in Re Liberty Mutual Insurance Company ( 2017 )

Opinion issued October 5, 2017
In The
Court of Appeals
For The
First District of Texas
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NO. 01-17-00363-CV
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IN RE LIBERTY COUNTY MUTUAL INSURANCE COMPANY, Relator
Original Proceeding on Petition for Writ of Mandamus
OPINION
In this original proceeding, Liberty County Mutual Insurance Company seeks
relief from the trial court’s order compelling discovery related to severed and abated
claims arising from uninsured/underinsured motorist insurance coverage.1 We
conditionally grant relief.
1
The underlying case is Latrisha Morris v. Liberty County Mutual Insurance
Company, cause number 2016-28433, pending in the 165th District Court of Harris
County, Texas, the Honorable Ursula A. Hall presiding.
Background
The underlying suit arises out of a car accident that occurred in May 2014.
Latrisha Morris was injured when her vehicle was struck by a vehicle driven by
Amitbhali Momim.
Morris was insured under an automobile insurance policy underwritten by
Liberty Mutual. The insurance policy provides for uninsured/underinsured motorist
coverage. Under this provision, Liberty Mutual is obligated to “pay compensatory
damages which [Morris] is legally entitled to recover from the owner or operator of
an ‘uninsured motor vehicle’ because of ‘bodily injury:’ (1) sustained by an
‘insured;’ and (2) caused by an accident.”
In May 2016, Morris sued Momim and Liberty Mutual, asserting that
Momim’s negligence caused the accident and that Momim was not insured for it.
Against Liberty Mutual, Morris sought declaratory relief that Liberty was
contractually liable under the insurance policy, and asserted both contractual and
extra-contractual fraud and statutory claims against it based on its failure to pay
policy benefits.
A. Severance and Abatement of Extra-Contractual Claims
Liberty Mutual moved to sever the contractual and extra-contractual claims
against it into a separate action and to abate all activity related to these claims. See
Brainard v. Trinity Universal Ins. Co., 216 S.W.3d 809, 818 (Tex. 2007). The trial
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court granted the motion in part, and it severed and abated all pending causes of
action against Liberty Mutual except for Morris’s claims for breach of contract and
declaratory judgment. Thus, the extra-contractual claims were severed and abated
but the contractual claims continued to proceed in the underlying case.
B. Plaintiff’s Discovery Requests
Morris subsequently served Liberty Mutual with interrogatories, requests for
admissions, and requests for production. These requests sought discovery of Liberty
Mutual’s claims history, the basis for its alleged denial of Morris’s claim for
uninsured motorist coverage, prior similar lawsuits, and internal policies and
procedures concerning uninsured motorist investigations. Examples from the
interrogatories include requests that Liberty Mutual:
 “[S]tate the amount of all settlement offers made by [Liberty Mutual]
in an effort to resolve Plaintiff’s claim prior to suit being filed and the
method you used and how you calculated this amount and/or Plaintiff’s
damages.”
 “State the procedures relied upon and the criteria utilized by [Liberty
Mutual] in its investigation of Plaintiff’s claim to evaluate and place a
dollar value on her claim.”
 “Identify every person who participated to any degree in the
investigation and adjusting of the claims, defenses, or issues involved
in this case, describe the involvement of each person identified, list their
qualifications, state the dates of each investigation, and whether it was
reduced to writing and describe in detail the investigation and
information gathering process that they utilized to assist you in your
decision to deny or adjust payment of Plaintiff’s claim.”
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 “Identify every person who has complained, within the past five (5)
years in Texas, about any claim adjustment and/or denial based on any
of the reasons that you contend support your adjustment and/or denial
of Plaintiffs claim.”
 Provide the following information for the last five years: (a) “the total
number of written claims filed, including the original amount filed for
by the insured and the classification by line of insurance of each
individual written claim;” (b) “the total number of written claims
denied,” (c) “the total number of written claims settled, including the
original amount filed for by the insured, the settled amount, and the
classification of line of insurance of each individual settled claim;” (d)
“the total number of written claims for which lawsuits were instituted
against [Liberty Mutual], including the original amount filed for by the
insured, the amount of final adjudication, the reason for the lawsuit, and
the classification by line of insurance of each individual written claim;”
and (e) “the total number of complaints, their classification by line of
insurance, the nature of each complaint, the disposition of these
complaints, and the time it took to process each complaint.”
Liberty Mutual filed objections and responses to the requests, contending that
the requested discovery was irrelevant to any current cause of action because a cause
of action for uninsured motorist benefits does not arise until the underlying tort suit
is resolved:
To the extent Plaintiff seeks to recover [uninsured motorist] benefits,
there has been no legal determination that Defendant is under any
contractual duty to pay benefits, and there presently exists no legally
cognizable basis for Plaintiff to request information concerning any
cause of action for Breach of Contract, Common Law Bad Faith, and/or
violations of the Texas Insurance Code or Texas Deceptive Trade
Practices Act, Breach of Fiduciary Duty, Fraud or recovery of attorney's
fees because they are immaterial and irrelevant to the underlying tort
lawsuit and thus not reasonably calculated to lead to the discovery of
admissible evidence as to any viable claims or causes of action against
this Defendant. See Brainard v. Trinity Universal Insurance Company,
216 S.W.3d 809, 818 (Tex. 2007).
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Liberty Mutual’s claims adjuster, Marianne Cagle, reviewed and verified the
discovery responses. Morris requested Cagle’s deposition. Consistent with its
objections to the discovery requests, Liberty Mutual responded that there was no
basis to depose Cagle until the issues of liability, damages, and coverage are
resolved.
C. Liberty Mutual’s Motion to Quash Deposition
Liberty Mutual moved to quash the deposition of Cagle as overbroad,
harassing, and irrelevant to the issues of liability, damages, and coverage. Liberty
Mutual stipulated that it had issued a policy of insurance to Morris, that the policy
included uninsured motorist benefits, and that the underlying accident is a covered
event. But Liberty Mutual asserted that “the only issues involved in this lawsuit is
the liability of [Morris] and the alleged tort-feasor, Amitbhali Momim, that were
both involved in the underlying motor vehicle accident and the amount of [Morris’s
damages resulting from the underlying motor vehicle accident.” Liberty Mutual
contends that the deposition is sought regarding Cagle’s role as a claims adjuster and
necessarily seeks discovery as to the abated extra-contractual claims.
Morris responded that she seeks to depose Cagle “as the person who had
information regarding Defendant’s discovery responses, including [Morris’s]
declaratory judgment claim.”
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After conducting a hearing, the trial court denied Liberty Mutual’s motion to
quash and directed it to produce Cagle for deposition within sixty days.
Morris then amended her petition in the underlying case to remove all claims
against Liberty Mutual except her claim for declaratory judgment. A determination
has not been made as to Momim’s negligence and/or liability for the underlying
accident, the existence and amount of Morris’s damages, or Momim’s status as an
underinsured motorist.
Standard of Review
Discovery matters are generally within the trial court’s sound discretion, but
“mandamus will issue to correct a discovery order if the order constitutes a clear
abuse of discretion and there is no adequate remedy by appeal.” In re Colonial
Pipeline Co., 968 S.W.3d 938, 941 (Tex. 1998); see Walker v. Packer, 827 S.W.2d
833, 839 (Tex. 1992). A clear abuse of discretion occurs when the trial court’s
decision is so arbitrary and unreasonable that it amounts to clear error. See Walker,
827 S.W.2d at 839 (quoting Johnson v. Fourth Court of Appeals, 700 S.W.2d 916,
917 (Tex. 1985)). Because a trial court has no discretion in determining what the law
is, the trial court abuses its discretion if it clearly fails to analyze or apply the law
correctly. See id. at 840. “To satisfy the clear abuse of discretion standard, the relator
must show ‘that the trial court could reasonably have reached only one decision.’”
Liberty Nat’l Fire Ins. Co. v. Akin, 927 S.W.2d 627, 630 (Tex. 1996) (quoting
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Walker, 827 S.W.2d at 840). “In determining whether appeal is an adequate remedy,
appellate courts consider whether the benefits outweigh the detriments of mandamus
review.” In re BP Prods. N. Am., Inc., 244 S.W.3d 840, 845 (Tex. 2008).
Discussion
In seeking mandamus relief, Liberty Mutual contends that (1) discovery
beyond the issues of liability and damages regarding the underlying accident is
irrelevant because it is not liable until these issues have been determined; and
(2) Cagle’s assistance with answering interrogatories regarding Morris’s policy is an
insufficient basis to allow the deposition at this stage of the case. Liberty Mutual
further asserts that it lacks an adequate remedy by appeal because it is being
compelled to bear the burden of providing a deposition not relevant to any current
claim. In response to the petition, Morris argues that (1) she is entitled to depose
Cagle because “[t]he deposition of a witness who provides discovery responses is
relevant” and (2) Liberty has an adequate remedy by appeal.
A. Scope of Discovery
A trial court must make an effort to impose reasonable limits on discovery. In
re Am. Optical, 988 S.W.2d 711, 713 (Tex. 1998). Although the scope of discovery
is broad, requests must show a reasonable expectation of obtaining information that
will aid the dispute’s resolution. In re CSX Corp., 124 S.W.3d 149, 152 (Tex. 2003)
(citing Am. Optical, 988 S.W.2d at 713). Thus, discovery requests—including
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depositions—must be reasonably tailored to include only matters relevant to the
case. Id. Information is relevant if it tends to make the existence of any fact that is
of consequence to the determination of the action or defense more or less probable
than it would be without such information. See TEX. R. EVID. 401.
Because Morris dismissed her breach of contract claim and her extra-
contractual claims have been severed and abated, Morris’s only pending claim in the
underlying case is her request for a declaratory judgment regarding Liberty Mutual’s
obligation to pay uninsured motorist benefits under the policy. For the reasons
discussed below, we conclude that the trial court erred in denying Liberty Mutual’s
motion to quash because the information sought through Cagle’s deposition is
neither relevant to Morris’s pending claims nor reasonably calculated to lead to the
discovery of admissible evidence. See TEX. R. CIV. P. 192.3(a); TEX. R. EVID. 401.
1. The pending claims are limited to third party liability for the accident.
The scope of relevant discovery in uninsured motorist cases differs from other
insurance disputes because, unlike most first-party cases in which the terms of the
policy alone dictate the outcome, uninsured motorist coverage hinges on the liability
of the alleged uninsured, at-fault third-party motorist, under applicable tort law. See
Brainard, 216 S.W.3d at 818 (citing Henson v. S. Farm Bur. Cas. Ins. Co., 17
S.W.3d 652, 654 (Tex. 2000)). Consequently, “the insurer’s contractual obligation
to pay benefits does not arise until liability and damages are determined.” Id.; see
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also In re United Fire Lloyds, 327 S.W.3d 250, 255 (Tex. App.—San Antonio 2010,
orig. proceeding)
To recover benefits under an uninsured motorist policy, a policy beneficiary
must show (1) that the insured has underinsured motorist coverage, (2) that the
underinsured motorist negligently caused the accident that resulted in the covered
damages, (3) the amount of the insured’s damages, and (4) that the underinsured
motorist’s insurance coverage is deficient. See Brainard 216 S.W.3d 809 at 818;
State Farm v. Nickerson, 216 S.W.3d 823, 824 (Tex. 2006); Norris, 216 S.W.3d at
822-23; Henson, 17 S.W.3d at 654; In re Progressive County Mut. Ins. Co., 439
S.W.3d 422, 426-27 (Tex. App.—Houston [1st Dist.] 2014, no pet.); In re United
Fire Lloyds, 327 S.W.3d at 255. Accordingly, “a claim for [uninsured motorist]
benefits is not presented until the trial court signs a judgment” resolving these issues.
Brainard, 216 S.W.3d at 818.
Liberty Mutual stipulated in its pleadings and responses that (1) Morris was
insured for uninsured motorist benefits under its policy; and (2) the underlying
accident was a covered occurrence under the policy’s provisions. This stipulation
narrows the relevant issues in the present case to those of a “typical car wreck”
case—namely, (1) Momim’s liability for the underlying car accident, (2) Momim’s
uninsured/underinsured status, and (3) the existence and amount of Morris’s
damages. See In re Progressive, 439 S.W.3d at 427.
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In determining whether Morris is entitled to discovery on her declaratory
judgment claim prior to a judgment on liability and damages regarding the
underlying accident, we are guided by case law requiring the severance and
abatement of extra-contractual claims. See, e.g., In re Progressive, 439 S.W.3d at
426-27. An insured must first establish that the insurer is liable on the contract before
the insured can recover on extra-contractual causes of action against an insurer for
failing to pay or settle an underinsured motorist insurance claim. Thus, extra-
contractual claims must be severed and abated until the underinsured motorist breach
of contract claim is determined. See In re Allstate Cnty Mut. Ins. Co., 447 S.W.3d
497; In re Progressive, 439 S.W.3d 422. The rationale for requiring abatement and
severance of these types of claims is that they may be rendered moot by a
determination of underlying liability. See U.S. Fire Ins. Co. v. Millard, 847 S.W.2d
668, 673 (Tex. App.—Houston [1st Dist.] 1993, orig. proceeding) (“Abatement of
the bad faith claims must necessarily accompany severance of those claims from the
contract claim. Without abatement, the parties will be put to the effort and expense
of conducting discovery and preparing for trial of claims that may be disposed of in
a previous trial.”); In re United Fire Lloyds, 327 S.W.3d at 265 (holding that
abatement of the insured’s extra-contractual claims was required to “do justice,
avoid prejudice, and further convenience.”).
10
We apply similar reasoning to the case at hand. Because Liberty Mutual’s
contractual obligations do not ripen until after Morris has obtained a judgment
against Momim on liability, damages, and coverage, the requested discovery is
irrelevant to any current claims, which are the building blocks for an eventual
determination of the parties’ contractual rights. See In re Progressive, 439 S.W.3d
at 426-27; In re United Fire Lloyds, 327 S.W.3d at 256. An insurer is not required
to incur litigation expenses on these issues because they may be rendered moot by
the trial of the underlying accident. Id.; see also In re State Farm Mut. Auto. Ins.
Co., 395 S.W.3d 229, 237 (Tex. App.—El Paso 2012, orig. proceeding); In re Am.
Nat. Cnty. Mut. Ins. Co., 384 S.W.3d 429, 437 (Tex. App.—Austin 2012, no pet.).
Our decision in In re Progressive is instructive. Progressive concerned,
among other things, a trial court’s refusal to abate discovery in an uninsured motorist
case. 439 S.W.3d at 428. Our court recognized that, “to prevail on her extra-
contractual claims . . . [the plaintiff] must demonstrate that [the insurer] was
contractually obligated to pay her uninsured motorist claim.” Id. at 427. Because the
existence of coverage for the accident was not in dispute, this “will essentially
involve the issues in a typical car wreck: the comparative negligence of [the plaintiff]
and the other driver and [the plaintiff’s] damages.” Id. We reasoned that requiring
the parties to engage in discovery on matters unrelated to these issues—including
the insurer’s uninsured motorist claims-handling history and its internal policies and
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procedures concerning the investigation of uninsured motorist claims—before the
underlying liability was determined would be “manifestly unjust.” Id. On this basis,
we held that the trial court erred in refusing to abate discovery as to issues beyond
the underlying car accident. Id. at 427-28.
As in Progressive, Liberty Mutual has conceded the existence of coverage—
namely, that Morris was an insured under the policy and that the underlying accident
was a covered occurrence under the policy’s UIM provisions. Accordingly, the
remaining issues are those relating to the underlying accident: (1) Momim’s liability
for the car accident, (2) Momim’s uninsured/underinsured status, and (3) the
existence and amount of Morris’s damages. It is undisputed that there has been no
judgment or other judicial determination as to any of these issues. Absent such
judgment, Liberty Mutual owes no contractual or extra-contractual UIM duties.
The deposition of Cagle is irrelevant to the issues currently pending in the
case. Cagle’s only connection to the underlying car accident and resulting damages
is that she is a claims adjuster for the insurance company that underwrites Morris’s
policy and signed the company’s discovery responses. Cagle’s testimony would not
have “any tendency to make a fact more or less probable” as to any of the relevant
issue in the current case. TEX. R. EVID. 401. Although Cagle’s testimony as to
Liberty Mutual’s claim-handling activities or its general policies and procedures is
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relevant to Morris’s extra-contractual claims, those claims have been properly
severed and abated. See In re Progressive, 439 S.W.3d at 427.
In sum, Morris requests a deposition of a claims adjuster when she does not
have a justiciable cause of action against Liberty Mutual for uninsured motorist
benefits. The information Morris seeks to discover may become relevant, but not
unless Morris obtains a judgment establishing (1) Momim’s liability for the
underlying car accident, (2) Momim’s uninsured/underinsured status, and (3) the
existence and amount of Morris’s damages.
2. Morris has not otherwise demonstrated a basis for the discovery.
Morris further argues that she is entitled to depose Cagle because Cagle
“assisted or provided information in answering [Liberty Mutual’s] interrogatories”
and verified its interrogatory answers. Morris’s circular argument that the mere act
of objecting to requests that are beyond the scope of permissible discovery can itself
serve as the basis for obtaining discovery on the same irrelevant issues would, if
permitted, render discovery requirements meaningless.
Liberty Mutual objected to the majority of the questions propounded in the
interrogatories as outside the scope of permissible discovery. The interrogatories
primarily sought information regarding Morris’s extra-contractual claims, which
were severed and abated by the trial court. Liberty Mutual’s objections that
discovery on the severed and abated claims was improper are well-founded. See In
13
re Farmers Tex. Cnty. Mut. Ins. Co., 509 S.W.3d 463, 467 (Tex. App.—Austin 2015,
orig. proceeding) (“The record, however, includes discovery requests propounded
by [plaintiff] that are broader than his breach of contract claim, his factual allegations
in his pleadings, and a copy of the section of his insurance policy addressing the
relevant UIM coverage . . . .”). Nothing in Liberty Mutual’s interrogatory answers
suggests that Cagle has any knowledge relevant to the issues of Momim’s liability,
damages, or underinsured status. Discovery propounded on irrelevant issues does
not become relevant by a party correctly objecting to its relevance and providing the
required designations.
Apart from its objections, Liberty Mutual provided answers in response to
interrogatories pertaining to Morris’s medical records. These answers, however,
merely refer to Morris’s medical records. For instance, Interrogatory No. 4 requested
that Liberty Mutual “identify each medical bill you received for Latrisha Morris,
including the date received, the amount submitted, the name of the provider, the
amount paid for each bill and the reason for denial of Uninsured benefits for each
bill since May 5, 2014.” Liberty Mutual objected that the request was in part
irrelevant, but responded as follows: “Subject to and without waiving the foregoing
objections, see copies of all medical bills of Plaintiff received by Defendant [with
corresponding label numbers] . . .”
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Morris’s medical records are relevant to the amount of damages she claimed
as a result of the accident, but Cagle’s verification of the interrogatories is an
insufficient basis to allow the deposition. The only relevant testimony Cagle could
provide would consist of confirming that Liberty Mutual had produced the medical
records that it had been provided. Morris has independent and superior access to her
own records, and deposing Cagle on their contents would be unreasonable and
unduly burdensome. See TEX. R. CIV. P. 192.4(a) (providing that discovery should
be limited when “the discovery sought is unreasonably cumulative or duplicative, or
is obtainable from some other source that is more convenient, less burdensome, or
less expensive”); see also In re Arras, 24 S.W.3d 862, 864 (Tex. App.—El Paso
2000, no pet.) (granting mandamus relief challenging order requiring claims
representative to submit to deposition because plaintiffs already received “the exact
information” from car accident defendants and thus “the information sought by
Plaintiffs is clearly obtainable from some other source that is more convenient, less
burdensome, or less expensive” and “the information sought via deposition and
subpoena duces tecum is unreasonably cumulative and/or duplicative.”).
Finally, the discovery that Morris seeks may become relevant once liability
for the car accident is determined. Morris relies on the decisions in In re Luna and
In re Garcia to contend that the verifying agent who answers discovery requests is
always subject to deposition. See In re Luna, No. 13-16-00467-CV, 2016 WL
15
6576879, at *1 (Tex. App.—Corpus Christi, Nov. 7, 2016, orig. proceeding); In re
Garcia, No. 04-07-00173-CV, 2007 WL 1481897, at *1 (Tex. App.—San Antonio
May 23, 2007, orig. proceeding). In both cases, the courts of appeals granted
mandamus relief to allow the deposition of an insurer’s representative in actions for
uninsured motorist coverage. But these cases are distinguishable because both cases
arose after liability of the third party driver had been determined and the coverage
dispute had ripened. In Luna, the plaintiff had obtained a default judgment against
the other motorist in her personal injury suit. See 2016 WL 6576879, at *1. In
Garcia, the plaintiff had “collected from the other motorist's liability insurer at the
full policy limits.” 2007 WL 1481897, at *1. But the insurer disputed the plaintiff’s
actual damages. See id. at *2. Unlike Garcia, there is no indication at this stage of
Morris’s case that Cagle’s deposition is relevant to any asserted defense, as questions
about uninsured motorist coverage await determination of primary liability and
damages.
B. Adequate Remedy by Appeal
Finally, to be entitled to mandamus relief, Liberty Mutual also must
demonstrate that it lacks an adequate remedy by appeal. Because we conclude that
the order compels discovery irrelevant to the underlying case, Liberty Mutual
necessarily lacks an adequate remedy by appeal. See In re CSX Corp., 124 S.W.3d
at 153. (“We have said that where a discovery order compels production of ‘patently
16
irrelevant or duplicative documents’ . . . there is no adequate remedy by appeal
because the order ‘imposes a burden on the producing party far out of proportion to
any benefit that may obtain to the requesting party.’”) (quoting Walker, 827 S.W.2d
at 843). Insurers have a substantial right not to undergo the expense of conducting
discovery on issues that ultimately may be unnecessary because of the result in the
underlying tort case. See In re Old Am. Cnty. Mut. Ins. Co., No. 13–11–00412–CV,
2012 WL 506570, at *5 (Tex. App.—Corpus Christi Feb. 16, 2012, orig.
proceeding); see also United Fire Lloyds, 327 S.W.3d at 257. Insurers similarly have
been held to lack an adequate remedy by appeal when required to respond to
discovery for extra-contractual claims that may be rendered moot by the
determination of the breach of contract claims. See Allstate, 447 S.W. at 504; In re
Progressive, 439 S.W.3d at 427–28; see also In re State Farm, 395 S.W.3d at 239.
If mandamus is not granted, Liberty Mutual would be required to prepare for and
respond to discovery concerning claims that similarly lack justiciability. See Millard,
847 S.W.2d at 675; In re Trinity Universal Ins. Co., 64 S.W.3d 463, 468 (Tex.
App.—Amarillo 2001, orig. proceeding).
Conclusion
For the forgoing reasons, we conditionally grant the petition for writ of
mandamus and direct the trial court to (1) vacate its order compelling the deposition
and (2) grant Liberty Mutual’s motion to quash. We are confident that the trial court
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will promptly comply, and our writ will issue only if it does not. We dismiss any
pending motions as moot.
Jane Bland
Justice
Panel consists of Chief Justice Radack and Justices Keyes and Bland.
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