Court Opinion

ID: 9659389
Source: CourtListenerOpinion
Date Created: 2023-08-23 21:43:22.011857+00
Date Added: 2024-06-11T18:14:07.474102
License: Public Domain

LESLIE BROCK YATES, Justice,
dissenting.
I respectfully disagree with the majority’s conclusion that severance was not required under the facts of this case. This court has held on numerous occasions that it is an abuse of discretion for a trial court to refuse to sever and abate extra-contractual claims from a breach of contract claim when the extra-contractual or bad faith claims are based on an inadequate settlement offer. Mid-Century Ins. Co. of Texas v. Lerner, 901 S.W.2d 749, 752 (Tex.App.-Houston [14th Dist.] 1995, orig. proceeding); Northwestern Nat’l Lloyds Ins. Co. v. Caldwell, 862 S.W.2d 44, 46-47 (Tex.App.-Houston [14th Dist.] 1998, orig. proceeding); State Farm Mut. Automobile Ins. Co. v. Wilborn, 835 S.W.2d 260, 262 (Tex.App.-Houston [14th Dist.] 1992, orig. proceeding). That is precisely the situation here. The majority’s conclusion that Akin requires severance only when an offer to settle the entire breach of contract claim has been made misses the mark. Liberty Nat’l Fire Ins. Co. v. Akin, 927 S.W.2d 627 (Tex.1996).
Relators sought to sever the contract claim from the bad faith, Insurance Code, and DTPA claims. If left joined, relators would be in the unenviable position of having to argue a contradiction to the jury. The contract claim would require relators to contend they had no obligation to pay out under the policy. At the same time, evidence of the offered pay out would be necessary to the bad faith claim. In a trial of these two matters together, the offer of settlement could be introduced in evidence by the court for the bad faith cause of action, but be highly prejudicial and not admissible in the contract case. Such a contradiction requires severance. This contradiction was not at issue in Akin. As the Akin court noted, the insurer paid the portion of the claim that it did not dispute. Id. at 630. Thus, evidence regarding payment of the uncontested portion of the claim would not unduly prejudice its defense.
This case meets the requirements for the granting of a motion for separate trials or severance. The causes of action represent separate and distinct claims, each of which could constitute a lawsuit within itself. Severance of the claims would avoid prejudice to the parties with regard to the use of the settlement offer in evidence. The Akin court explicitly recognized the potential for prejudice in having to defend a “contract claim at the same time and before the same jury that would consider evidence that the insurer had offered to settle the entire dispute.” Akin, 927 S.W.2d at 630.
That prejudice cannot adequately be addressed by the possibility of a jury finding the Sworn Statement in Proof of Loss constituted only a partial settlement offer. At that stage, the damage would already have been done. The jury would be faced *361with the question of “why would a company offer to settle a claim for which they are not obligated?” This questioning underlies the reasons why settlement offers are not admissible to prove liability for, or invalidity of, the claim or its amount. Tex.R. Evid. 408 (Vernon 2002). Offers to settle are excluded to encourage settlement and because “such evidence does not represent a party’s actual position, but is an amount he is willing to give or take to avoid the expense or annoyance of litigation.” State Farm Mut. Automobile Ins. Co., 835 S.W.2d at 261. Relators must be free from the prejudice that evidence of a settlement inevitably plants in jurors’ minds. The Texas Supreme Court specifically stated that a severance may be necessary in some bad faith cases. Akin, 927 S.W.2d at 630. “A trial court will undoubtedly confront instances in which evidence admissible only on the bad faith claim would prejudice the insurer to such an extent that a fair trial on the contract claim would become unlikely.” Id. I believe that to be the case here.
For these reasons, I respectfully dissent.