Lawyer finds Texas SC’s insurance opinion ‘troubling’

With every major storm that pounds Texas, hundreds to thousands of lawsuits against insurance providers follow in the wake.

And now, in a decision that troubles at least one insurance litigator, the Texas Supreme Court has laid the groundwork to limit the scope of the discovery that transpires in those insurance claim lawsuits, recently finding that a plaintiff wanting to force an insurance carrier to show how adjusters handled similar policy claims amounted to an impermissible “fishing expedition.”

The high court’s opinion, issued Oct. 31 in the case of In re National Lloyds Insurance, stems from a lawsuit brought by Mary Erving against National Lloyds.

On Tuesday, New York attorney Matthew Morris, a litigator for Proskauer, posted a column on the law firm’s website calling the Texas Supreme Court’s opinion “troubling.”

“National Lloyd’s is notable because many high courts give lower courts a wide berth in discovery issues, especially when the lower courts have already substantially pared down the discovery demands in dispute,” writes Morris.

“Particularly troubling is the fact that unfair claims handling by insurers is often apparent only when those practices are examined through a wider lens that captures how similarly situated policyholders are treated differently—but that perspective isn’t available without access to an insurer’s claims files.

“Counsel seeking to prove an insurer’s bad faith in handling claims, at least in Texas, will have to keep in mind that the threshold to obtain the kind of comparative evidence Erving sought is now apparently fairly high.”

Morris is an associate in Proskauer’s litigation department and works on a variety of disputes concerning insurance coverage.

Case background

In September 2011 and June 2012, storms swept through Cedar Hill, a city south of Dallas, damaging Erving’s home. For both storms, she filed policy claims with National Lloyds and the insurers sent adjusters to inspect the residence. Following the inspections, National Lloyds paid the claims.

Believing National Lloyds had undervalued her claims, Erving sued, alleging breach of contract and good faith and fair dealing, fraud and violations of the Texas Deceptive Trade Practices Act, court records show.

During discovery, Erving sought 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 and Ideal Adjusting, the two adjusting firms that handled Erving’s claims, the high court’s opinion states.

National Lloyds objected, arguing the discovery requests were overbroad and unduly burdensome.

However, the trial court presiding over the suit ordered National Lloyds to produce claims files of properties in the same city and from the same storms, and an appeals court eventually denied the company’s petition for mandamus.

The rulings drove National Lloyds to turn to the Supreme Court of Texas, which found “scouring claim files in hopes of finding similarly situated claimants whose claims were evaluated differently from Erving’s is at best an ‘impermissible fishing expedition.’”

“Erving argues that the trial court did not abuse its discretion because its discovery order is narrowly tailored,” the opinion states.

“But such limits in and of themselves do not render the underlying information discoverable. Because the information Erving seeks is not reasonably calculated to lead to the discovery of admissible evidence, the trial court’s order compelling discovery of such information is necessarily overbroad.”

Attorneys Maitreya Tomlinson and Todd Smith of the Smith Law Group and attorney Joe Williams represent Erving.

National Lloyds is represented in part by Andrews Kurth LLP attorneys Martha Hopkins, Ronald Casey Low and Scott Brister.

Texas Supreme Court case No. 13-0761