IN RE: UNITED SERVICES AUTOMOBILE ASSOCIATION (2026)

DISSENTING OPINION

This case presents a straightforward opportunity to preserve the orderly administration of justice. Requiring the parties to try damages now, only to revisit those issues after a new trial is granted, serves no legitimate end. Accordingly, I respectfully dissent.

This original mandamus proceeding arises from a lawsuit filed by the real-parties-in interest Michael William Mills and Jennifer Rebecca Mills (the “Millses”) alleging the relator United Services Automobile Association (“USAA”) wrongfully denied their homeowner's insurance claim. After USAA failed to answer, the trial court entered a default judgment. In this proceeding, USAA challenges the trial court's denial of its motion to set aside the no-answer default judgment. Because the record establishes that USAA satisfied the requirements for a new trial under Craddock and because it lacks an adequate remedy by appeal, I would conditionally grant mandamus relief.

BACKGROUND

The Millses filed suit against USAA, their homeowner insurer, on December 8, 2025. Their petition alleged various causes of action including breach of contract, breaches of the common law duty of good faith and fair dealing, and violations of various provisions of the Texas Insurance Code and the Texas Deceptive Trade Practices Act, all allegedly stemming from USAA's denial of an insurance claim for damage to their home. The Millses served USAA through their registered agent Corporation Services Company (“CSC”) on December 12, 2025.

On February 20, 2026, USAA still had not answered the petition, and the Millses filed a motion for a no-answer default judgment. In their motion, the Millses requested a hearing be set at a later time on the issue of damages, which the trial court granted on March 3, 2026.

On March 26, 2026, USAA filed a motion to set aside the default judgment and, in the alternative, motion for new trial. In the motion, USAA asserts that it became aware of the default judgment on March 6, 2026, when it received the Rule 306a notice of the default judgment. It attached to its motion a declaration of “Claims Litigation Support Specialist I” Jessica Perez. According to Perez, USAA's agent for service of process is CSC. When a petition is served, CSC uploads the petition into an online portal accessible by certain USAA employees. For the Millses' petition, the case was placed into a queue that “belonged to Claims Litigation Support Specialist Senior, Sandra Adams.” However, at the time the Millses' petition came through the CSC portal, Adams was on vacation, so Perez was covering her duties. Perez avers that she mistakenly routed the petition to the automobile claims department rather than the litigation department. According to Perez,

Once the petition landed in the auto claims department, the auto litigation manager noted in the USAA claim file that the property lawsuit had been assigned to him by mistake, but the notation was marked as “privileged” because it originated from a member of a litigation team. Because the entry was privileged, the auto claims department could not view the entry. The petition was thus never routed to the correct USAA department, and went unanswered.

The Millses filed their response to USAA's motion on April 1, 2026, arguing that USAA is a sophisticated party, which ignored their petition after it had been sent to USAA's litigation team. On April 9, 2026, the trial court denied USAA's motion.

On April 20, 2026, USAA filed a motion to reconsider. With this motion, USAA attached the declaration of Marco Gorena, “a litigation claim manager in the auto claims department.” Gorena is not an attorney or member of the legal profession. In his declaration he states that upon recognizing the petition had been mistakenly assigned to him, he made a note it needed to be reassigned. He further adds:

I took this action because I thought that this would handle the matter, and that the petition would be reassigned based on my note, thus sending the petition to the correct department. I was unaware that others could not see my note, which had been marked privileged. I did not intend for the petition to go unanswered, and believed I had taken actions to make sure it would be answered. My inadvertent mistake was not made with the intent that the petition not be answered.

On June 3, 2026, the trial court denied USAA's motion to reconsider. USAA filed its petition for writ of mandamus on June 26, 2026, and the Millses filed a response. USAA asks us to direct the trial court to vacate its orders denying the motion to set aside the default judgment and new trial and instead grant the motions. Because I would conditionally grant this petition, I dissent from the majority's decision denying relief.

STANDARD OF REVIEW

Mandamus is an extraordinary remedy that will only be granted when a relator can show that (1) the trial court clearly abused its discretion, and (2) no adequate appellate remedy exists. In re H.E.B. Grocery Co., L.P., 492 S.W.3d 300, 302 (Tex. 2016) (orig. proceeding) (per curiam). The relator has the burden of proof on both elements of mandamus relief. Id. A trial court abuses its discretion when it clearly fails to analyze or apply the law correctly. Id. Appellate courts will not disturb a trial court's decision unless it amounts to a clear and prejudicial error of law or fails to correctly analyze or apply the law to the facts. Id. at 302–03. The relator must establish the trial court could have reasonably reached only one decision. Id. at 303.

Mandamus will not issue where there is “a clear and adequate remedy at law, such as a normal appeal.” Id. at 304 (quoting State v. Walker, 679 S.W.2d 484, 485 (Tex. 1984) (orig. proceeding)). Because mandamus is intended to be an extraordinary remedy, it is available only in limited circumstances. Walker v. Packer, 827 S.W.2d 833, 840 (Tex. 1992) (orig. proceeding). “The writ will issue ‘only in situations involving manifest and urgent necessity and not for grievances that may be addressed by other remedies.’ ” Id. (quoting Holloway v. Fifth Court of Appeals, 767 S.W.2d 680, 684 (Tex. 1989) (orig. proceeding)).

ANALYSIS

Abuse of Discretion

Any analysis must begin with the Texas Supreme Court's reminder that “[d]efault judgments are ‘greatly disfavor[ed]’ under Texas law, consistent with the strong policy preference for adjudicating cases on the merits.” Tabakman v. Tabakman, 728 S.W.3d 703, 707 (Tex. 2025) (quoting In re Lakeside Resort JV, LLC, 689 S.W.3d 916, 921, 925 (Tex. 2024) (orig. proceeding) (per curiam)). Indeed, as Justice Huddle recently noted, joined by three of her colleagues:

The growing hostility toward default judgments unsurprisingly has yielded consistent—usually unanimous—dispositions in this Court: we have not affirmed a default judgment in more than two decades ․ [T]his is true whether the Court's decision turns on the text of a statute governing service, a rule of procedure, application of the Craddock test, or due process principles.

Huffman Asset Mgmt., LLC v. Colter, No. 24-0205, ––– S.W.3d ––––, ––––, 2026 WL 1500963, at *6 (Tex. May 29, 2026) (Huddle, J., concurring, joined by Devine, J., Young, J., Sullivan, J.). Here, we are asked to apply the Craddock test to a motion to set aside a default judgment. Craddock v. Sunshine Bus Lines, 134 Tex. 388, 133 S.W.2d 124, 126 (1939).

A trial court's refusal to grant a motion for new trial is reviewed under an abuse of discretion standard. Dolgencorp of Tex., Inc. v. Lerma, 288 S.W.3d 922, 926 (Tex. 2009) (per curiam). “When a defaulting party moving for new trial meets all three elements of the Craddock test, then a trial court abuses its discretion if it does not grant a new trial.” Dolgencorp of Tex., Inc., 288 S.W.3d at 926. In Craddock, the Texas Supreme Court held the trial court erred by denying a motion to set aside a no answer default judgment and grant a new trial where it was shown (1) the failure to answer was a mistake, and not intentional, (2) there was a meritorious defense, and (3) the plaintiff would not suffer injury by granting the motion. 133 S.W.2d at 126. For the reasons that follow, I would hold that USAA satisfied all three elements, and so the trial court abused its discretion by not granting USAA's motion to set aside the default judgment and for new trial. See In re Adams, 416 S.W.3d 556 (Tex. App.—Tyler 2013, orig proceeding) (mem. op.) (granting mandamus relief where the trial court abused its discretion and denied Relator's motion for new trial despite having satisfied Craddock test).

Unintentional Mistake

USAA's burden as to the first Craddock element of unintentional mistake is satisfied if the factual assertions in the Perez and Gorena declarations, if true, negate intentional or consciously indifferent conduct by USAA and are not controverted by the Millses. See In re R.R., 209 S.W.3d 112, 115 (Tex. 2006) (per curiam). A deliberate failure to answer is not enough to show intentionality, nor is mere negligence enough for conscious indifference. Tabakman, 728 S.W.3d at 708 (citing Smith v. Babcock & Wilcox Constr. Co., 913 S.W.2d 467, 468 (Tex. 1995)). The controlling fact is the “absence of an intentional failure to answer rather than a real excuse for not answering” when determining if the first element is satisfied. Milestone Operating, Inc. v. ExxonMobil Corp., 388 S.W.3d 307, 310 (Tex. 2012). To that end, the defendant's excuse does not need to even be a good one to suffice. Fid. & Guar. Ins. Co. v. Drewery Const. Co., Inc., 186 S.W.3d 571, 576 (Tex. 2006).

While the employee who typically routes court filings for USAA was out of the office, another team member covered her duties. The USAA employee covering duties mistakenly routed the petition to the auto claims department rather than the litigation department. In her affidavit to the court, the employee did not state she acted to purposefully prevent USAA from filing an answer in the case. See Norton v. Martinez, 935 S.W.2d 898, 902 (Tex. App.—San Antonio 1996, no writ) (finding the first element of the Craddock test satisfied where mistakes in routing an insurance coverage notification in the municipality resulted in the city attorney not receiving notice of a requirement to answer). In their motion to reconsider the denial of the motion to set aside the default judgment, an additional declaration from the automobile claims department further confirmed the employee who mistakenly received the petition “did not intend for the petition to go unanswered, and believed [he] had taken actions to make sure it would be answered.” “In the absence of controverting evidence that [USAA's] failure to appear was due to an intentional act or conscious indifference, [USAA's] affidavits should be taken as true.” Id.

The affidavits do not demonstrate an intentional act or conscious indifference. USAA, therefore, satisfied the first element of the Craddock test.

Meritorious Defense

The second prong of the Craddock test required USAA to set up a meritorious defense in their motion to set aside the default judgment. Dolgencorp of Tex., Inc., 288 S.W.3d at 927. A meritorious defense has been set up “if it alleges facts which in law would constitute a defense to the plaintiff's cause of action and is supported by affidavits or other evidence providing prima facie proof that the defendant has such a defense. Id. at 928.

In its motion, USAA states the insurance claim was denied because the insured's policy specifically excludes the type of claim the insured made on their policy—damage to the home's foundation. The insured had filed a claim that their home, which was covered by the USAA insurance policy, suffered damage following a storm. USAA included excerpts from the policy in their motion that showed the policy excluded:

Earth Movement arising from or caused by or resulting from ․ any act of nature, meaning: (Earthquake, including land shock waves or tremors before, during or after a volcanic eruption; (2) Landslide; mudslide or mudflow; (3) Subsidence, sinkhole, erosion or movement resulting from improper compaction, site selection or any other external forces; (4) Earth sinking, rising or shifting, expanding or contracting of earth, all whether combined with water or not; ․ (m) Settling, cracking, shrinking, bulging or expansion of pavements, patios, foundations, walls, floors, roofs or ceilings;

USAA's motion states the Millses' claim fell within these excluded categories.

USAA's assertions and supporting document are sufficient to satisfy Craddock's second element because they would constitute a defense to the Millses' claim and the assertion is more than conclusory. Compare U.S. Bank Nat'l Ass'n as Tr. for RMTP Tr. Series 2021 Cottage-TT-V v. Bus. Unlimited 27, LLC, No. 02-25-00315-CV, 2026 WL 1041632, at *3 (Tex. App.—Fort Worth Apr. 16, 2026, pet. filed) (mem. op.) (“Some facts supporting the defense—albeit basic and perhaps even threadbare—must be presented, either by affidavit or through evidence presented at the hearing on the motion for new trial.”) (citing Dolgencorp of Tex., Inc, 288 S.W.3d at 927–28), with Lynch v. Lopez, No. 02-22-00435-CV, 2023 WL 3878434 (Tex. App.—Fort Worth June 8, 2023, no pet.) (mem. op.) (finding second element of Craddock not met where the only support for the element was a paragraph stating “adverse consequences ․ but present[ing] no facts that would constitute a defense”).

Having provided sufficient facts in their motion to set aside the default judgment, USAA satisfied the second Craddock element.

No Injury to Plaintiff

To meet the last element of the Craddock test, USAA's motion to set aside the default judgment stated that granting the motion would not occasion delay or otherwise injure the Millses. Craddock, 133 S.W.3d at 126. Once USAA alleged there would be no injury in their motion, the burden shifted to the Millses to show that injury would occur if the trial court granted USAA's motion to set aside the default judgment Dir., State Employees Workers' Comp. Div. v. Evans, 889 S.W.2d 266, 270 (Tex. 1994).

USAA's motion asserted that “mere weeks” had passed between the filing of its motion and the entering of the no-answer default judgment order, so there was not a loss of witnesses or valuable evidence as would delay or injure the Millses. Because their response only focused on the first element of the Craddock test, the Millses response did “not address the second and third element.” Indeed, even in their response to USAA's motion for reconsideration of the denial of the motion to set aside the default judgment, the Millses still did not address the second or third element of the test. Thus, they have failed to carry their burden.

The third element is likewise met. Nothing in the record suggests that granting a new trial would have caused delay or otherwise prejudiced the Millses. Because USAA satisfied all three elements of the Craddock test, the trial court abused its discretion by denying its motion to set aside the default judgment. In re R.R., 209 S.W.3d at 117.

Adequate Appellate Remedy

I also conclude that USAA lacks an adequate remedy by appeal. To be sure, mandamus does not lie to correct every erroneous interlocutory ruling, and litigation expense alone does not render appellate review inadequate. Walker, 827 S.W.2d at 842. But the adequacy of remedy inquiry is a practical one that requires courts to weigh the circumstances presented rather than rely on categorical rules. In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 137 (Tex. 2004); In re McAllen Med. Ctr., Inc., 275 S.W.3d 458, 464 (Tex. 2008).

Finality of Default Judgment Order

Mandamus relief will not be available for a final, appealable order as there is an adequate appellate remedy. See Lehmann v. Har–Con Corp., 39 S.W.3d 191, 195 (Tex. 2001). In this case, the order granting default judgment did not dispose of the issue of damages and is therefore not final. See In re Blankenhagen, 513 S.W.3d 97, 101 (Tex. App.—Houston [14th Dist.] 2016, orig. proceeding) (“Accordingly, the Default Judgment is not a final judgment because the amount of relators' damages has not yet been determined and cannot be ascertained from ․ the Default Judgment[.]”). The motion for default judgment asked that “the Court enter judgment against Defendant, United Services Automobile Association; to set matter for hearing to accept evidence upon Plaintiffs' damages, that Plaintiff recover costs expended in filing this suit; that Plaintiff recover prejudgment and post judgment interest; and that Plaintiff have such other and further relief at law or in equity to which Plaintiff may be justly entitled.” The court's order granted the motion in all things, thereby leaving open the need to have a hearing on damages. See In re Burlington Coat Factory Warehouse of McAllen, Inc., 167 S.W.3d 827, 829 (Tex. 2005) (“Although a judgment following a trial on the merits is presumed to be final, there is no such presumption of finality following a summary judgment or default judgment.”); Zamarripa v. Sifuentes, 929 S.W.2d 655, 657 (Tex. App.—San Antonio 1996, no writ) (holding the “default judgment does not dispose of the prejudgment interest claim pled in plaintiff's petition. The judgment is completely silent on prejudgment interest and does not contain a Mother Hubbard clause.”).

The Appellate Remedy is Inadequate

This proceeding involves more than the ordinary burdens associated with continued litigation. By denying a new trial, the trial court prevented USAA from litigating a defense that, if successful, would defeat coverage under the policy. The dispute therefore concerns not merely the amount recoverable, but whether the policy affords coverage for the claimed loss at all. If the exclusion applies, USAA would not be liable under the policy for the damages claimed.

Whether an appellate remedy is “adequate” requires appellate courts to carefully balance jurisprudential considerations when determining whether to review the actions of lower courts. Prudential, 148 S.W.3d at 136. Mandamus review of “incidental, interlocutory rulings” can unduly interfere with the trial courts, distract the appellate court to issues unimportant to the ultimate disposition of the case, and add unproductively to litigation expense. Id. However, reviewing significant rulings in exceptional cases can preserve important substantive and procedural rights, provide helpful guidance on the law that may otherwise prove elusive on appeal, and, importantly for this case, “spare private parties and the public the time and money utterly wasted enduring eventual reversal of improperly conducted proceedings.” Id. Conducting a damages trial under these circumstances risks wasting substantial judicial and public resources because any resulting judgment is likely to be undone when the default judgment is ultimately set aside. See McAllen Med. Ctr., 275 S.W.3d at 466 (“[I]nsisting on a wasted trial simply so that it can be reversed and tried all over again creates the appearance not that the courts are doing justice, but that they don't know what they are doing. Sitting on our hands while unnecessary costs mount up contributes to public complaints that the civil justice system is expensive and outmoded.”).

Indeed, the Supreme Court has granted mandamus relief recently in a similar situation as the one presented here. See Lakeside Resort, 689 S.W.3d at 916. Lakeside Resort had not been properly served and therefore did not answer the petition filed against them resulting in a default judgment on liability. Id. at 919–20. The default judgment precluded Lakeside Resort's ability to defend itself on the issue of liability. Id. at 921 (discussing why default judgments are disfavored and noting that “an absent defendant often has not actually chosen to abandon its right to defend itself.”). The trial court erroneously believed it had issued a final, appealable order granting the default judgment, and denied Lakeside Resort's motion to set aside the default judgment and for new trial. Id. at 920. The Supreme Court held the trial court's determination that its plenary power had expired and its order execution of the judgment was an abuse of discretion and ultimately granted relief. Id. at 925.

The Texas Supreme Court's recognition of a lack of adequate appellate remedy is not new.¹ In TransAmerican National Gas Corporation v. Powell, the Supreme Court granted mandamus relief where the trial court abused its discretion by striking TransAmerican's pleadings as a discovery sanction. 811 S.W.2d 913 (Tex. 1991). There was no adequate appellate remedy where TransAmerican was forced to go to trial on damages as the sanctions imposed were an abuse of discretion and the appeal would be not whether TransAmerican had been liable, but whether the trial court had abused its discretion in imposing sanctions. Id. at 920 (“[W]hen a trial court imposes discovery sanctions which have the effect of precluding a decision on the merits of a party's claims—such as by striking pleadings, dismissing an action, or rendering default judgment—a party's remedy by eventual appeal is inadequate, unless the sanctions are imposed simultaneously with the rendition of a final, appealable judgment.”).

Under these circumstances, appellate review following final judgment does not provide an adequate remedy. If the denial of the motion for new trial is ultimately determined to have been erroneous, the parties and the courts will have devoted substantial resources to proceedings conducted without affording USAA the opportunity to litigate a defense it was entitled to assert under Craddock. As Prudential and McAllen recognize, the adequacy of remedy analysis includes consideration of the public and private costs associated with proceedings that may ultimately prove unnecessary. See Prudential, 148 S.W.3d at 136-37; McAllen Med. Ctr., 275 S.W.3d at 464-68.

CONCLUSION

Reasonable minds may disagree about whether extraordinary relief is warranted here. But Craddock reflects Texas's enduring preference for resolving disputes on their merits rather than by default. Because USAA satisfied all three Craddock elements and presented a defense that could defeat liability altogether, the trial court abused its discretion in refusing to grant a new trial. The interests of justice are best served by allowing the defense to be heard.

Because the trial court abused its discretion and because appeal is not an adequate remedy under Prudential and McAllen, I would conditionally grant mandamus relief. Accordingly, I dissent.

FOOTNOTES

1.   Indeed, in McAllen Med. Ctr., the Supreme Court acknowledged that in cases dating back to the 1800's, jurisprudence has recognized the availability of mandamus when it affords a “more complete and effectual remedy” when “other modes of redress are inadequate or tedious.” 275 S.W.3d 458, 467 (Tex. 2008) (citing Bradley v. McCrabb, Dallam 504, 507 (Tex.1843)).

Dissenting Opinion by: Velia J. Meza, Justice