Going For Bad Faith

Garner insurance lawyers who know insurance law, know that actually prevailing in a bad faith claim is difficult.  Getting the insurance company to pay what they should is not hard but getting the extra money for bad faith in Texas is difficult because of the way Texas Courts interpret the law.  An Appeals Court in Corpus Christi was making it easier in a 2016 opinion styled, In Re State Farm Lloyds.  This is a mandamus opinion dealing with discovery issues.

Angelica Gongora’s home was damaged in hailstorms.  She submitted a claim with State Farm.  The adjuster, Sylvia Garza, inspected Gongora’s home and asserted that the damage did not exceed the deductible and therefore did not pay the claim.  Gongora sued State Farm stating that Garza failed to include all of the damages in her estimate  and that Garza grossly undervalued the damages and failed to include adequate funds in the estimate to cover the costs of repairs.

Gongora subsequently invoked the appraisal clause in her homeowner’s policy and the appraisal came back at more than ten times the amount Garza had estimated.  State Farm paid the appraisal amount.  In the lawsuit Gongora propounded discovery to State Farm seeking production of:

All documents relating to work performance, claims patterns, claims problems, commendations, claims trends, claims recognitions, and/or concerns for any person who handled the claim made the basis of this lawsuit.

State Farm objected on the grounds of vagueness, irrelevance, overbreath, confidentiality, and privilege.

Gongora argued the request was proper to show whether or not State Farm’s claim handling procedures met industry standards, and was needed to prove the bad faith claim.  State Farm argued that since the appraisal amount had been paid that this request was no longer needed by Gongora.  The Judge Ordered State Farm to respond to the request and this mandamus action resulted.

The law on discovery as stated by the Texas Supreme Court is that while the scope of discovery is broad, permissible discovery requests “must show a reasonable expectation of obtaining information that will aid the dispute’s resolution.”  However, a request is not over broad merely because it may call for information of doubtful relevance.

State Farm contends that it being ordered to produce “re-inspection files” for insurance claims handled by Garza that are not at issue in this case, is an abuse of the Judge’s discretion.  Citing the Texas Supreme Court, State Farm contends that the “handling of other claims is generally irrelevant to a suit based on alleged undervaluing of an insurance claim.”

This Court disagreed with the argument by State Farm and distinguished the Texas Supreme Court case cited by State Farm from this case.

In the case cited by State Farm, the claimant sought the discovery of third party claim files in order to compare her insurance company’s evaluation of the damage to her home with its evaluation of the damage to other homes to support the contention that it undervalued her claims.  In this case, Gongora seeks Garza’s re-inspection files to determine whether State Farm was reasonably relying on Garza’s investigation and evaluation of Gongora’s claims where Gongora has alleged that State Farm failed to properly train Garza, Garza was incompetent, and State Farm knew that Garza was incompetent.  Garza is an employee of State Farm and a named defendant in this lawsuit.  The trial court had the opportunity to review a re-inspection file for Garza and hear argument about its contents and potential relevance to this case.  This appeals court thus ruled that the trial court acted within its discretion in determining that internal evaluations of Garza’s performance in the form of re-inspection files are relevant to the issues raised in this lawsuit.  Accordingly, State Farm was overruled.