Suing For Bad Faith

A Texas insurance law lawyers needs to know the proper way to sue on bad faith insurance cases. The proper way will differ depending on the type of case. When the claim arises out of an uninsured motorist claim it is different than other types of bad faith claims. The Houston Court of Appeals [1st Dist.] recently addressed this issue. The style of the case in In re Progressive County Mutual Insurance Company. This is a mandamus proceeding. Here is some of the relevant information from that case.
Following an automobile collision with an uninsured motorist’s vehicle, Guia sued her insurer, Progressive. While investigation into the claim was ongoing, Guia sued Progressive for breach of the uninsured motorist provisions in her policy, violations of Chapter 542 of the Texas Insurance Code, violations of the Deceptive Trade Practices-Consumer Protection Act, and breach of the duty of good faith and fair dealing. Guia served Progressive with a number of discovery requests, some of which would not be relevant to the breach-of-contract claim. Progressive filed a motion to sever the breach of contract claim for uninsured motorist coverage from the extra-contractual claims. The trial court judge signed an order abating the motion to sever, allowing discovery to move forward on all claims, and deferring the other issues covered by the motion until the pretrial hearing. Progressive filed a writ seeking to compel severance and abatement.
Texas Rule of Civil Procedure 41 governs severance of claims. The rule provides, in part, that “actions which have been improperly joined may be severed . . . on such terms as are just. Any claim against a party may be severed and proceeded with separately.” Id. The predominant reasons for a severance are to do justice, avoid prejudice, and promote convenience. Claims are properly severable if: (1) the controversy involves more than one cause of action; (2) the severed claim is one that would be the proper subject of a lawsuit if independently asserted; and (3) the severed claim is not so interwoven with the remaining action that it involves the same facts and issues. Only the third element is in dispute here.
The Texas Supreme Court has considered whether severance is required in a case involving breach of contract and extra-contractual claims against an insurer under a homeowner’s policy. In refusing to grant mandamus relief, the Court rejected “an inflexible rule that would deny the trial court all discretion and . . . require severance in every case involving bad-faith insurance claims, regardless of the likelihood of prejudice.” Ultimately, the Court concluded that the contractual and extra-contractual claims in that case were interwoven, with most evidence admissible on both claims, and that any prejudicial effect could be ameliorated by appropriate limiting instructions.
In this case, to prevail on her extra-contractual claims against Progressive, Guia must demonstrate that Progressive was contractually obligated to pay her uninsured motorist claim. To do this, Guia must first prove that she had uninsured motorist coverage, that the other driver negligently caused the accident and was uninsured, and the amount of her damages. It appears that the first issue is not in dispute. Therefore, Guia’s breach-of-contract claim will essentially involve the issues in a typical car wreck: the comparative negligence of Guia and the other driver and Guia’s damages. The bad faith claim here is more complicated. In her most recent petition, she alleges that Progressive breached their duty of good faith and fair dealing, violated the insurance code by failing to timely pay the claim, and further alleges Progressive’s conduct was knowing and intentional in violation of the Deceptive Trade Practices Act. In discovery, Guia seeks production of all documents related to lawsuits and claims against Progressive regarding the denial of uninsured/underinsured motorist claims for over ten years. Examples of these requests include:
Request 3. Produce all documents of any type as to claims asserted against Progressive during period from January 1, 2001, up to and including present day as a result of nonpayment of uninsured/underinsured motorist claims in Texas regardless of whether a lawsuit was filed and/or liability was denied.
Request 4. Produce all documents of any type as to all lawsuits filed against Progressive during period from January 1, 2001, up to and including present day, as a result of nonpayment of uninsured/underinsured motorist claims in Texas regardless of whether liability was denied.
Request 16. A copy of each and every policy, manual, protocol, instruction booklet or similar writing concerning procedures for the investigation and handling of uninsured/underinsured motorist claim which was in effect at the time Plaintiff made her claims in this case, and for the seven years preceding Progressive’s denial of Plaintiff’s claim.
These requested documents are irrelevant to the breach-of-contract claim, and the introduction of Progressive’s claims handling history in unrelated accidents at the trial of Guia’s breach-of-contract claim would be manifestly unjust.
This appeals court concluded that severance of the insured’s extra-contractual claims is required in this instance to avoid prejudice.