Bad Faith Insurance Claims

An insured in Grand Prairie, Arlington, Fort Worth, Dallas, or anywhere else in North Texas might wonder how an under-insured motorist claim works. That is a long answer, but here is how some of it worked in this situation.
The Dallas Court of Appeals issued an opinion on August 12, 2011, in the case styled In Re State Auto Property & Casualty Insurance Company and Hotchkiss Family Holdings, Inc D/B/A Hotchkiss Insurance Agency. This is a mandamus proceeding complaining of two orders of the trial court. Here is some background information.
Graeber and Kori Anderson were involved in an auto accident in which liability was disputed. After Graeber settled his lawsuit against Kori Anderson within Anderson’s policy limits, he sued State Auto, two of its adjusters, and his local insurance agent, Hotchkiss, seeking underinsured (UIM) benefits and extra-contractual damages for bad faith and other claims. State Auto asked the court to sever and abate the UIM claims from the extra-contractual claims. This was denied, but separate trials with separate juries was ordered, as well as a stay of discovery and proceedings on the extra-contractual claims until the disposition of the UIM claim.
Thereafter, Graeber was served with a notice of deposition. His attorneys attempted to stop this, claiming he had already been deposed in the underlying lawsuit and it was duplicative to take his deposition again. State Auto claimed this was wrong, stating that they had not participated in the previous deposition. The Judge allowed State Auto to proceed with the deposition but signed an order to depose Graeber only as to (1) any diagnosis or treatment he “has had since he gave his prior deposition” in the Anderson lawsuit, (2) “any additional damages he claims to have incurred since the prior deposition, and (3) anything that has happened since the date of the prior deposition.” The trial court further ordered that State Auto “shall pay $100 for any questions asked of Graeber that were covered in his prior deposition.
State Auto’s writ of mandamus complained of these two rulings.
In discussing this case, this appeals court pointed out that according to the Texas Supreme Court, Graeber was entitled to settle, rather than proceed to judgment against Anderson, but neither that settlement nor any admission of liability from Anderson established UIM coverage. A jury could find that Anderson was not at fault or award damages that do not exceed Anderson’s liability insurance.
While State Auto consented to Graeber’s settlement with Anderson, such consent did not constitute a judgment on the merits of that action. Further, Graeber had presented no evidence or case law to show State Auto was bound, or to what extent it may be bound, to what occurred in the prior lawsuit. The consent to settlement was to protect the insurer’s subrogation rights against the uninsured motorist or any other person legally responsible for Graeber’s injuries.
This court went on to say, it was a clear abuse of the trial court’s discretion to order that Graeber could be questioned only about (1) any diagnosis or treatment he “has had since he gave his prior deposition” in the Anderson lawsuit, (2) “any additional damages he claims to have incurred since the prior deposition; and (3) anything that has happened since the date of the prior deposition.” Additionally, Graeber offered no authority allowing the trial court to order an advance sanction of $100 against State Auto for any question asked in violation of the trial court’s order. This court pointed out, “… sanctions are available for actual abuse of the discovery process after notice and a hearing. The award of preemptive sanctions here was an abuse of the trial court’s discretion.”
The trial court’s order here not only prevents discovery that on its face goes to the heart of Graeber’s UIM case, but awards sanctions for any attempt to develop a record supporting the need for such discovery. This appeals court ordered the trial court to vacate its order.