Texas courts provide important roadmap regarding discovery in UM/UIM cases.

May 22nd, 2022 By David L. Plaut

Two recent decisions about discovery in the uninsured/underinsured motorist (“UM/UIM”) context are important to note.  The Texas Supreme Court’s decision in In re USAA General Indemnity Co., 624 S.W.3d 782 (Tex. 2021) severely limits the availability and scope of corporate representative depositions in UM/UIM cases.  Moreover, the brand-new decision of the Dallas Court of Appeals in In re Home State County Mut. Ins. Co. d/b/a Safeco and Najeeba Aneesa Sabour (Tex. App.–Dallas May 10, 2022, orig. proceed.) applies USAA and likewise forecloses corporate representative depositions in UM/UIM cases when the “car wreck” phase of trial is proceeding and the carrier has stipulated to the applicable insurance policy and amount of UM/UIM limits. Both cases addressed the question of appropriate topics for corporate representative depositions and both preclude any examination of the carrier’s “claims handling” and investigation.

Overview of the Supreme Court’s USAA Decision

In the USAA case, as often happens, the trial court denied the carrier’s motion to quash a corporate representative deposition and subpoena duces tecum finding nothing wrong with allowing standard discovery for cases of this sort.  The Corpus Christi Court of Appeals agreed and denied mandamus relief.  On appeal to the Texas Supreme Court, Justice Lehrmann addressed the discovery and topics requested for the proposed corporate representative deposition and foreclosed inquiry into much of what Plaintiff’s counsel intended to explore.

While questions about the carrier’s legal theories and defenses were deemed appropriate topics, questions about the carrier’s “claims handling process” were impermissible.  The Court emphasized that the only issues in the “car wreck” phase of a UM/UIM trial are the liability of the tortfeasor and the amount of damages.  Id. at 794. See also Brainard v. Trinity Universal Ins. Co., 216 S.W.3d 809, 818 (Tex. 2006) (construing the phrase “legally entitled to recover” to require a judgment establishing the liability of the tortfeasor and damages); Henson v. Southern Farm Bureau Cas. Ins. Co., 17 S.W.3d 652, 653-654 (Tex. 2000) (holding prejudgment interest could not be recovered because there was no coverage until after a judgment establishing the underinsured motorist’s liability); Weber v. Progressive County Mut. Ins. Co., 2018 WL 564001, at *3 (Tex. App.–Dallas 2018, pet. denied) (concluding trial court did not abuse its discretion when it sustained special exceptions that Plaintiff’s claim for breach of contract was premature because her petition did not assert she had obtained a judgment against the underinsured driver; thus, she did not establish the existence of a duty or obligation the insurer failed to meet); In re Liberty Cty. Mut. Ins. Co., 557 S.W.3d 851, 856 (Tex. App.–Houston [14th Dist.] 2018, orig. proceeding) (holding “[UIM] insurer’s contractual obligation to pay benefits does not arise until liability and damages are determined”).

In light of the foregoing, In re USAA specifically holds the policyholder cannot seek discovery concerning the reasons for a carrier’s denial of the claim or information about the carrier’s “investigation process.”  The policyholder in USAA sought to depose the carrier’s corporate representative on nineteen areas of examination and also sought “any and all reports” the carrier prepared regarding the UM/UIM claim.  Id. at 786.  In connection with its motion to quash, however, USAA had stipulated that it did not dispute that:

  • a policy of insurance with USAA was in effect on the date of the accident;
  • the identity of the Named Insured under the policy;
  • that the vehicle involved in the accident was a “scheduled vehicle” under the policy; and
  • the policy limits for UM/UIM coverage under the policy.

Id. at 787.

Not surprisingly, the Texas Supreme Court held the policyholder could not depose the carrier’s corporate representative about “all aspects of the UIM policy” as USAA had already conceded the policy provided coverage – subject to the UM/UIM policy limits – assuming the Brainard requirements were met in the “car wreck” portion of the case.  Moreover, because the carrier’s entitlement to offsets “comes into play only after a jury determines” the tortfeasor’s liability and the amount of amount of damages, “inquiry into offsets” was premature.  See id. at 793.

In re USAA, however, goes even further than barring questions about the UM/UIM policy when the foregoing stipulations have been offered.  The Court also held that inquiry into the carrier’s “reasons for denying [the policyholder’s] claim” are simply improper and subject to an instruction by counsel not to answer.”  Id. at 794.  However, if the amount of the policyholder’s damages is disputed – as is usually the case in UM/UIM cases – the topic of damages is not “wholly irrelevant.”  Id.  If the carrier has non-privileged information on the “existence and amount of damages that information is discoverable.”  Id.  Justice Lehrmann specifically recognized that the policyholder cannot discover attorney-client work product privileged assessment of valuation based on attorney communications.  Id.

The Sabour Decision Reiterates In re USAA

In the Sabour case, Safeco was the UM/UIM carrier and – like USAA –stipulated to the existence of a valid insurance policy, the identity of the Named Insured, the vehicle being a “scheduled vehicle,” and that policy provided UIM coverage up to a certain amount.  Id. at *2.   Under these circumstances, the Dallas Court of Appeals found the carrier’s production of “1208 pages of responsive documents and things in this matter, including its entire unprivileged claim file, which included Plaintiff’s policy, correspondence between the parties, the police report stemming from the accident and witness statements regarding the accident” was not an unhelpful “document dump.”  Id. at *4.  The Court therefore held that the proposed corporate representative deposition “would provide little if any additional benefit in relation to the cost.”  Id. at *10.

USAA and Sabour Foreclose UM/UIM Corporate Representative Depositions Where the Carrier Stipulates to Coverage and Defends on the Ground that Plaintiff Is Simply “Asking for Too Much.”

However keenly some trial courts may dislike these decision, In re USAA and Sabour preclude inquiry into carrier thought processes when UM/UIM valuation is based on attorney analysis and the advice of counsel.  Very often the carrier’s defense in a UM/UIM case is something along the lines of “the Plaintiff is asking for too much and they have the burden of proof.”  If that’s the defense at trial based on counsel’s recommendations, then USAA and Sabour foreclose all inquiry into carrier thought processes.  The overwhelming number of discovery fights in UM/UIM cases may be fairly characterized as involving improper inquiry into “claims handling” and carrier investigation rather than “valuation” as claim value is usually determined by defense counsel.  This is certainly the case when Plaintiff’s counsel asserts “list price” medical damages in connection with damages claims rather than the negotiated rates that would apply had the medical bills been submitted to a health insurer, a practice the Texas Supreme Court criticized in its recent Auto Crushers case.  See In re K&L Auto Crushers, LLC, 627 S.W.3d, 239 (Tex. 2021).

Despite the clarity of these decisions, we will likely see continued litigation exploring the brightness of the line between impermissible questions about “claims handling” and questions about carrier “valuation.”  However, the USAA and Sabour decisions appear to indicate the appropriate response to most questions about carrier valuation is the time-honored “None ya.”