Insurance Company Perspective On Insurance Lawsuits – Part 2

Knowing how insurance companies and their attorneys look at denied claims that result in a lawsuit is valuable to the attorney and his client who is suing the insurance company for the denied claim.  The State Bar of Texas is a source for some helpful information.  In particular the Insurance Law Section is a good source because it publishes articles in a publication called Journal of Insurance Law.

A recent article title “A Practical Guide To Defending A First-Party Property Insurance Claim” has good information contained within it.  Part of what it tells us is as follows:

If the plaintiff hasn’t sent a proper notice, an insurance company attorney may want to file a verified answer seeking an abatement until the demand is received.  Although proper notices do not have to be detailed, they do need to comply with all the elements set forth in Chapter 542 of the Texas Insurance Code.  Once the insurance company lawyer is armed with a specific number that the claimant will be seeking, he can better evaluate the potential range of damages the client is facing.

Because insurance carriers are among the least popular defendants, it is important to take advantage of any rules to ensure a favorable forum.  Cases that are originally filed in state court may be removed to federal court where there is diversity of citizenship and an amount in controversy of more than $75,000.  In Texas, where state trial court judges are selected through partisan elections, federal forums will often be more favorable.  Federal judges with lifetime appointments often have more time and staff available to consider dispositive motions.  In addition, jurors are drawn from a broader area, which generally results in more rural, conservative jurors.  For these reasons, attorneys for plaintiffs may include a Texas-resident adjuster as a defendant to defeat diversity.  It is important to consider whether the case can still be removed by arguing that the adjuster was improperly joined and her citizenship should be disregarded.  For cases governed by Section 542A of the Texas Insurance Code (which applies to weather-related claims), the carrier has the option to elect to assume the liability for acts of its individual adjusters.  Such an election may or may not mean that the individual adjuster is not properly named as a defendant.  This election must occur prior to suit being filed to render the lawsuit removable, so the window to elect liability is short.

Next comes the discovery process.  When assessing how to proceed with discovery in the case, one should ask what facts and motivations are driving the lawsuit.  Making this determination can, in itself, be difficult, and answering discovery in an insurance lawsuit presents its own unique challenges.

In addition to standard written discovery requests, the attorney may want to issue subpoenas to prior insurance carriers.  If there are issues related to repairs, the plaintiff ’s mortgage company (generally also an insured on most policies) may also be involved.  The attorney will want to subpoena those mortgage company files early in the process, as they can take time to be produced.

Regarding depositions, when the insurance lawyer deposes the plaintiff he is, of course, gathering facts related to their perspective on the claimed loss and damages.  For instance, he will want to find out their opinions about the actions and attitudes of the adjusters and representatives they may have dealt with over the course of the claim.  But perhaps most importantly, he wants to get a sense of how they will be seen by a jury.  One should do their best to have a good understanding of facts and details of the case.  It helps to have a broad outline with questions that come up in most insurance first-party claims, but it is also important to ask open-ended questions to open up new areas of inquiry.  Too often, litigators who are married to an overly detailed outline end up missing key follow-up questions that unearth critical facts.  In addition to deposing the plaintiff, he should consider deposing any public adjuster, contractors or people in charge of conducting repairs, and causation experts that have been designated.

The focus of the plaintiff ’s case will often derive from the client’s claims file.  It is discoverable.  The attorney should carefully review the file and discuss with the client—prior to production—to determine when the client reasonably anticipated litigation.  Many claims notes or claims journal entries may be protected from discovery pursuant to the work-product privilege if they were created prior to that date.  While the claims file generally contains all the information relevant to plaintiff ’s claims, most plaintiff ’s lawyers will seek discovery well beyond those documents.  The Texas Supreme Court and most Texas appellate courts have been supportive of attempts to limit overly broad discovery requests, stating that discovery is a tool to make the trial process more focused, not a weapon to make it more expensive.  The court must also consider the proportionality of the discovery with respect to the needs of the case, the amount in controversy, the parties’ access to relevant information, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit.  (This becomes especially relevant when requests for electronic discovery seek to review files in specific formats or ask for metadata.)  It may be appropriate to bring the concept of proportionality into discovery disputes.  For example, all of the carrier’s manuals and training materials may not be relevant to a garden-variety hail claim, but a more limited production of manuals in effect at the time of the claim and relevant to the claim may be appropriate.  Insurance carrier clients also often have concerns about dissemination of proprietary materials, given that plaintiff ’s attorneys may attempt to use the same materials in multiple cases against the carriers.  However, most courts are unsympathetic to those concerns, given that a confidentiality or protective order can arguably prevent dissemination.


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