A Dallas County Claim

The Texas Supreme Court issued an opinion in 2014, in a case styled, In Re National Lloyds Insurance Company.  For insurance lawyers, this case discusses relevant discovery issues.

This case involves allegations of underpaid insurance claims.  In September 2011 and June 2012, storms swept through Cedar Hill and caused damaged to Mary Erving’s home.  Erving filed a claim with Nation Lloyds and an adjuster was sent in response to each claim.  Following the inspections, National Lloyds paid the claims.

Concerned that National Lloyds had undervalued the claims, Erving sued for breach of contract and violations of the Texas Insurance Code and the Texas DTPA.  During the discovery process, Erving requested production of all claim files from the previous six years involving three individual adjusters.  She also requested all claim files from the past year for properties in Dallas and Tarrant Counties involving Team On Adjusting, LLC, and Ideal Adjusting, Inc., the two adjusting firms that handled Erving’s claim.  Erving sought via interrogatory the names, addresses, phone numbers, policy numbers, and claim numbers associated with the requested claim files.

National Lloyds objected to the requests as overly broad, unduly burdensome, and seeking information that was neither relevant nor calculated to lead to the discovery of admissible evidence.  The trial court ordered production of this information and documents and this mandamus action resulted.

Erving argued that the requested production should provide proof one way or another whether the adjusters used the same methods; spent an equivalent amount of time; and used the same pricing data when they determined Erving’s claims as compared to the claims of her fellow Cedar Hill policyholders.   She also contends that she needs the requested information to prove the adjusters did not properly inspect her house or value her claims.  She plans to prove that National Lloyds undervalued her claims by establishing a baseline and comparing her claims to that baseline.  Erving argues that significant differences would evidence bad faith and support other legal claims including fraud.

Essentially, Erving has proposed to compare National Lloyds’ evaluation of the damage to her home with National Lloyds’ evaluation of the damage to other homes to support her contention that her claims were undervalued.  This court says its fails to see how National Lloyds’ over-payment, underpayment, or proper payment of the claims of unrelated third parties is probative of its conduct with respect to Erving’s undervaluation claims at issue in this case.  This is especially so given the many variables associated with a particular claim, such as when the claim was filed,  the condition of the property at the time of filing, and the type and extent of damage inflicted by the covered event.  Scouring claim files in hope of finding similarly situated claimants whose claims were evaluated differently from Erving’s is at best an impermissible fishing expedition.  Without more, the information sought does not appear reasonably calculated to lead to the discovery of evidence that has a tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable, which is what is required under Texas Rule of Evidence 401 and Texas Rules of Civil Procedure 192.3(a).

This Texas Supreme Court overruled the trial judge.

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