Perez v. National Liability & Fire Insurance Company

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
SEBASTIAN PEREZ,
Plaintiff,
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v. 	CIVIL ACTION NO. 4:25-cv-2192
NATIONAL LIABILITY & FIRE
INSURANCE COMPANY,
Defendant.
MEMORANDUM OPINION
Pending 	before 	the 	Court 	is 	Defendant 	National 	Liability 	& 	Fire
Insurance Company’s (“National”) Partial Motion to Dismiss or Alternatively,
to Sever and Abate (ECF No. 9).1 Based on a review of the motion, arguments,
and applicable law, the Court GRANTS IN PART National’s motion (id.). The
Court DISMISSES WITHOUT PREJUDICE Plaintiff’s breach of contract
claim for lack of subject matter jurisdiction. The Court FURTHER ABATES
discovery and all other activity related to Plaintiff’s non-contractual claims.
I. 	Background
This case concerns a dispute for underinsured motorist (“UIM”) benefits.
On May 14, 2025, Plaintiff Sebastian Perez (“Perez”) filed a Complaint against
1 The parties have consented to the jurisdiction of the Magistrate Judge for all
purposes, including entry of final judgment. (ECF No. 16).
United States District Court
Southern District of Texas
ENTERED
March 07, 2026
Nathan Ochsner, Clerk
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National based on diversity jurisdiction. 	(ECF No. 1). 	On January 3, 2022,
Perez was allegedly driving a commercial vehicle during his employment with
Hazmat International, Inc. (“Hazmat”) and was rear-ended by a truck driven
by Lucio Torres (“Torres”). (Id. at 2). Torres “was issued a citation for failing
to control his speed” and was deemed “the sole cause” of the accident. 	(Id.).
Torres had an automobile insurance policy issued by Progressive with a bodily
injury liability coverage limit of $30,000 per person; however, Torres was
underinsured for Perez’s damages from the accident. 	(Id.). 	Perez, through
Hazmat, has been a beneficiary under National’s insurance policy No. 73 APB
00476. (Id.) National gave Perez “consent to settle his claims with Torres and
his insurance carrier for their insurance policy limits.” 	(Id.). 	Accordingly,
Torres’s insurance carrier, Progressive, “tendered the full limits of its bodily
injury coverage to Plaintiff.” (Id.). In September 2024, Plaintiff sent National
a demand letter and offered to settle his UIM claim pursuant to National’s
policy limits. 	(Id. at 3). 	National refused Perez’s offer, and this lawsuit
followed. (Id.).
In his Complaint, Perez asserts causes of action for (1) violations of the
Texas Insurance Code and the Texas Deceptive Trade Practices Act (“DTPA”);
(2) a declaratory judgment that he is entitled to recover under the UIM
insurance contract; and (3) alternatively a “judgment against National for
breach of contract” for failure to pay damages pursuant to the terms of the UIM
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contract. 	(Id. at 3–5). 	For relief, Plaintiff seeks damages, attorney’s fees,
interest, and costs. (Id. at 4–6).
National filed a Partial Motion to Dismiss or, Alternatively, to Sever and
Abate. 	(ECF No. 9). 	Although National does not seek dismissal of Perez’s
cause of action for declaratory judgment, National seeks dismissal of the claims
for breach of contract, violations of the Texas Insurance Code, and violations
of the DTPA for lack of subject matter jurisdiction under Federal Rule of Civil
Procedure (“Rule”) 12(b)(1), or for failure to state a claim under Rule 12(b)(6).
(Id. at 1–3). 	Alternatively, National requests these claims be severed and
abated under Rule 21, or bifurcated and abated under Rule 42(b), pending
resolution of Perez’s declaratory-judgment action. 	(Id. at 1, 3, 8). 	Perez filed
a response in opposition (ECF No. 14), and National filed a reply (ECF No. 19).
II. 	Legal Standard
A. Rule 12(b)(1)
Under Rule 12(b)(1), a claim may be dismissed for lack of subject matter
jurisdiction. The Constitution confers federal courts jurisdiction to adjudicate
“cases” and “controversies.” 	U.S. C ONST . ART . III, § 2, cl. 1; Shields v. Norton,
289 F.3d 832, 834–35 (5th Cir. 2002). “A case or controversy must be ripe for
decision, meaning that it must not be premature or speculative. 	That is,
ripeness 	is 	a 	constitutional 	prerequisite 	to 	the 	exercise 	of 	jurisdiction.”
Shields, 289 F.3d at 835. 	Federal courts may raise jurisdictional defects sua
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sponte, including subject matter jurisdiction under the ripeness doctrine.
McCall v. Dretke, 390 F.3d 358, 361 (5th Cir. 2004) (citations omitted).
“A court should dismiss a case for lack of ‘ripeness’ when the case is
abstract or hypothetical.” 	Dahl v. Vill. of Surfside Beach, No. 22-40075, 2022
WL 17729411, at *2 (5th Cir. Dec. 16, 2022) (quoting New Orleans Pub. Serv.
v. Council of New Orleans, 833 F.2d 583, 586 (5th Cir. 1987)). In other words,
if 	a 	case 	“rests 	upon 	‘contingent 	future 	events 	that 	may 	not 	occur 	as
anticipated, or indeed may not occur at all,’” then it is not ripe, and must be
dismissed. 	Texas v. United States, 523 U.S. 296, 300 (1998); Dahl, 2022 WL
17729411, at *2.
B. Rule 12(b)(6)
To survive a Rule 12(b)(6) motion to dismiss, the plaintiff must plead
“enough facts to state a claim to relief that is plausible on its face.” 	Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007). 	“A claim has facial plausibility
when the plaintiff pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable for the conduct alleged.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). 	In reviewing a motion to dismiss
under Rule 12(b)(6), this Court accepts all well-pleaded facts as true, viewing
them in the light most favorable to the plaintiff. 	Alexander v. AmeriPro
Funding, Inc., 848 F.3d 698, 701 (5th Cir. 2017) (citing Martin K. Eby Constr.
Co. v. Dallas Area Rapid Transit, 369 F.3d 464, 467 (5th Cir. 2004)). Because
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a complaint must be liberally construed in favor of the plaintiff, a motion to
dismiss under Rule 12(b)(6) is generally viewed with disfavor and is rarely
granted. 	See IberiaBank Corp. v. Ill. Union Ins. Co., 953 F.3d 339, 345 (5th
Cir. 2020).
C. Bifurcation, Severance, and Abatement
According to Rule 42(b), “[f]or convenience, to avoid prejudice, or to
expedite and economize, the court may order a separate trial of one or more
separate issues, claims, crossclaims, counterclaims, or third-party claims.”
“When ordering a separate trial, the court must preserve any federal right to
a jury trial.” 	Id. 	The burden is on the party seeking separate trials to show
they are necessary, and the decision is left to the “sound discretion of the trial
court.” Maguire v. State Farm Mut. Auto. Ins. Co., No. 3:19-cv-00339, 2020 WL
13441595, at *2 (S.D. Tex. Mar. 3, 2020) (citation omitted). Under Rule 21, the
court “may also sever any claim against a party.”
Federal courts enjoy discretion to abate claims. 	See, e.g., Perez v. State
Farm Mut. Auto. Ins., No. 18-cv-4531, 2019 WL 2075931, at *2 (S.D. Tex. May
10, 2019) (exercising discretion to grant separate trials and to abate discovery
of extra-contractual claims until the UIM issues were decided and the court
entered judgment on the UIM claims). 	“The key question for courts when
exercising this discretion is whether abatement will aid judicial efficiency and
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economy.” 	Debesingh v. Geovera Specialty Ins., No. 4:18-cv-02316, 2018 WL
4810629, at *3 (S.D. Tex. Oct. 4, 2018) (citation omitted).
III. 	Discussion
First, National argues the UIM breach of contract claim and Texas
statutory claims must be dismissed for lack of subject matter jurisdiction
because the claims are not ripe until Perez obtains a judgment establishing he
is entitled to UIM benefits. 	(ECF No. 9 at 4–5). 	Second, and relatedly,
National argues the claims should be dismissed for failure to state a claim
because 	Perez 	has 	not 	obtained 	a 	judgment 	establishing 	the 	conditions
precedent for UIM coverage, and thus, he is not entitled to relief. (Id. at 5–9).
In the alternative, National contends that even if the claims survive dismissal,
“they must still be severed and abated pending resolution of the declaratory-
judgment action and entry of a final judgment establishing that Plaintiff is
legally entitled to recover UIM benefits.” (Id. at 6).
A. Breach of Contract Claim
In this diversity case, the Court applies the substantive law of the forum
state—Texas. Am. Int’l Specialty Lines Ins. Co. v. Canal Indem. Co., 352 F.3d
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254, 260 (5th Cir. 2003).2 To recover benefits under a UIM policy under Texas
law, the policy beneficiary must show “(1) that the insured has underinsured
motorist coverage, (2) that the underinsured motorist negligently caused the
accident that resulted in the covered damages, (3) the amount of the insured’s
damages, and (4) that the underinsured motorist’s insurance coverage is
deficient.” In re Liberty Cnty. Mut. Ins. Co., 537 S.W.3d 214, 220 (Tex. App.—
Houston [1st Dist.] 2017, no pet.) (citing Brainard v. Trinity Universal Ins. Co.,
216 S.W.3d 809, 818 (Tex. 2006)). “[T]he insured must establish both fault on
the part of the underinsured driver and the extent of the claimant’s damages
before becoming entitled to recover UIM benefits.” Lafleur v. State Farm Mut.
Auto. Ins. Co., No. 5:25-cv-17, 2025 WL 1332045, at *2 (S.D. Tex. May 7, 2025);
see also Mota v. Nat’l Union Five Ins. Co. of Pittsburgh, PA., No. 2:23-cv-00116,
2024 WL 4948636, at *3 (S.D. Tex. Mar. 29, 2024) (explaining that a UIM
insurer “is under no contractual duty to pay benefits until the insured obtains
a judgment establishing the liability and underinsured status of the other
motorist”). 	That requisite determination may be obtained as a judgment
2 Texas’s statutory language for recovery based on UIM coverage states, “[UIM]
coverage must provide for payment to the insured of all amounts that the insured is legally
entitled to recover as damages from owners or operators of underinsured motor vehicles
because of bodily injury or property damage, not to exceed the limit specified in the insurance
policy, and reduced by the amount recovered or recoverable from the insurer of the
underinsured motor vehicle.” TEX . I NS . CODE § 1952.106.
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directly “against the tortfeasor, or alternatively . . . in a declaratory judgment
action against the insurer.” Lafleur, 2025 WL 1332045, at *3.
As such, a plaintiff seeking UIM benefits may state a plausible claim for
breach of contract if he (1) “obtains a judgment establishing the liability and
underinsured status of the other motorist,” or (2) “settle[s] with the tortfeasor
. . . and then proceed[s] to litigate UIM coverage with the insurer” through a
declaratory judgment claim. Ali v. Allstate Indem. Co., No. 4:20-cv-02769, 2021
WL 3868306, at *2 (S.D. Tex. Aug. 9, 2021), report and recommendation
adopted, No. 4:20-cv-02769, 2021 WL 3860716 (S.D. Tex. Aug. 30, 2021).
“Indeed, it is well-settled that neither a tortfeasor’s admission of liability nor
a settlement with them will trigger UIM coverage under Texas law. The same
applies to simply filing a lawsuit against the plaintiff’s insurer for UIM
benefits.” Lafleur, 2025 WL 1332045, at *3.
Here, Perez has only gone so far as to settle with Torres and file this
lawsuit. 	(ECF No. 1 at 2). 	In the Complaint, Perez seeks a declaratory
judgment establishing Torres’s fault and his entitlement to benefits—but has
not obtained one. 	(Id. at 3–4). 	And National expressly refutes that such a
judgment exists or has been entered (see ECF No. 9 at 4–5 (“Plaintiff has not
obtained a judgment establishing the other driver’s liability and underinsured
status. . . . Until a judgment is entered, National has no contractual duty to
pay UIM benefits.”)). “Thus, [Perez] has not complied with the condition that
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would make him eligible for his UIM benefits, and consequently, he cannot yet
demonstrate that [National] has ducked its contractual duty to pay.” Lafleur,
2025 WL 1332045, at *3.
“[U]ntil 	[Perez] 	obtains 	a 	judgment 	establishing 	the 	[tortfeasor’s]
liability and underinsured status, his purported injury . . . is abstract and
contingent on future events that may or may not occur.” Id. (collecting cases).
At this juncture, Perez’s breach of contract claim is improper—“his declaratory
judgment action is ‘the proper vehicle’ to litigate whether he is eligible for UIM
benefits.” 	Id. (citations omitted). 	“Simply put, the need for further facts
regarding [Perez’s] UIM benefits plainly renders his breach of contract claim
unripe, and the Court cannot exercise subject matter jurisdiction over it.” Id.;
see also Mota, 2024 WL 4948636, at *10 (dismissing UIM breach of contract
claim without prejudice for lack of subject matter jurisdiction); Ibarra v.
Allstate Fire & Cas. Ins. Co., No. 20-cv-280, 2020 WL 3259806, at *3 (W.D. Tex.
June 16, 2020) (same).
Accordingly, the Court dismisses without prejudice Perez’s breach of
contract claim for lack of subject matter jurisdiction.
B. Non-Contractual, Statutory Claims
National next posits that “resolution of the declaratory-judgment claim
may avoid a breach of contract and moot any extracontractual claims.” 	(ECF
No. 9 at 8). According to National, “[b]ecause there is no basis to proceed with
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the [extracontractual] Claims at this time, they should be severed and abated
pending resolution of the declaratory-judgment action.” 	(Id. (citing F ED. R.
C IV. P. 21)). 	National alternatively suggests “they should be bifurcated,
abated, and tried after the issues related to UIM coverage have been resolved.”
(Id. (citing F ED. R. C IV. P. 42(b))). 	The Court finds that abatement of these
claims is the proper course.
“It 	is 	well-settled 	that, 	before 	an 	insured 	can 	recover 	on 	extra-
contractual causes of action against an insurer for failing to pay or settle a
UIM-insurance claim, the insured must first establish that the insurer is liable
on the contract.” 	Maguire, 2020 WL 13441595, at *2 (collecting cases).
Therefore, Texas courts have long favored severance (or bifurcation) and
abatement of non-contractual claims in UIM cases. 	Id. (collecting cases). 	To
be clear, federal courts are not bound to follow this procedural posture, but
courts in this district routinely do. 	See Elham v. State Farm Mut. Auto. Ins.,
No. 4:24-cv-2235, 2024 WL 4219745, at *2 (S.D. Tex. Sep. 17, 2024) (collecting
cases); Hoang v. Allstate Fire & Cas. Ins. Co., No. 4:22-cv-4082, 2023 WL
11999535, at *3 (S.D. Tex. Nov. 15, 2023) (same). 	Courts have likewise
recognized 	that 	for 	“bad 	faith 	claim[s], 	abatement, 	not 	dismissal, 	is 	the
appropriate treatment.” 	Lafleur, 2025 WL 1332045, at *4 (citing Gomez v.
Allstate Fire & Cas. Ins. Co., No. 1:18-cv-0950, 2019 WL 5149859, at *2 (W.D.
Tex. May 29, 2019) (citing Perez, 2019 WL 2075931, at *2)).
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The Court finds National “should not be required to engage in discovery
of extra-contractual issues before the underlying UIM liability is determined
because such discovery may be rendered moot.” Maguire, 2020 WL 13441595,
at *4 (quoting In re Liberty Cnty. Mut. Ins., 537 S.W.3d at 221). 	“Abatement
of the non-contractual claims also serves the judicial economy, ensuring that
any trial in this matter is appropriately tailored to the relevant issues.”
Lafleur, 2025 WL 1332045, at *4 (citing Accardo v. Am. First Lloyds Ins. Co.,
No. 11-cv-0008, 2012 WL 1576022, at *5 (S.D. Tex. May 3, 2012)). As such, the
Court grants in part National’s request and abates the non-contractual claims.
Worth noting, the Court declines to sever or bifurcate Perez’s non-
contractual claims from the contractual claims. See Lafleur, 2025 WL 1332045,
at *4 (citing Ache v. Witte, No. 6:20-cv-1320, 2020 WL 6240231, at *1 (W.D. La.
Oct. 21, 2020) (“Under [Rule 21], the Court may sua sponte sever any claim
against any 	party.”); FED R. C IV. P. 42(b); Elham, 2024 WL 	4219745, at
*1 (“Whether separate trials are warranted is left to the sound discretion of the
trial court.” (citation and internal quotations omitted))). The Court finds that
abating the non-contractual claims best serves judicial economy at this time,
rather than severing the claims and opening a new case or ordering a separate
trial. 	See Debesingh, 2018 WL 4810629, at *3. 	“Several sister district courts
have adopted this approach, allowing the parties to simply reinstate their non-
contractual claims when the time is right.” 	Lafleur, 2025 WL 1332045, at *4
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(citing Gomez, 2019 WL 5149859, at *2–3 (dismissing a breach of contract
claim and abating, but not severing or bifurcating, a bad faith claim while the
parties litigate a declaratory judgment action); Accardo, 2012 WL 1576022, at
*3, *5 n.3, *6 (same); Schober v. State Farm Mut. Auto. Ins., No. 3:06-cv-1921,
2007 WL 2089435, at *4–5 (N.D. Tex. July 18, 2007) (dismissing the breach of
contract 	claim 	for 	lack 	of 	jurisdiction 	and 	abating, 	but 	not 	severing 	or
bifurcating, the non-contractual bad faith and exemplary damages claims)).
“Although bifurcation or severance of the claims may later become necessary,
the Court will cross the bridge when it comes to it.” Id.
IV. 	Conclusion
Based on the foregoing, the Court GRANTS IN PART National’s Partial
Motion to Dismiss or Alternatively, to Sever and Abate (ECF No. 9). The Court
DISMISSES WITHOUT PREJUDICE Perez’s breach of contract claim for
lack of subject matter jurisdiction. The Court FURTHER ABATES discovery
and all other activity related to Perez’s non-contractual claims.
SIGNED in Houston, Texas on March 6, 2026.
Richard W. Bennett
United States Magistrate Judge
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