No Discovery of Claim of Bad Faith Until UIM Claim Resolved
Rosalita Calsoncin’s made contractual and extracontractual claims related to the underinsured motorist (UIM) provisions in an insurance policy issued by Germania Select Insurance Company. Germania requested that the Court of Appeals instruct the Honorable Brooks Hagler, presiding judge of the 259th District Court, to vacate portions of an order entered on July 14, 2020, in Cause No. 2019-014. In that order, Judge Hagler lifted the abatement of litigation of Calsoncin’s extracontractual claims. The Court of Appeals, in In Re Germania Select Insurance Company, No. 11-20-00176-CV, State of Texas in the Eleventh Court of Appeals (September 25, 2020) ruled on the motion for writ of mandate.
Calsoncin was a passenger in a car that was in a collision with a vehicle driven by Ginger Bartee. Calsoncin was an insured under a policy issued by Germania that provided UIM coverage. After Calsoncin settled her claims against Bartee, she sued Germania to recover UIM benefits under the policy.
Calsoncin alleged that she was injured in the accident, that Bartee caused the accident, and that Bartee was underinsured. Calsoncin requested a declaratory judgment that she was entitled to recover under the UIM policy the damages that resulted from the accident (the UIM claim). Calsoncin also asserted that Germania had been unjustly enriched and had violated the Texas Deceptive Trade Practices Act, the Texas Insurance Code, and the duty of good faith and fair dealing (the extracontractual claims).
Germania filed a motion to sever the extracontractual claims from the UIM claim and to abate the extracontractual claims. Judge Hagler first signed an agreed order that severed the extracontractual claims and abated the extracontractual claims pending the resolution of the UIM claim. Judge Hagler later heard Calsoncin’s motion on July 9, 2020. Judge Hagler granted Calsoncin’s motion to lift the abatement of the extracontractual claims and stated: “I want the record to reflect the reason I’m ruling the way I am is driven by the current crisis of the pandemic.” Judge Hagler also ruled that Calsoncin could take the deposition of Germania’s claims adjuster without “any restrictions other than what you will all have provided to you under the rules of procedure and forms of objection.”
After Calsoncin filed a notice to take the deposition of Germania’s claims adjuster, Germania sought mandamus relief.
Mandamus is an extraordinary remedy and is warranted only when the trial court clearly abused its discretion and there is no adequate remedy by appeal. A trial court abuses its discretion when its ruling is arbitrary and unreasonable or is made without regard for guiding legal principles or supporting evidence. Ordinarily, the scope of discovery is within the discretion of the trial court. However, discovery requests must be reasonably tailored to include only matters relevant to the case. A trial court abuses its discretion by ordering discovery that exceeds that permitted by the rules of procedure.
A motorist is underinsured if his or her liability insurance is insufficient to pay for the injured party’s actual damages. UIM coverage provides payment to the insured for all amounts that the insured is “legally entitled to recover” as damages from the UIM. The recovery is reduced by the amount recovered or recoverable from the insurer of the UIM’s vehicle and cannot exceed the insured’s policy limits.
The UIM insurer is under no contractual duty to pay benefits until the insured obtains a judgment establishing the liability and underinsured status of the other motorist. To recover benefits under a UIM policy, the insured must show:
- that the insured has UIM coverage,
- that the UIM negligently caused the accident that resulted in the covered damages,
- the amount of the insured’s damages, and
- that the UIM’s insurance coverage is deficient.
Because UIM coverage hinges on the liability under applicable tort law of the alleged UIM, the scope of discovery in a UIM case differs from other insurance disputes in which the terms of the policy alone dictate the outcome. Specifically, the insurer should not be required to put forth the effort and expense of conducting discovery, preparing for a trial, and conducting voir dire on bad faith claims that could be rendered moot by the portion of the trial relating to UIM benefits.
In this case, Calsoncin’s UIM claim has been severed from her extracontractual claims, there has been no determination of liability on the UIM claim, and the extracontractual claims could be rendered moot by the underlying liability determination in the UIM case.
Therefore, at this time, any discovery into the extracontractual claims is not relevant to the UIM claim. The Court of Appeals recognized the challenges that the pandemic has presented to the courts and to litigants. However, even with those challenges, Judge Hagler did not have the discretion to allow Calsoncin to conduct discovery that was relevant only to claims that are not ripe and may never exist.
When a trial court orders discovery that is not relevant, the resisting party has no adequate remedy by appeal. As a result the Court of Appeals concluded that Judge Hagler abused his discretion when he lifted the abatement and allowed litigation to proceed on Calsoncin’s extracontractual claims and that Germania does not have an adequate remedy by appeal and the Court of Appeals directed the Honorable Brooks Hagler to vacate that portion of the July 14, 2020 order in which he lifted the abatement of litigation on Calsoncin’s extracontractual claims.
Mandate is a remedy that is almost never granted. It was granted in this case because the parties had not resolved the issue of whether Calsoncin was entitled to UIM benefits. Since she could lose that case, which the insurer challenged, allowing discovery for the bad faith refusal to pay was clearly premature and if there was no right to UIM benefits the bad faith portion of the suit would be moot. The discovery demanded, and allowed by Judge Hagler, would punish Germania to help him deal with time needed to deal with criminal cases and was improper in the civil action.
© 2020 – Barry Zalma
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and email@example.com.
Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.
Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts