of the
extra- cont ra ctu al cl aims

. Mo re ov er , i n the i nst ant c ase, the tr ial co urt di d notatt empt t o fashion a remedy

for t he preju dic e occas ion ed byproof of a s ettl ement offer dur ing the tr ialW e re c o g n i ze th a t a tri a l c o u rt i s o b l i g a te d to s c h e d u l e i ts c a s e s i n s u c h a m a n n e r a s to 2 e x p e d i ti o u s l y re s o l v e th e m a n d th a t a tri a l c o u rt i s g i v e n b ro a d d i s c re ti o n i n m a n a g i n g i ts d o c k e t. S e e , e .g ., C l an t on v. C l ark , 639 S. W

. 2d 929, 931 (T ex. 1982)

. G i v en t he m any com pet i ng i nt er est s i nv ol v ed, f ai r ness t o t he pa rt i es , j ud i c i al ec on om y , an d t he t ri al co urt ' s ri gh t t o m an ag e an d c on t rol i t s do c k et, so m e c ou rt s ha ve hel d t hat sev er ance and abat em ent ar e no t t he o nl y v al i d pr ocedur es av ai l abl e t o t he t r i al cour t i n i nsur ance c a s e s s u c h a s th e i n s ta n t o n e . S ee , e. g. , I n r e Tr avel er s Ll oyds o f

Tex. I ns. C o. , 273 S. W

. 3d 3 68, 374
- 75 (T e x . A p p .– S a n A n to n i o 2 0 0 8 , o rig . p ro c e e d i n g ) (a l l o w i n g b i fu rc a ti o n ra th e r th a n s e v e ra n c e ); In re A lls ta te Tex. Ll oyds , 2 02 S

. W

. 3d 895 , 900 ( T ex. App. –C or pus Chr i st i 200 6, or i g. pr oceedi ng) ( sam e)

. G i v en t he pr ocedur al und er pi nni ngs o ft hi s case and t he p et i t i on f or w r i t ofm andam us cur r ent l y bef or e us, we exp r ess n o o p i n i o n o n th i s i s s u e h e re i n . 7 of the c ontract ual cl aim. Ab sentany su ch act ion , w e c oncl ude that the tr ial cour t abu sed 2 it s dis creti on i n deny ing the moti on for sev er ance and aba tement. See Akin , 927 S.W .2d at 63 0. IV. C oncl usi on Beca use w e c oncl ude the t ri al cour t ac ted o uts ide the boundar ies of it s d is creti on in re fusing se v er ance and abatement, and in fail ing to fashion any othe r re medy

to pr ev ent prejud ice, un der the facts an d circumst ance s o f t his case, we CONDIT IONAL LY GRANT T rinity ’s petition for a w rit of man dam us. Accordin gly , the stay previously impo sed b y

this Cou rti s L IF TED. See T EX
. R. A PP
. P. 5 2.10( b) (“Un les s v acat ed or modi fied, a n order g ra nti ng temporar

y reli ef is effect iv e unt il the cas e is finall y decide d.” ). W e dir ectthe tr ial
cour t t o v acat e i ts order deny ing Tri nity ’s moti on to sev er and abate and t o c onduc t furt her pr oce e d i n g s i n t h i s c a s e c o n s i s t e n t w i t h t h i s o p i n i o n . Th e w r i t w i l l i s s u e o n l y i f t h e tr ial
cour t fail s t o c omply

w it h our di re cti v e.

LINDA REYNA Y AÑEZ, J u s t i c e

Me moran dum Opi nio n del iv er ed and filed thi s the 30th day of Ma rc h, 2009.