Allstate Pays Policy Limits, Still Faces Bad-Faith Suit: Burgess v. Allstate (2021)

Barbara Burgess was seriously injured in a car accident caused by another driver in Williamson County, Texas. The at-fault driver carried insufficient coverage to compensate her for her injuries, so she turned to her own underinsured motorist (UIM) policy with Allstate Fire and Casualty Insurance Company.

The case went to a jury in the 368th District Court. Jurors found the other driver fully at fault and awarded Burgess $386,008 in compensatory damages, including $75,000 for past physical pain and roughly $311,009 for future medical expenses. Despite that verdict, the trial court signed a judgment for only $50,000, the amount of the UIM policy limits, which Allstate paid after the coverage judgment. When Burgess pressed additional claims over Allstate's handling of the case, Allstate moved for summary judgment, arguing that paying those limits ended its obligations entirely.

Attorney Josh Fogelman of FVF Law Firm, serving as co-counsel with Justin Hill of the Hill Law Firm, appealed that ruling to the Third Court of Appeals in Austin. The central legal question was whether an insurer that eventually pays its UIM policy limits can walk away from bad-faith and statutory unfair-settlement-practices claims free of liability.

In a published opinion issued November 24, 2021 (No. 03-20-00088-CV), the court of appeals reversed the summary judgment Allstate had won below. The court held that an insurer can face common-law bad-faith liability and liability under Chapter 541 of the Texas Insurance Code even when it later pays UIM benefits, as long as the insured demonstrates an injury independent of the loss of those benefits. Because Burgess alleged mental anguish caused by Allstate's delay and conduct during the claims process, the court found she had pleaded a legally sufficient independent injury, and her extracontractual claims were allowed to proceed.

The Texas Civil Justice League separately analyzed the decision, noting that it reconciles earlier conflicting precedent and could open the door to extracontractual claims in UIM cases more broadly. The ruling does not increase the underlying $386,008 jury award or the $50,000 policy-limits judgment, but it allows Burgess to pursue additional damages tied to Allstate's handling of her claim.