UM/UIM Demand Letter - Texas

UM/UIM (UNINSURED/UNDERINSURED MOTORIST) DEMAND LETTER

State of Texas

[LAW FIRM LETTERHEAD]

SETTLEMENT COMMUNICATION — FOR RESOLUTION PURPOSES ONLY
TEX. R. EVID. 408 / FED. R. EVID. 408 MAY LIMIT SPECIFIED USES OF DISPUTED-CLAIM NEGOTIATIONS; THEY DO NOT CREATE A GENERAL PRIVILEGE

VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED
AND VIA EMAIL TO: [________________________________]

Date: [__/__/____]

[INSURANCE COMPANY FULL LEGAL NAME]
[________________________________] (Attn: UM/UIM Claims Department)
[________________________________]
[________________________________], TX [________]

Attention: [________________________________], [________________________________] (Adjuster Title)
Re: FORMAL DEMAND FOR UM/UIM POLICY LIMITS — TEXAS INSURANCE CODE
Insured/Claimant: [________________________________]
Policy Number: [________________________________]
Claim Number: [________________________________]
Date of Loss: [__/__/____]
UM/UIM Policy Limits: $[________________________________]
Tortfeasor: [________________________________]
Tortfeasor's Carrier: [________________________________]
Tortfeasor's Liability Limits: $[________________________________]
Response Deadline: [__/__/____] at 5:00 p.m. Central Time

Dear [________________________________]:

I. INTRODUCTION AND NATURE OF DEMAND

This firm represents [________________________________] ("our client") in connection with a claim for [☐ uninsured / ☐ underinsured] motorist benefits arising from a motor vehicle collision on [__/__/____] in [________________________________], Texas. This letter constitutes a formal demand for payment of the full UM/UIM policy limits of $[________________________________] under Texas law.

Our client purchased this policy and paid premiums precisely for circumstances like this. Texas law mandates that every automobile liability policy issued in this state include UM/UIM protection — see Tex. Ins. Code § 1952.101 — to ensure policyholders are not left without recourse when the negligent party lacks adequate coverage. [________________________________] ("the Company") has an obligation under both contract and Texas statute to promptly, fairly, and fully compensate our client.

II. TEXAS UM/UIM LEGAL FRAMEWORK

A. Statutory Requirement — Tex. Ins. Code § 1952.101

Texas Insurance Code § 1952.101 prohibits any insurer from delivering or issuing an automobile liability policy in Texas unless it includes UM/UIM coverage in at least the amounts required under Tex. Transp. Code Chapter 601. As of this writing, Texas minimum financial responsibility limits are $30,000 per person / $60,000 per occurrence for bodily injury and $25,000 for property damage. See Tex. Transp. Code § 601.072.

An insured may reject UM/UIM coverage only in writing pursuant to Tex. Ins. Code § 1952.101(c). No such written rejection exists here.

B. UIM Offset Rule — Tex. Ins. Code § 1952.106

Under § 1952.106, underinsured motorist coverage "must provide for payment to the insured of all amounts that the insured is legally entitled to recover as damages ... 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." Calculate the claim using the policy limit, proven damages, and amounts recovered or recoverable from the underinsured motorist's insurer. Whether limits for multiple covered vehicles can be combined depends on the actual policy's limit-of-liability language and applicable Texas law; § 1952.106 itself does not impose an anti-stacking rule.

C. Consent to Settle / Subrogation

The standard Texas UM/UIM policy conditions coverage on the insured obtaining the insurer's consent before settling with, and releasing, the liable party, so that the insurer's subrogation rights are preserved. We hereby formally request the Company's written consent to settle with [________________________________] (tortfeasor's carrier) for its policy limits of $[________________________________]. Texas courts have held that an insurer relying on a consent-to-settle/subrogation clause to avoid coverage must show it was actually prejudiced by the insured's settlement. Separately, in any dispute over whether a vehicle is uninsured, the Company — not our client — bears the burden of proof under Tex. Ins. Code § 1952.109.

Please provide written consent to settle within [____] days of the date of this letter.

D. Policy Information

III. COVERAGE TRIGGER

A. ☐ Uninsured Motorist (UM) Claim

The tortfeasor, [________________________________], qualifies as an "uninsured motorist" under Tex. Ins. Code § 1952.101 because:

☐ The tortfeasor carried no automobile liability insurance at the time of the collision
☐ The tortfeasor's insurer, [________________________________], has disclaimed or denied coverage
☐ The tortfeasor's insurer is insolvent or in receivership
☐ The owner or operator cannot be identified, and the unknown vehicle made actual physical contact with our client or our client's property (Tex. Ins. Code § 1952.104(3))

If the tortfeasor has collectible liability coverage but its limit is low, compare that limit with the insured's UIM limit under § 1952.103; a below-minimum liability limit alone does not establish this UM ground.

B. ☐ Underinsured Motorist (UIM) Claim

The tortfeasor's vehicle meets the "underinsured motor vehicle" definition in Tex. Ins. Code § 1952.103 if its collectible liability limit was originally below our client's UIM limit or was reduced below that limit by payments on claims arising from this accident. The applicable facts are:

☐ The tortfeasor's collectible liability limit is $[________________________________], below our client's UIM limit of $[________________________________]
☐ Our client has exhausted, or will exhaust upon settlement, the tortfeasor's policy
☐ Our client's total damages of $[________________________________] exceed all available third-party coverage
☐ The tortfeasor's carrier, [________________________________], has tendered its limits of $[________________________________]

IV. THE COLLISION AND LIABILITY

A. Facts of the Collision

On [__/__/____], at approximately [________________________________], our client was [________________________________] at or near [________________________________], [________________________________] County, Texas.

[________________________________]
(Provide a detailed, specific narrative of the collision including direction of travel, traffic conditions, road conditions, weather, and the exact sequence of events.)

B. Tortfeasor's Negligence Under Texas Law

The tortfeasor, [________________________________], was negligent under Texas law in the following particulars:

☐ Failure to maintain a proper lookout
☐ Failure to yield the right-of-way
☐ Following too closely — Tex. Transp. Code § 545.062
☐ Excessive speed or speed unsafe for conditions — Tex. Transp. Code § 545.351
☐ Distracted or inattentive driving
☐ Failure to obey a traffic control device — Tex. Transp. Code § 544.004
☐ Improper lane change — Tex. Transp. Code § 545.060
☐ Driving while intoxicated — Tex. Penal Code § 49.04
☐ Failure to control vehicle
☐ [________________________________]

C. Evidence of Liability

1. Police/Crash Report
[________________________________] Police Department / [________________________________] County Sheriff Crash Report No. [________________________________], dated [__/__/____], which [________________________________].

2. Witness Statements
[____] independent witnesses [________________________________].

3. Physical Evidence
[________________________________] (point of impact, skid marks, debris field, vehicular damage patterns)

4. Photographs / Video
[________________________________] (dashcam, traffic camera, cell phone video)

5. Expert Analysis
[________________________________], accident reconstructionist, has determined: [________________________________].

D. Absence of Comparative Fault — Tex. Civ. Prac. & Rem. Code § 33.001

Under Texas's modified comparative fault scheme, a plaintiff may not recover if found more than 50% responsible. Our client bears zero comparative fault for this collision. [________________________________].

V. OUR CLIENT'S INJURIES AND TREATMENT

A. Injury Summary

As a direct and proximate result of the collision, our client sustained the following injuries, all diagnosed and documented by licensed treating physicians:

Primary Injuries:

• [________________________________]
• [________________________________]
• [________________________________]

Secondary / Consequential Injuries:

• [________________________________]
• [________________________________]

B. Treatment Chronology

C. Current Condition and Prognosis

[________________________________]
(Describe permanent restrictions, ongoing pain, functional limitations, and treating physician's prognosis.)

D. Permanent Impairment

VI. DAMAGES

A. Past Medical Expenses

B. Future Medical Expenses (Present Value)

Life care plan prepared by [________________________________] on [__/__/____].

C. Lost Income and Earning Capacity

Past Lost Income (from [__/__/____] to [__/__/____]):

• Employer: [________________________________]
• Pre-injury earnings: $[________________________________] per [________________________________]
• Weeks/months lost: [____]
• Total Past Lost Income: $[________________________________]

Future Lost Earning Capacity (Present Value):

• Vocational expert: [________________________________]
• Economic expert: [________________________________]
• Future Lost Earning Capacity: $[________________________________]

D. Non-Economic Damages

Under Texas law, our client is entitled to recover for:

• Physical pain and mental anguish — past and future
• Physical impairment — past and future
• Disfigurement — past and future
• Loss of consortium (spouse/children, if applicable)

[________________________________]
(Describe specific, concrete impacts on daily life, sleep, relationships, hobbies, and activities.)

Non-Economic Damages: $[________________________________]

E. Total Damages Summary

VII. UIM BENEFITS CALCULATION

A. Offset Calculation — Tex. Ins. Code § 1952.106

Demand the lesser of net underinsured damages and the available UIM limit, after applying any other policy terms supported by current law. The tortfeasor recovery is credited against total damages; it does not automatically reduce the stated UIM policy limit.

B. Policy Limits Demand

We hereby demand payment of the full UM/UIM policy limits of $[________________________________].

Our client's documented damages of $[________________________________] exceed the available coverage. We ask the Company to evaluate and resolve the claim at the full available UM/UIM limits. For a UIM claim, the contractual duty to pay arises after the required determination of the other driver's liability and underinsured status; the Company may dispute those issues before they are established.

VIII. PROMPT PAYMENT OBLIGATIONS — TEX. INS. CODE CH. 542

[________________________________] ("the Company") is subject to the Texas Prompt Payment of Claims Act, Tex. Ins. Code Ch. 542, which establishes the following mandatory deadlines:

Penalty for Noncompliance — § 542.060: When an insurer is liable for a claim and fails to comply with an applicable Chapter 542 requirement, § 542.060 may require the claim amount plus 18% per annum interest on that amount from the date payment was due, plus reasonable and necessary attorneys' fees. (For claims governed by Ch. 542A — first-party claims for property damage from forces of nature — the interest rate is instead the postjudgment rate plus 5%; that subchapter does not govern UM/UIM bodily-injury claims.)

Important UIM timing note: A UIM carrier has no contractual duty to pay benefits until a judgment establishes the other driver's liability and underinsured status. Brainard v. Trinity Universal Insurance Co., 216 S.W.3d 809, 818 (Tex. 2006), quoted in Allstate Ins. Co. v. Irwin, 627 S.W.3d 263 (Tex. 2021). Chapter 542's 18% remedy requires a violation by an insurer liable for the claim; its application depends on that posture and the statutory conditions. Evaluate a UM claim separately.

IX. GOOD FAITH OBLIGATIONS AND BAD FAITH WARNING

The Company owes our client — its own insured — a duty of good faith and fair dealing recognized under both Texas statute and common law. This duty is more demanding in the UM/UIM context because the claimant is the Company's own policyholder, not an adverse third party.

A. Statutory Duties — Tex. Ins. Code § 541.060

The Company is prohibited from engaging in the following unfair settlement practices:

1. Misrepresenting a material fact or policy provision relating to coverage at issue — § 541.060(a)(1)
2. Failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement when liability is reasonably clear — § 541.060(a)(2)
3. Failing to provide a reasonable written explanation for denial or inadequate offer — § 541.060(a)(3)
4. Refusing to pay a claim without conducting a reasonable investigation — § 541.060(a)(7)
5. Refusing, failing, or unreasonably delaying a settlement offer on first-party coverage because other coverage may be available — § 541.060(a)(5)

B. Common Law Bad Faith Standard — Universe Life Ins. Co. v. Giles

Under Universe Life Ins. Co. v. Giles, 950 S.W.2d 48 (Tex. 1997), an insurer breaches its common law duty of good faith and fair dealing when it: (1) denies or delays payment of a claim and (2) knew or should have known that it was reasonably clear the claim was covered. Both elements must be established.

C. Menchaca Five-Rule Framework

USAA Tex. Lloyds Co. v. Menchaca, 545 S.W.3d 479 (Tex. 2018) established five interrelated rules governing the relationship between contract breach and statutory bad faith:

1. General Rule: No policy benefits as extracontractual damages unless the policy provides a right to them.
2. Entitled-to-Benefits Rule: If a right to benefits is established, those benefits are recoverable as actual damages under Ch. 541 when the insurer's violation causes their loss.
3. Benefits-Lost Rule: Even without a current contractual right, benefits are recoverable if the insurer's statutory violation caused the insured to lose that contractual right.
4. Independent-Injury Rule: An insured may recover extracontractual damages for an injury independent of and not solely limited to loss of policy benefits.
5. No-Recovery Rule: An insured cannot recover damages for an insurer’s statutory violation without establishing either a right to policy benefits or an injury independent of that right.

D. DTPA Tie-In

The two statutes provide distinct routes. Tex. Ins. Code § 541.151 authorizes a Chapter 541 action for specified deceptive acts listed in DTPA § 17.46(b), if the claimant relied on the act to the claimant's detriment. Conversely, Tex. Bus. & Com. Code § 17.50(a)(4) permits a qualifying consumer to sue under the DTPA for an act or practice violating Insurance Code Chapter 541. A DTPA damages action generally requires the consumer's written notice at least 60 days before suit, identifying the specific complaint and amounts of economic damages, mental-anguish damages, and expenses including attorneys' fees; § 17.505(b) contains limited exceptions. This demand supplies that notice only if those particulars are completed: complaint [________]; economic damages $[________]; mental-anguish damages, if any, $[________]; expenses including fees $[________]; notice date [__/__/____]. Available damages depend on the pleaded route and its elements: § 541.152 uses actual damages, while § 17.50(b)(1) uses economic damages and its own rules for knowing or intentional conduct.

E. Available Remedies for Bad Faith

If the Company's liability becomes reasonably clear and it then fails to attempt a prompt, fair, and equitable settlement, that conduct may support relief under Tex. Ins. Code § 541.060(a)(2)(A), subject to proof of the claim and applicable remedies. A good-faith dispute over the other driver's liability, damages, or coverage is not itself proof of bad faith.

X. ARBITRATION

A. Policy Arbitration Clause

The policy [☐ contains / ☐ does not contain] a mandatory arbitration clause for UM/UIM disputes.

[________________________________]
(If applicable, quote the exact arbitration clause and identify the applicable arbitration rules and venue.)

B. Arbitration Notice (If Applicable)

If the Company fails to accept this demand by the deadline, consider this letter as notice of our client's intent to invoke arbitration under the policy and applicable Texas law.

XI. RESPONSE DEADLINE AND CONSEQUENCES

THIS DEMAND EXPIRES AT 5:00 P.M. CENTRAL TIME ON [__/__/____].

This deadline is firm. If the Company fails to tender the full UM/UIM limits of $[________________________________] by the deadline:

1. Suit will be filed in the [________________________________] District Court, [________________________________] County, Texas, seeking all policy benefits plus all statutory and extracontractual remedies under Tex. Ins. Code Chs. 541 and 542;
2. Bad faith claims will be pleaded, including treble damages and attorneys' fees;
3. A complaint will be filed with the Texas Department of Insurance (TDI), 1601 Congress Avenue, Austin, TX 78701; mailing address P.O. Box 12030, Austin, TX 78711-2030; Consumer Protection Help Line: 1-800-252-3439; www.tdi.texas.gov;
4. Interest under § 542.060 will be sought if the Company becomes liable for the claim and violates an applicable Chapter 542 requirement; a UIM demand before the required liability judgment does not by itself start the 18% remedy.

XII. CONCLUSION

Our client purchased UM/UIM coverage and paid premiums in reliance on the promise of protection. That protection is now required. The liability of the tortfeasor is clear. The damages are severe and well-documented. Our client's damages far exceed all available coverage. There is no legitimate basis to withhold payment of the full UM/UIM policy limits.

We strongly urge the Company to resolve this matter within the deadline stated above.

Respectfully submitted,

[________________________________]
(Law Firm Name)

By: ___________________________________
[________________________________]
State Bar No. [________________________________]
[________________________________]
[________________________________], TX [________________________________]
Tel: [________________________________]
Email: [________________________________]

Counsel for [________________________________]

ENCLOSURES:
☐ Policy declarations page and UM/UIM endorsements
☐ Police / crash report (Report No. [________________________________])
☐ Complete medical records and bills (providers listed in Section V)
☐ Photographs of vehicles and accident scene
☐ Lost wage documentation / employer verification
☐ Life care plan / vocational evaluation (if applicable)
☐ Expert reports (if applicable)
☐ Tortfeasor's liability policy limits confirmation

COPY TO:

• [________________________________] (Client)
• [________________________________], [________________________________] (Tortfeasor's Carrier — re: consent to settle)

TEXAS UM/UIM LAW QUICK REFERENCE

SOURCES AND REFERENCES

• Texas Insurance Code Chapter 542 (Prompt Payment of Claims Act): https://statutes.capitol.texas.gov/Docs/IN/htm/IN.542.htm
• Texas Insurance Code Chapter 541 (Unfair Methods of Competition): https://statutes.capitol.texas.gov/GetStatute.aspx?Code=IN&Value=541
• Texas Insurance Code § 541.060 (Unfair Settlement Practices): https://law.justia.com/codes/texas/insurance-code/title-5/subtitle-c/chapter-541/subchapter-b/section-541-060/
• Texas Insurance Code Chapter 1952 (UM/UIM Coverage): https://statutes.capitol.texas.gov/Docs/IN/htm/IN.1952.htm
• Texas Insurance Code § 1952.101 (rejection in writing under (c)): https://codes.findlaw.com/tx/insurance-code/ins-sect-1952-101/
• Texas Insurance Code § 1952.106 (recovery/offset) & § 1952.109 (burden of proof — uninsured status): https://law.justia.com/codes/texas/insurance-code/title-10/subtitle-c/chapter-1952/subchapter-c/section-1952-106/
• Texas Insurance Code § 542.056 (accept/deny; arson 30-day; 45-day extension) & § 542.059(b) (catastrophe +15 days): https://law.justia.com/codes/texas/insurance-code/title-5/subtitle-c/chapter-542/subchapter-b/section-542-056/
• Allstate Ins. Co. v. Irwin, 627 S.W.3d 263 (Tex. 2021) (discretionary declaratory-judgment fees; quotes Brainard's UIM payment-duty rule)
• USAA Tex. Lloyds Co. v. Menchaca, 545 S.W.3d 479 (Tex. 2018): https://www.txcourts.gov/media/1441365/140721.pdf
• Universe Life Ins. Co. v. Giles, 950 S.W.2d 48 (Tex. 1997): https://caselaw.findlaw.com/court/tx-supreme-court/1215532.html
• Texas Deceptive Trade Practices Act (DTPA), Tex. Bus. & Com. Code Ch. 17: https://statutes.capitol.texas.gov/SOTWDocs/BC/htm/BC.17.htm
• Texas Dept. of Insurance (TDI): https://www.tdi.texas.gov
• TDI Consumer Protection: https://www.tdi.texas.gov/consumer/index.html
• Texas Transportation Code § 601.072 (Financial Responsibility Limits): https://statutes.capitol.texas.gov/Docs/TN/htm/TN.601.htm
• Haun Mena — Texas Insurance Code Ch. 542 Overview: https://haunmena.com/texas-insurance-code-chapter-542/
• Dick Law Firm — Prompt Payment Explained: https://www.dicklawfirm.com/blog/2025/april/what-is-the-prompt-payment-of-insurance-in-texas/
• Hanna Plaut — Consent to Settle in TX UM/UIM: https://www.hannaplaut.com/a-judicially-created-catch-22-the-settlement-without-consent-clause/