in Re Texas Farmers Insurance Company, Farmers Insurance Exchange and Farmers Texas County Mutual Insurance Company

COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 02-13-00449-CV
IN RE TEXAS FARMERS INSURANCE RELATORS
COMPANY, FARMERS INSURANCE
EXCHANGE AND FARMERS TEXAS
COUNTY MUTUAL INSURANCE
COMPANY
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ORIGINAL PROCEEDING
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MEMORANDUM OPINION1
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I. Introduction
In a single issue, Relators Texas Farmers Insurance Company, Farmers
Insurance Exchange, and Farmers Texas County Mutual Insurance Company
ask this court for relief from Respondent the Honorable Patrick Ferchill’s order
requiring them to produce documents in response to Real Party in Interest (RPI)
1
See Tex. R. App. P. 47.4.
James Holiday’s discovery requests.2 We conditionally grant relief, vacating
Respondent’s order to provide information in response to requests for production
Nos. 4, 6, 9, 10, 11, 12, and 13 to allow RPI the opportunity to tailor the requests
for production as discussed at the hearing on the motion to compel, to allow
Relators to file a privilege log for the documents that they claim are privileged,
and to allow Respondent the opportunity to then review the documents in camera
to determine which, if any, are not privileged.
II. Background
In 2010, on the way home from drinking alcohol at Railhead Smokehouse,
Jeffery Herron fell off an all-terrain vehicle (ATV) owned and operated by Todd
Jarvis, who had a homeowner’s policy, a personal umbrella policy, and a
personal automobile policy with Relators. Herron sued Jarvis and Railhead;
Railhead countered against Jarvis for negligently causing Herron’s injuries.
Relators agreed to provide a defense to Jarvis under the homeowner’s and
umbrella policies, under a full reservation of their rights and defenses, but not
under the automobile policy. Relators then filed for declaratory relief, seeking a
declaration that they had no duty to defend or indemnify Jarvis under any of the
policies. They attached the policies to the petition.
Jarvis counterclaimed, seeking a declaration that Relators had a duty to
defend and indemnify him, arguing that the ATV fell within the “lawn, garden, or
2
Holiday is the successor guardian of the estate of Jeffery Herron.
2
farm equipment” exception to the motor vehicle exclusion in the homeowner’s
policy and claiming that Relators had violated insurance code chapter 541 by
asserting their reservation of rights and attempting to avoid contractual liability.
RPI filed a cross-action, seeking the same declaration and relief as Jarvis. RPI
sent his first request for production to Relators, and Relators responded and
objected to the following requests that are at issue here:
Request No. 4: Please produce complete copies of all claims
manuals or training materials, or other materials that address the
handling of liability claims under homeowners policies.
Response: Objection, work product privilege. Objection, not
reasonably calculated to lead to the discovery of admissible
evidence. Plaintiffs[] object to this request for production because
this matter has been abated. Plaintiffs[] also object because the
probative value, if any, is outweighed by the burden of producing this
information. Plaintiffs[] object to this request because it is a request
for confidential and proprietary information.
....
Request No. 6: Please produce all documents pertaining to the
“Motor Vehicle” exclusion in the homeowners policy issued to the
Jarvis[] family.
Response: Objection, work product and attorney client privileges.
Objection, not reasonably calculated to lead to the discovery of
admissible evidence. Plaintiffs[] object to this request for production
because this matter has been abated. You already have a copy of
the policy. Subject to these objections, a disk containing
photographs, depositions and other documents has been produced.
....
Request No. 9: Provide all documents pertaining to any and all
liability claims for which a defense was provided with reservations to
one of your insureds because of the exceptions to the “Motor
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Vehicle” exclusion in the homeowners policy with the language used
in the policy issued to the Jarvis[] family.
Response: Objection, work product privilege and attorney client
privilege. Objection, not reasonably calculated to lead to the
discovery of admissible evidence. Plaintiffs[] object to this request
for production because this matter has been abated. Plaintiffs[] also
object because the probative value, if any, is outweighed by the
burden of producing this information. Plaintiffs[] object to this
request because it is a request for confidential and proprietary
information.
Request No. 10: Provide all documents pertaining to any and all
liability claims for which a defense was provided without reservation
to one of your insureds because of the exceptions to the “Motor
Vehicle” exclusion in the homeowners policy with the language used
in the policy issued to the Jarvis[] family.
Response: Objection, work product privilege and attorney client
privilege. Objection, not reasonably calculated to lead to the
discovery of admissible evidence. Plaintiffs[] object to this request
for production because this matter has been abated. Plaintiffs[] also
object because the probative value, if any, is outweighed by the
burden of producing this information. Plaintiffs[] object to this
request because it is a request for confidential and proprietary
information.
Request No. 11: Provide all documents pertaining to any and all
liability claims for which indemnity payments were paid on behalf of
your insured because of the exceptions to the “Motor Vehicle”
exclusion in the homeowners policy with the language used in the
policy issued to the Jarvis[] family.
Response: Objection, work product privilege and attorney client
privilege. Objection, not reasonably calculated to lead to the
discovery of admissible evidence. Plaintiffs[] object to this request
for production because this matter has been abated. Plaintiffs[] also
object because the probative value, if any, is outweighed by the
burden of producing this information. Plaintiffs[] object to this
request because it is a request for confidential and proprietary
information.
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Request No. 12: Provide all documents pertaining to the types of
vehicles for which liability coverage was provided because of the
language of the exceptions to the “Motor Vehicle” exclusion in the
homeowners policy with the language used in the policy issued to
the Jarvis[] family.
Response: Objection, work product privilege and attorney client
privilege. Objection, not reasonably calculated to lead to the
discovery of admissible evidence. Plaintiffs[] object to this request
for production because this matter has been abated. Plaintiffs[] also
object because the probative value, if any, is outweighed by the
burden of producing this information. Plaintiffs[] object to this
request because it is a request for confidential and proprietary
information.
Request No. 13: Provide all documents pertaining to any [sic] and
motor vehicles included as an exception to the “Motor Vehicle”
exclusion in the homeowners policy since the vehicle was lawn,
garden or farm equipment.
Response: Objection, work product privilege and attorney client
privilege. Objection, not reasonably calculated to lead to the
discovery of admissible evidence. Plaintiffs[] object to this request
for production because this matter has been abated. Plaintiffs[] also
object because the probative value, if any, is outweighed by the
burden of producing this information. Plaintiffs[] object to this
request because it is a request for confidential and proprietary
information.
RPI filed a motion to compel, complaining that he had agreed to maintain
confidentiality of any proprietary information and arguing that he sought
information regarding the insurance policy and its procedural handling as
determinative of the defense in the suit and his counterclaim. He also argued
that he had a substantial need for the information that Relators claimed was
subject to work-product privilege and that he would be unable to obtain the
substantial equivalent of it by other means without undue hardship.
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Relators responded by arguing that their claims manual and the
documents underlying the coverage determination were not reasonably
calculated to lead to the discovery of admissible evidence, were confidential and
proprietary information, and were subject to attorney-client and work-product
privileges. Relators argued that the action was a coverage action with no bad
faith asserted by any party, making No. 4 irrelevant. Relators argued that the
documents requested in Nos. 6, 9, 10, 11, 12, and 13 were germane to the
issues being litigated and were therefore subject to attorney-client and work-
product privileges. They did not attach any affidavits or other evidence besides
their responses to the requests for production.
At the hearing on the motion to compel, Relators argued that No. 4 was
overbroad, irrelevant, unduly burdensome, a fishing expedition, and violated
attorney-client privilege but said that if it were tailored to the facts of the case,
they would answer it. RPI’s counsel said that he would limit No. 4, and Relators
said that if the request were resubmitted or the order rewritten to include the
limitation, they would respond to it without further objection. Prior to granting the
motion, Respondent indicated that he would be amenable to No. 4 being refined
and encouraged the parties to refine it; however, in his order, Respondent
granted No. 4 without limiting it.
Relators argued at the hearing that attorney-client privilege applied as to
Nos. 6, 9, 10, 11, 12 and that work-product privilege applied to Nos. 6 and 9–13.
At the conclusion of the hearing, Respondent overruled Relators’ objections and
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required production of responsive information and documents by December 20,
2013. This court issued a stay of Respondent’s order compelling production to
consider Relators’ mandamus petition.
III. Discovery
Relators complain that the trial court abused its discretion by overruling
their objections to requests for production Nos. 4, 6, 9, 10, 11, 12, and 13
because the requests were irrelevant, overbroad, and unduly burdensome and
violate the work product and attorney-client privileges and that they have no
adequate remedy by appeal.3
A. Standard of Review and Applicable Law
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
Olshan Found. Repair Co., 328 S.W.3d 883, 887 (Tex. 2010) (orig. proceeding);
In re Kings Ridge Homeowners Ass’n, Inc., 303 S.W.3d 773, 778 (Tex. App.—
Fort Worth 2009, orig. proceeding). When determining whether the trial court
abused its discretion, we are mindful that the purpose of discovery is to seek the
truth so that disputes may be decided by what the facts reveal, not by what facts
are concealed. In re Colonial Pipeline Co., 968 S.W.2d 938, 941 (Tex. 1998)
(orig. proceeding). The rules governing discovery do not require as a
3
In his response to Relators’ petition, RPI argues that Relators failed to
reassert these objections at the hearing, but the record reflects—as set out
above—that Relators raised these objections at the hearing.
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prerequisite to discovery that the information sought be admissible; it is enough
that the information appears reasonably calculated to lead to the discovery of
admissible evidence. See Tex. R. Civ. P. 192.3(a). But this broad grant is
limited by the legitimate interests of the opposing party to avoid overly broad
requests, harassment, or disclosure of privileged information. In re Am. Optical
Corp., 988 S.W.2d 711, 713 (Tex. 1998) (orig. proceeding).
Appellate courts will not intervene to control incidental trial court rulings
when an adequate remedy by appeal exists. In re Prudential Ins. Co. of Am.,
148 S.W.3d 124, 136 (Tex. 2004) (orig. proceeding). An appeal is inadequate
when a party is in danger of losing substantial rights, such as when the appellate
court would not be able to cure the trial court’s discovery error, when the party’s
ability to present a viable claim or defense at trial is vitiated or severely
compromised by the trial court’s discovery error, or when the trial court disallows
discovery and the missing discovery cannot be made a part of the appellate
record or the trial court, after proper request, refuses to make it part of the
record. In re Van Waters & Rogers, Inc., 145 S.W.3d 203, 210–11 (Tex. 2004)
(orig. proceeding). Appellate courts must consider whether the benefits of
mandamus review outweigh the detriments when determining whether appeal is
an adequate remedy. In re BP Prods. N. Am., Inc., 244 S.W.3d 840, 845 (Tex.
2008) (orig. proceeding).
A clear abuse of discretion warranting correction by mandamus occurs
when a trial court’s decision is without basis or guiding principles of law. Kings
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Ridge, 303 S.W.3d at 778. A trial court abuses its discretion by ordering
discovery that exceeds that permitted by the rules of procedure. In re CSX
Corp., 124 S.W.3d 149, 152 (Tex. 2003) (orig. proceeding).
Rule 193.3 requires that a party who claims that material or information
responsive to written discovery is privileged state in the response to discovery or
in a separate document: (1) that information or material responsive to the
request has been withheld; (2) the request to which the information or material
relates; and (3) the privilege or privileges asserted. Tex. R. Civ. P. 193.3(a).
The party seeking discovery may then serve a written request that the
withholding party identify the information and material withheld, and within fifteen
days of service of that request, the withholding party must serve a response that
(1) describes the information or materials withheld that, without revealing the
privileged information itself or otherwise waiving the privilege, enables other
parties to assess the privilege’s applicability, and (2) asserts a specific privilege
for each item or group of items withheld. Tex. R. Civ. P. 193.3(b). Rule 193.4
provides for a hearing with regard to assertions of privilege and for in camera
review if determined necessary by the trial court. Tex. R. Civ. P. 193.4. A trial
court abuses its discretion when it fails to conduct an adequate in camera
inspection of documents when such a review is critical to evaluation of a privilege
claim. In re Living Ctrs. of Tex., Inc., 175 S.W.3d 253, 261 (Tex. 2005) (orig.
proceeding). Trial courts “‘must make an effort to impose reasonable discovery
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limits.’” In re Allstate Cnty. Mut. Ins. Co., 227 S.W.3d 667, 668 (Tex. 2007) (orig.
proceeding) (quoting CSX, 124 S.W.3d at 152).
B. Analysis
RPI’s counsel never requested a privilege log, and the trial court granted
the motion to compel despite Relators’ offer at the motion hearing to produce a
privilege log and to submit documents for in camera inspection. See Tex. R. Civ.
P. 193.3. Respondent therefore had nothing to review to base his decision to
overrule Relators’ objections based on the attorney-client and work-product
privileges. Further, although all of the parties agreed at the hearing to narrow
request for production No. 4, Respondent’s written order does not reflect this
modification. And, as set out above and argued by Relators, the discovery
requests at issue, which seek “all” documents without regard to any limitation as
to time, are facially overbroad as to breadth and scope. See Allstate, 227
S.W.3d at 669 (noting that discovery requests that are overbroad as to time,
location, and scope and that can easily be more narrowly tailored to the dispute
at hand are improper); see also In re Deere & Co., 299 S.W.3d 819, 821 (Tex.
2009) (orig. proceeding).
Therefore, we sustain Relators’ sole issue and vacate Respondent’s order
to allow RPI the opportunity to tailor the requests for production as discussed at
the hearing on the motion to compel, to allow Relators to file a privilege log for
the documents that they claim are privileged, and to allow Respondent the
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opportunity to then review the documents in camera to determine which are not
privileged.
IV. Conclusion
Having sustained Relators’ sole issue, we conditionally grant relief. The
stay will be lifted after the parties notify this court that RPI has tailored his
requests for production at issue here, Relators have produced a privilege log,
and Respondent has had an opportunity to review Relators’ documents to
determine whether the attorney-client or work-product privileges apply. The writ
will issue only in the event that the parties and Respondent fail to comply within
thirty days of the date of this opinion.
/s/ Bob McCoy
BOB MCCOY
JUSTICE
PANEL: MCCOY, MEIER, and GABRIEL, JJ.
DELIVERED: January 30, 2014
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