TEXAS SUPREME COURT HOLDS TRIAL COURT ABUSED DISCRETION BY COMPELLING INSURANCE COMPANY TO PRODUCE OTHER INSURED’S CLAIM FILES

On Halloween, the Texas Supreme Court issued a scary opinion for plaintiff’s lawyers seeking to employ overly broad discovery tactics, by granting an insurer’s petition for writ of mandamus to overturn a discovery order compelling the production the unrelated claim files of other insureds.  In In Re National Lloyds Insurance Company No. 13-0761, Plaintiff, a homeowner, filed a lawsuit against her homeowner’s insurer for breach of contract, breach of duty of good faith and fair dealing, fraud, conspiracy to commit fraud, and DTPA and Insurance Code violations arising from an allegation that the insurer undervalued the insured’s insurance claim for damages that allegedly occurred from two separate storms in the Dallas area.

During discovery, the insured 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 One Adjusting, LLC, and Ideal Adjusting, Inc., the two adjusting firms that handled the insured’s claims.  The trial court ordered production of the files for claims handled by Team One and Ideal Adjusting.  The trial court also limited the order to claims related to properties in Cedar Hill and to the storms that caused the damage to the insured’s residence.

The insured argued that the claim files of other insureds were necessary so she could 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.  The Texas Supreme Court stated, “we fail to see how National Lloyds’ overpayment, underpayment, or proper payment of the claims of unrelated third parties is probative of its conduct with respect to Plaintiff’s undervaluation claims at issue in this case.”  The Court further stated, “scouring claim files in the hopes of finding similarly situated claimants whose claims were evaluated differently from Erving’s [Plaintiff] is at best an impermissible fishing expedition.”  The Court agreed with the Insurer that the trial court’s order compelling discovery of such information is necessarily overbroad.