Insurance Lawsuits – What Can You Learn?

Insurance lawyers can listen to a client’s perspective on what happened in a claim but often times will not understand the extent of wrong doings by an insurer until a lawsuit has been filed and the discovery process completed.  In this regard, exactly what is discoverable in a lawsuit?

The areas and information that can be discovered in a lawsuit will vary with each situation.  The Beaumont Court of Appeals issued an opinion in 2021, that touches on this issue of “what is discoverable.”  The opinion is styled, In Re Liberty Insurance Corporation.

In the lawsuit, the insureds, Michael and John Young, sued their insurer, Liberty Insurance Corporation, for various violations of the Texas Insurance Code arising out of a pipe burst that caused damage to their home.

The Youngs sought discovery of “an unredacted copy of its claim handling guidelines.”  Young complained that Liberty redacted claims handling instructions for “1) Photo claim requirements of an investigation; 2) Guidelines on supplements; 3) Flooring and debris removal; 4) Painting and Sealing; 5) Repair v. replace; 6) Matching; 7) Depreciation; 8) Overhead and profit; 9) Cleaning and remediation; 10) Channeling/Assignment of claims; 11) Receiving claim; 12) Initial contact rules; 13) Gathering details of claim; 14) Determining coverage; 15) Denial letters; 16) Field Reinspections; 17) Closing claims; 18) Discussing settlement with customers; [and] 19) First contact rules.” Young attached Liberty’s responses to Young’s requests for production, which included requests for (1) “all documents used to instruct, advise, guide, inform, educate, or assist provided
to any person handling the claim made the basis of this lawsuit that related to the
adjustment of this type of claim, e.g. residential burst pipe property damages from
August 1, 2015 – the time the lawsuit was filed[]” and (2) “Your written procedures or policies (including document(s) maintained in electronic form) that were in effect from August 24, 2017– the date the lawsuit was filed that pertain to the handling of complaints made by policyholders in Texas[.]” Liberty objected that each request was “overbroad[.]”

Liberty objected to the requests and a hearing was held.  Young argued the entire document should be unredacted because Liberty redacted sections, such as denial policies and a section on determining coverage, that were important in a full claim denial policy case.  Liberty replied that the case was about a shower pan drain line leak and guidelines concerning other types of claims were not relevant.  The Judge ruled for Liberty to provide the requests.  This appeal followed and this appeals Court reversed that ruling.

The Texas Rules of Civil Procedure allow a discovery request that has a reasonable expectation of obtaining information that will aid in resolution of the dispute.  However, discovery requests must not be overbroad.  A central consideration in determining overbreadth is whether the request could have been more narrowly tailored to avoid including tenuous information and still obtain the necessary, pertinent information.

Pursuant to Texas Rule of Civil Procedure 192.3(a), “A party may obtain discovery regarding any matter that is not privileged and is relevant to the subject matter of the pending action, whether it relates to the claim or defense of the party seeking discovery or the claim or defense of any other party.”  But overbroad requests for irrelevant information are improper whether they are burdensome or not. An overbroad discovery request is one that seeks irrelevant information that is not properly tailored to the dispute at hand as to time, place, and subject matter.  When a party propounds overly broad requests, the trial court must either sustain the objection or act to narrowly tailor the requests.

By ordering an unredacted complete production of Liberty’s claims handling
guidelines, the trial court necessarily ordered production of information for types of claims other than water damage to single-family residential dwellings.  Young’s
requested production of “all” of Liberty’s policies pertaining to handling “complaints” made by any Texas policyholders regardless of the type of claim is
overly broad and exceeds the scope of relevant information. A discovery order that compels production beyond the rules of procedure is an abuse of discretion for which mandamus is the proper remedy.

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