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." The Company's UIM obligation is therefore the per-person/per-occurrence limit stated in the declarations, reduced by the amount our client recovers (or is entitled to recover) from the tortfeasor's liability carrier. Separately, the standard Texas policy's "Limit of Liability" clause bars stacking of UM/UIM limits across multiple vehicles beyond the highest applicable limit — an anti-stacking limitation grounded in the policy language and Texas case law rather than in § 1952.106 itself.

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 tortfeasor was a hit-and-run driver who cannot be identified
☐ The tortfeasor's stated limits of $[________________________________] are below Texas minimum requirements

B. ☐ Underinsured Motorist (UIM) Claim

The tortfeasor qualifies as an "underinsured motorist" under Tex. Ins. Code § 1952.101 because:

☐ The tortfeasor's liability limits of $[________________________________] are insufficient to fully compensate our client's damages
☐ 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

B. Policy Limits Demand

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

Our client's total damages of $[________________________________] vastly exceed the combined available coverage. This is a clear policy limits case. Paying the full UM/UIM limits is both legally required and in the Company's economic interest.

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: An insurer that violates Ch. 542 is liable for the claim amount plus 18% per annum interest on that amount, computed from the date payment was due, plus reasonable 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: Because UM/UIM coverage uses tort law to fix the insurer's liability, Texas courts hold that the insurer's contractual obligation to pay UIM benefits — and thus Ch. 542's deadlines and 18% penalty — generally does not arise until a judgment establishes the tortfeasor's liability and underinsured status. See Allstate Ins. Co. v. Irwin, 627 S.W.3d 263 (Tex. 2021). The prompt-payment framework applies most cleanly where the Company denies or delays a UM claim after coverage is reasonably clear; counsel should evaluate its application to the specific posture of this claim.

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 extracontractual damages if the insurer did not violate the policy and caused no independent injury.

D. DTPA Tie-In

Chapter 541 incorporates the Texas Deceptive Trade Practices Act (DTPA), Tex. Bus. & Com. Code Ch. 17, as a tie-in statute. Under Tex. Ins. Code § 541.151, a claimant may pursue the same acts that violate Ch. 541 as violations of the DTPA, potentially recovering economic damages plus, for knowing violations, up to three times the amount of economic damages pursuant to Tex. Bus. & Com. Code § 17.50(b)(1).

E. Available Remedies for Bad Faith

Any attempt to deny, delay, or unreasonably undervalue this claim will constitute bad faith under both Tex. Ins. Code Ch. 541 and Texas common law, triggering all remedies enumerated above.

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), 333 Guadalupe Street, Austin, TX 78701; P.O. Box 149104, Austin, TX 78714; Consumer Protection Hotline: 1-800-252-3439; www.tdi.texas.gov;
4. The 18% statutory interest under § 542.060 will be demanded for every day of delay beyond the prompt-payment deadlines.

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) (UIM benefits/obligation arise on judgment establishing tortfeasor liability & underinsured status)
• USAA Tex. Lloyds Co. v. Menchaca, 545 S.W.3d 479 (Tex. 2018): https://www.mdjwlaw.com/experience/successes/usaa-texas-lloyds-company-v-menchaca-545-s-w-3d-479-tex-2018
• 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/