On October 28, 2016, the Supreme Court of Texas squelched a trial court order granting a policyholders’ motion to compel that reached its bench by mandamus petition. The dispute arose out of multidistrict litigation (MDL) involving claims for property damage caused by the 2012 hail storms that tormented Hidalgo County, Texas. The policyholders sought compensatory and extra-contractual damages against several insurers for underpayment of insurance claims.
A pretrial court appointed by the MDL panel granted the policyholders’ motion to compel the insurer to produce all management reports and related communications containing historical data, damage reports, and payment of all claims arising out of the Hidalgo hail storms. This information would include damages and claims occurring in other counties and submitted by other plaintiffs. The court of appeals denied mandamus relief, refusing to find that the pretrial court abused its discretion.
The Supreme Court of Texas took the case and issued a conditional writ of mandamus, directing the pretrial court to vacate its order. First, the court rejected the policyholders’ argument that the information was probative and necessary to demonstrate their claims for bad faith and punitive damages by showing that the insurer made different payments on similar claims. Relying on its prior ruling in a similar MDL discovery dispute involving this same insurer, the court reiterated that the insurer’s “overpayment, underpayment, or proper payment of the claims of unrelated third parties [is not] probative of its conduct with respect to [these plaintiffs].” In addition, the court restated its position that “given the many variables associated with a particular claim . . . [s]couring claim files in hopes of finding similarly situated claimants whose claims were evaluated differently from there is at best an ‘impermissible fishing expedition.’”
While the majority of decisions regarding the scope of discovery in insurance claims litigation seems to favor policyholders, this decision suggests that courts are no longer willing to force insurers to ‘open their books’ to policyholders. The decision also illustrates that the standard policyholder argument that an insurer’s conduct in handling similar claims is relevant and discoverable in bad faith cases is not infallible. The reasoning used by the court provides solid support insurers can utilize in their quests to resist such broad discovery attacks on their files.
In re. Nat’l Lloyd’s Ins. Co.
, No. 15-0452, 2016 Tex. LEXIS 963 (Oct. 28, 2016).