Bad Faith Discovery of Claims and Underwriting Files is Generally Irrelevant in a Coverage Action

Florida courts have consistently ruled that bad-faith discovery of an insurer’s business policies and claims handling procedures is premature until the insurer’s obligation to provide coverage has been established.  Florida’s Third DCA reiterated this rule in XL Specialty Ins. Co. v. Skystream, Inc., 988 So.2d 96, 98 (Fla. 3d DCA 2008).

In Skystream, the insurer initiated a declaratory judgment action to determine that it owed no duty to defend and indemnify against claims brought by the estates of passengers killed in an airplane crash. After the insurer’s duty to defend was determined on cross-motions for summary judgment, the insureds moved to amend to assert bad faith and also propounded bad faith discovery. In response, the insurer moved to dismiss and opposed the discovery with a motion for protective order, which the lower court denied. On certiorari review, the court held that the bad faith discovery was premature, even though there was a determination of coverage, because there still was not a ruling regarding damages. Id. at 98 (citing Imhof v. Nationwide Mut. Ins. Co., 643 So.2d 617, 619 (Fla. 1994)).

Insurer Was Entitled to Electronic Discovery of Insured’s Entire Computer System

Wynmoor Community Council, Inc., et al. v. QBE Ins. Corp., (S.D. Fla. 2012) – Court granted insurer’s discovery of electronically stored information (“ESI”) by a full mirror image of insured’s computer system. The court reasoned that this extreme request was warranted by plaintiffs’ suspicious document shredding and unwillingness or inability to comply with defendant’s requests for production.

Merly Nuñez v. Geico Gen. Ins. Co., (11th Cir. 2012) – Due to a split among Florida courts, the Eleventh Circuit certified the following question to the Florida supreme court: May an insurer require an insured to attend an examination under oath as a condition precedent to recovery of personal injury protection benefits?

 

Discovery Aimed at Producing Evidence of Physician’s Bias in Insurance Case Was Permissible

Steinger, Iscoe & Greene, P.A. & Washington v. GEICO Gen. Ins. Co. (Fla. 4th DCA 2012)

In this case, a law firm and its client petitioned the Fourth District for a writ of certiorari to quash a trial court order that compelled the firm to produce discovery pertaining to the firm’s relationship with treating physicians. The underlying case involved a claim against GEICO for uninsured motorist coverage and the order at issue required the claimant’s firm to produce (1) all records of payment by the firm to the four treating physicians who would be rendering expert opinions; (2) all “Letters of Protection” to those medical providers; and (3) all deposition and trial transcripts of those individuals or entities in the firm’s possession, provided, however, that the firm was able to redact the names of clients in cases that settled or where no lawsuit was filed.

The Fourth District began by noting that because the evidence code allows a party to attack a witness’s credibility based on bias, discovery aimed at producing evidence of a treating physician’s bias is permissible. It then acknowledged that Rule 1.280(b)(5)(A)(iii) limits financial bias discovery from retained experts, but emphasized that those limitations “cannot be used as a shield to prevent discovery of relevant information from a material witness—such as a treating physician.”

The court then balanced the need for the discovery against the burden placed upon the witnesses, concluding that:

“where there is a preliminary showing that the plaintiff was referred to the doctor by the lawyer (whether directly or through a third party) or vice versa, the defendant is entitled to discover information regarding the extent of the relationship between the law firm and the doctor. … Here, the law firm is not a party to the litigation and the record currently before us does not establish that the doctor in this situation has a financially beneficial relationship with the law firm. If there is such a relationship, past or present, the jury is entitled to know the extent of the financial connections between the doctor and the law firm. The existence of referral agreements is clearly a permissible ground for impeachment of a doctor.”

Because the Fourth District was unable to determine whether GEICO established the existence of a referral relationship between the health care providers and the law firm, it granted the petition and remanded the case:

“At the very least, the health care providers must provide financial bias discovery like that permitted by rule 1.280(b)(5)(A)(iii) as well as any history of referrals between the health care providers and the law firm. Beyond that, if GEICO can establish that the law firm or health care providers referred plaintiff to the other, more extensive financial bias discovery from both of them may be appropriate. Accordingly, the trial court should not have required the law firm to produce the discovery at issue, as it is premature at this point.”

Discovery of Insurer’s Claims File Was Improper and Would Result in Irreparable Harm

State Farm Fla. Ins. Co. v. Meir Aloni (Fla. 4th DCA 2012)

Four years after Hurricane Wilma ran its course, an insured filed a claim to its property insurer, alleging damages sustained four years prior. Although the insurer sent a reservation of rights letter rather than disclaiming coverage outright, a coverage dispute nevertheless ensued and the insured sent a request for production. Among the items requested was the insurer’s “complete claims file.” The insured maintained that the claims file materials would be relevant since it had to overcome the presumption that its belated notice of claim prejudiced the insurer.

The insurer argued that its file, and especially its activity log notes, were protected work product that contained personal thoughts, evaluations, mental impressions, and recommendations regarding the claim and the possibility of litigation. The trial court ordered discovery of the activity log notes, emails, and photographs contained in the claims file, and denied to rehear the matter. The court nevertheless granted a stay pending resolution of a petition to the fourth district.

Indeed, the fourth district accepted the petition and quashed the discovery order, explaining that the trial court departed from the essential requirements of the law in compelling the disclosure of the claims file materials since the insurer had demonstrated that such disclosure would result in irreparable harm and the insured had not proven its need and inability to obtain the substantial equivalent of the material without undue hardship.

Florida Law Prohibits Discovery on Insurer’s Claims File Until Coverage Litigation Has Been Concluded

State Farm Fla. Ins. Co. v. Desai (3d DCA 2013)

Roshani Desai filed a declaratory action to determine whether an alleged ‘plumbing loss’ was covered by her homeowners’ insurance policy. Prior to a determination as to coverage, the trial court entered a discovery order requiring the insurer to (1) produce claim manuals and/or guidelines relating to certain policy language and (2) provide a representative to testify as to the claims manual, guidelines, and insurance policy.

The insurer sought certiorari review of the discovery order, contending that Florida law prohibits insureds from obtaining discovery into an insurer’s claims file and claims handling materials until contract/coverage litigation has been concluded. The court agreed and thus granted the petition and quashed the discovery order.