in Re State Farm Lloyds

In the
Court of Appeals
Second Appellate District of Texas
at Fort Worth
___________________________
No. 02-21-00337-CV
___________________________
IN RE STATE FARM LLOYDS, Relator
Original Proceeding
17th District Court of Tarrant County, Texas
Trial Court No. 017-315960-20
Before Sudderth, C.J.; Kerr and Womack, JJ.
Memorandum Opinion by Chief Justice Sudderth
MEMORANDUM OPINION
State Farm Lloyds filed a petition for writ of mandamus seeking to vacate parts
of the trial court’s order requiring State Farm’s designated corporate representative to
answer specific deposition questions on or before October 27, 2021. Because we
hold that some of the questions are irrelevant to the litigation and therefore not
within the proper scope of discovery, we conditionally grant partial relief.
Background
Goldie Browning sued her home insurer, State Farm, and its adjuster, Roberto
Alvarado, after Alvarado denied a water-damage claim she made according to a
specific water-damage endorsement that she had purchased. Based on her allegation
that State Farm “systematically denies plumbing[-]leak claims at the initial valuation
stage knowing that the initial valuations are inaccurate, unreliable, and biased toward
generating estimates far below the actual cash value or replacement cost and
anticipating that claimants will not bother disputing the low offer,” Browning asserted
claims for breach of contract, unfair or deceptive acts or trade practices, breach of the
common-law duty of good faith and fair dealing, breach of the Prompt Payment of
Claims Act, breach of express or implied warranty, and fraud. Browning also alleged
that Alvarado had not reasonably investigated her claim.
Browning initially served a notice to depose a State Farm corporate
representative on August 31, 2021. State Farm moved to quash the deposition
because its counsel had a jury trial scheduled that day in a different county. See Tex.
2
R. Civ. P. 199.4. State Farm later filed a lengthy amended and supplemental motion,
in which it challenged most of the deposition topics on which Browning sought to
question the designated corporate representative as overly broad and irrelevant,
among other things. But State Farm said that it would be “willing to produce, at an
appropriate time, a company representative to testify concerning [its] formal written
policies and procedures applicable to the claim at issue in this lawsuit, and, to the
extent not duplicative of the adjuster’s deposition testimony, as to the facts underlying
the handling of the claim.”
Browning deposed Alvarado before the parties resolved the motion to quash
the corporate representative’s deposition. At the later motion-to-quash hearing, State
Farm agreed to several of the deposition topics outlined in Browning’s notice, either
as is or with amended language. After amending some of the designated questions
according to the parties’ agreements, the trial court denied State Farm’s motion to
quash. Its order requires State Farm to designate, on or before October 27, 2021, one
or more corporate representatives to answer the following questions about which
State Farm now complains:
6. Cycle times or metrics for investigating, adjusting, and paying first-
party property claims in Texas in force at the time of Plaintiff’s claim
that applied to the handling of Plaintiff’s insurance claim;
7. Guidelines, manuals, and procedures, that serve as criteria for
underwriting property insurance in Texas or determining whether
Plaintiff’s property was insurable;
....
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9. Duties, if any, owed by State Farm Lloyds to an insured in a first-
party property claim;
10. Incentives, bonuses, or compensation structure for first-party
property claims adjusters involved in the handling of Plaintiff’s insurance
claim, but in no event does State Farm Lloyds have to divulge or provide
information regarding the actual amounts paid to any of the adjusters or
supervisors involved in the handling of Plaintiff’s insurance claim;
....
12. Advertisements, marketing or promotional items, published, used
and/or distributed by State Farm Lloyds related to plumbing leak claims
in Texas within the last 5 years;
13. The performance, review, and oversight of first-party property
claims adjusters handling Plaintiff’s claims; [and]
14. Existence and location of electronically stored information related to
Plaintiff’s claim. Specifically, internal e-mails or messaging systems used
by State Farm Lloyds to communicate with adjusters or vendors,
Xactimate, or the claims management system and how to extract that
information for use in litigation.
Along with its mandamus petition in this court, State Farm filed a motion for
temporary relief. We requested a response to the petition from Browning but left the
motion for temporary relief pending. We now conditionally grant part of the relief
requested in State Farm’s mandamus petition and deny the motion for temporary
relief as moot.
Standard of Review and Applicable Law
This court may grant mandamus relief from a discovery order only when (1)
the trial court’s decision is so arbitrary and unreasonable that it amounts to “a clear
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and prejudicial error of law” and (2) the relator has no adequate remedy by appeal. In
re State Farm Lloyds, 520 S.W.3d 595, 604 (Tex. 2017) (orig. proceeding) (quoting
Walker v. Packer, 827 S.W.2d 833, 839 (Tex. 1992) (orig. proceeding)).
In determining whether the trial court abused its discretion, we may not
substitute our judgment for the trial court’s determination of factual or other
discretionary matters. Id. But because a trial court has no discretion in determining
what the law is or applying the law to even unsettled facts, we review its decisions on
questions of law and application-of-law-to-facts questions much less deferentially. Id.A trial court abuses its discretion by clearly failing to correctly analyze or apply the
law. In re M-I L.L.C., 505 S.W.3d 569, 574 (Tex. 2016) (orig. proceeding).
Even when a trial court abuses its discretion in making a discovery ruling, we
will intervene only if the relator has an inadequate remedy by appeal. In re Prudential
Ins. of Am., 148 S.W.3d 124, 136 (Tex. 2004) (orig. proceeding). Appeal is inadequate
when a discovery order compels production “beyond the rules of [civil] procedure.”
In re Nat’l Lloyds Ins., 507 S.W.3d 219, 223 (Tex. 2016) (orig. proceeding) (quoting In re
Nat’l Lloyds Ins., 449 S.W.3d 486, 488 (Tex. 2014) (orig. proceeding)).
The scope of discovery is generally within the trial court’s discretion so long as
a discovery order does not exceed what the rules of civil procedure permit. See Tex.
R. Civ. P. 192.4; State Farm Lloyds, 520 S.W.3d at 604; In re CSX Corp., 124 S.W.3d
149, 152 (Tex. 2003) (orig. proceeding). To be discoverable, evidence must be
relevant and nonprivileged. See Tex. R. Civ. P. 192.3(a); In re Nat’l Lloyds Ins., 532
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S.W.3d 794, 808 (Tex. 2017) (orig. proceeding). It need not be admissible but must
be reasonably calculated to lead to the discovery of admissible evidence. See Tex. R.
Civ. P. 192.3(a); Nat’l Lloyds, 532 S.W.3d at 808. Thus, although the permitted scope
of discovery is generally broad, a discovery request “must show a reasonable
expectation of obtaining information that will aid the dispute’s resolution.” Nat’l
Lloyds, 532 S.W.3d at 808 (quoting CSX, 124 S.W.3d at 152); In re CAR Fin. Servs., Inc.,
No. 02-20-00157-CV, 2020 WL 4213839, at *5 (Tex. App.—Fort Worth July 23,
2020, orig. proceeding) (mem. op.) (“A discovery request is not overly broad if it is
reasonably tailored to include only relevant matters.” (citing Nat’l Lloyds, 507 S.W.3d
at 223–24)).
Information is relevant if it tends to make the existence of a fact that is of
consequence to the determination of the action more or less probable than it would
be without the information. Tex. R. Evid. 401. We evaluate the relevancy of
discovery on a case-by-case basis by considering, among other things, the claims as
pleaded and the instrumentality of the alleged injury. See In re Sun Coast Res., Inc., 562
S.W.3d 138, 146 (Tex. App.—Houston [14th Dist.] 2018, orig. proceeding).
Analysis
In determining the relevance of the questions Browning seeks to ask the
corporate representative, we examine the allegations in Browning’s petition.
Browning alleged that State Farm (1) in general, systematically denies plumbing-leak
claims outright, (2) specifically as to her policy, took a premium on an insurable value
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it never meant to pay, (3) marketed services with no intent to sell them as advertised
because it never intended to pay for ingress and egress repairs covered by the water-
damage endorsement sold to Browning, (4) pretextually denied or undervalued
Browning’s claim, (5) misrepresented the cause and extent of damage to Browning’s
home, and (6) duped Browning into purchasing her policy, specifically the water-
damage endorsement. She also claimed that Alvarado failed to reasonably investigate
her claim. These claims fall into three broad categories: that Alvarado––and
therefore State Farm––failed to conduct a reasonable investigation before improperly
denying Browning’s claim, see Tex. Ins. Code Ann. § 541.060(a)(7); that Alvarado
never intended to pay her claim according to State Farm’s normal business practice;
and that State Farm misrepresented to Browning individually––and to other
customers via false advertising1––that it would pay claims pursuant to the type of
water-damage endorsement Browning had purchased, knowing that it never intended
to pay those claims. The gist of Browning’s alleged injury is that State Farm failed to
pay a covered claim.
Accordingly, we consider the proposed question topics against the foregoing
backdrop.
1
As to her false advertising claim, Browning did not allege that she relied on
any false advertising by State Farm in deciding to purchase her policy or additional
water-damage endorsement.
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Underwriting Guidelines, Manuals, and Procedures (Question 7)
Browning contends that the request to question the corporate representative
about “[g]uidelines, manuals, and procedures, that serve as criteria for underwriting
property insurance in Texas or determining whether Plaintiff’s property was
insurable,” is relevant because she has alleged that “during the underwriting and
binding of coverage of [her] insurance policy, State Farm failed to state a material fact
necessary to make other statements made not misleading, . . . specifically the
application of the water damage endorsement that she paid extra money for.”
According to Browning, “State Farm duped [her] into purchasing its policy but failed
to disclose that it will never pay claims absent a lawsuit.”
Although the materials that served as criteria for underwriting Browning’s
policy are relevant to the suit, particularly the allegation that State Farm made
misrepresentations to Browning in the underwriting of her policy,2 the remainder of
the request is overly broad, as urged by State Farm. Browning fails to explain how her
claims entitle her to the broad range of materials included in “[g]uidelines, manuals,
and procedures, that serve as criteria for underwriting property insurance in Texas.”
Underwriting requirements for different types of policies and insureds throughout the
2
Cf. Tri Invs., Inc. v. United Fire & Cas. Co., No. 5:18-CV-116, 2019 WL 3308512,
at *2 (S.D. Tex. May 24, 2019) (“The Court finds that information related to
underwriting is not relevant to the claims and defenses in this lawsuit, except to the
extent that Defendant received or conducted any pre-loss inspection or evaluation of
the condition of properties, which the Court finds is relevant and proportional to the
needs of the case.”).
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State, without limitation of any kind, are not properly “tailored with regard to time,
place, or subject matter” and do not seek information that is reasonably calculated to
lead to the discovery of admissible evidence. See Nat’l Lloyds, 507 S.W.3d at 225–26
(holding that discovery order requiring National Lloyds to produce all management
reports, emails, and related correspondence about insurance claims “in different
counties, experiencing different causes of loss, on different dates” was overly broad);
cf. Nat’l Lloyds, 449 S.W.3d at 489–90 (holding that claims files of similarly situated but
unrelated third parties were not relevant to undervaluation claim); In re State Farm
Lloyds, No. 02-20-00163-CV, 2020 WL 5242414, at *5 (Tex. App.—Fort Worth Sept.
3, 2020, orig. proceeding [mand. denied]) (mem. op.) (“Those variables are unique to
each claim and have no bearing on whether State Farm’s investigation or reliance on
Bryant Consultants’ report was reasonable.”). Thus, we conclude that the trial court
abused its discretion by denying the motion to quash as to the part of Question 7 not
expressly limited to requirements that would be applicable to Browning’s claim and
policy.
State Farm’s Duties (Question No. 9)
State Farm objected that the question about duties it owes in a first-party
insurance claim impermissibly seeks testimony on a question of law and, thus, is not
an appropriate question for the corporate representative. At the motion-to-quash
hearing, State Farm acknowledged that Browning had already questioned Alvarado
about this topic and that Alvarado had answered that he thought his duties were to
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conduct a reasonable investigation, pay whatever is owed under the policy, and make
no misrepresentations in handling the claim. In describing the intended scope of the
question, Browning’s lawyer told the court, “[O]bviously[,] they’re, you know, the
legal duties under Chapter 541, but . . . I just want to question somebody with respect
to State Farm’s policy, you know, with respect to their duties that they believe they
owe to a first-party insured.” He clarified that he meant he wanted to ask about
whether Browning had followed State Farm’s “internal procedures.”
Before the hearing, State Farm had agreed to produce a company
representative to testify to a more limited topic included within Question 9: “State
Farm’s formal written policies and procedures that serve as criteria for determining
whether claims are covered or excluded by any policy provisions you contend applied
to Plaintiff’s claim.” But the trial court did not so limit the question.
Whether a legal duty exists based on a particular set of facts is a question of law
for the trial court. See, e.g., Tri v. J.T.T., 162 S.W.3d 552, 563 (Tex. 2005); Pickens v.
Tex. Farm Bureau Ins., 836 S.W.2d 803, 805 (Tex. App.––Amarillo 1992, no writ);
Walker v. Fed. Kemper Life Assurance Co., 828 S.W.2d 442, 452 (Tex. App.––San
Antonio 1992, writ denied). Thus, as worded, Question 9 is overbroad in that it seeks
both relevant information––duties that may have arisen according to State Farm’s
particular policies and procedures––and information not reasonably calculated to lead
to the discovery of admissible evidence––duties that arise as a matter of law in a first-
party claim. See In re Allstate Cnty. Mut. Ins., 227 S.W.3d 667, 670 (Tex. 2007) (orig.
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proceeding) (“Overbroad requests for irrelevant information are improper whether
they are burdensome or not.”). But cf. In re Sting Soccer Grp., LP, No. 05-17-00317-CV,
2017 WL 5897454, at *7 (Tex. App.––Dallas Nov. 30, 2017, orig. proceeding) (mem.
op.) (holding that requests asking plaintiff “to produce documents it possessed that
supported the specific allegations in [its] petition” merely sought permissible discovery
supporting plaintiff’s specific factual and legal contentions under Rules 192.3(j) and
197.1, and thus were “not objectionable for seeking legal conclusions”). Although
Browning contends in this court that she seeks only customer-service-related
information, such as whether Alvarado violated company policy when he allegedly
was rude to Browning, the question is not so limited. Thus, the trial court should not
have denied the motion to quash as to Question 9 as written.
Advertising (Question No. 12)
State Farm contends that advertising materials are not relevant to the dispute
because Browning did not identify any advertisement she relied on to her detriment.
At the motion-to-quash hearing, Browning’s counsel indicated that he wanted “to
question a corporate representative with respect to this water[-] damage endorsement
and how it’s marketed to people.” According to Browning’s counsel, because his
client had paid for the extra endorsement, she was “shocked” when her claim was
denied; therefore, he believed “there’s some confusion with respect to the way this
stuff is marketed which puts the advertisements and marketing into play.” In
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response to the mandamus petition, Browning argued that “she would not have paid
extra for it had the truth been disclosed.”
Browning has not alleged that she was misled by State Farm’s advertising or
even that she saw any advertising that influenced her decision to purchase insurance,
or the particular water-damage endorsement at issue, from State Farm. That State
Farm might have advertised about the water-damage endorsement or its handling of
plumbing-leak claims in Texas in a way that confused or impacted other homeowners
is not relevant to whether Browning purchased her policy and endorsement under a
mistaken belief; thus, this question seeks to engage in an impermissible fishing
expedition. See Nat’l Lloyds, 449 S.W.3d at 489 (“Scouring claim files in hopes of
finding similarly situated claimants whose claims were evaluated differently from
Erving’s is at best an ‘impermissible fishing expedition.’”); In re Ford Motor Co., 427
S.W.3d 396, 397 (Tex. 2014) (orig. proceeding); In re Tex. Christian Univ., No. 02-20-
00350-CV, 2021 WL 126578, at *7 (Tex. App.––Fort Worth Jan. 14, 2021, orig.
proceeding) (mem. op.). Accordingly, we conclude that the trial court abused its
discretion by denying the motion to quash as to this question.
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Cycle Times or Metrics (Question 6), Compensation Structure for First-Party
Adjusters of Browning’s Claim (Question 10), and Performance Reviews for
First-Party Adjusters of Browning’s Claim (Question No. 13)
This group of questions seeks information that might shed light on whether or
why Alvarado or any other first-party adjuster working on Browning’s claim3 failed to
reasonably investigate Browning’s claim.
According to Browning, the question about cycle times or metrics is relevant to
the dispute because Alvarado “may have felt ‘rushed’ to deny Browning’s claim”; in
other words, “[p]erhaps there is pressure to ‘close’ claims and move on.” Whether
State Farm imposes cycle times or metrics on its claims adjusters that could pressure
those adjusters into failing to take the time to make an adequate investigation is
relevant to whether Alvarado’s investigation was reasonable, regardless of whether
that evidence would ultimately be admissible. See Tex. R. Evid. 401. For the same
reason, the question about Alvarado’s compensation structure,4 as opposed to his
particular compensation, and his past performance reviews are relevant. Cf. In re State
Farm Lloyds, No. 13-16-00362-CV, 2016 WL 5234610, at *4 (Tex. App.—Corpus
Christi–Edinburg Sept. 19, 2016, orig. proceeding) (mem. op.) (holding request for
3
Browning contends that at least one other adjuster worked on her claim. State
Farm does not contest that assertion. Assuming that allegation is true, the same logic
that applies to Alvarado with respect to this question applies to any other adjuster
working on Browning’s claim, in light of the allegations in Browning’s petition.
4
As the trial court acknowledged, Browning’s primary interest is not in
Alvarado’s specific salary, but whether State Farm had any incentives that would
reward him for denying claims or processing them quickly.
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reinspection files of adjuster was relevant when plaintiff had alleged that State Farm
unreasonably relied on adjuster’s evaluation of claim when it had failed to properly
train him and knew that he was incompetent).5
Electronic Information Storage (Question 14)
State Farm contends that Question 14, about the existence and location of
electronically stored information related to Browning’s claim, is vague, ambiguous,
and irrelevant on its face because “it could be read to call for testimony about the vast
universe of State Farm’s electronic programs, software, networks, databases, and
other wholly irrelevant computer systems.”
At the motion-to-quash hearing, Browning’s counsel told the trial court that
this deposition topic is related to State Farm’s objections that much of the
propounded discovery would be too burdensome to answer: “I wanna talk to
somebody knowledgeable with respect to their system to figure out the
burdensomeness and what we need to do to get it. . . . I don’t have to just take their
word for it, with respect to their litany of objections.” State Farm responded that it
5
State Farm also contends that Questions 6 and 10 impermissibly ask for
protected confidential, trade-secret information and that Question 13 asks for private
employee information. But State Farm did not include anything in the mandamus
record indicating that it properly raised a trade-secret privilege or privacy right, or if it
did, that it met its burden to prove it. See In re Continental Gen. Tire, Inc., 979 S.W.2d
609, 613 (Tex. 1998) (orig. proceeding); In re Marshall, 617 S.W.3d 670, 675–76 (Tex.
App.––San Antonio 2021, orig. proceeding); In re Mid-Century Ins., 549 S.W.3d 730,
733 (Tex. App.––Waco 2017, orig. proceeding); In re Crestcare Nursing & Rehab. Ctr.,
222 S.W.3d 68, 72–75 (Tex. App.––Tyler 2006, orig. proceeding [mand. denied])
(explaining also why information that implicates privacy concerns may be
discoverable).
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had “produced all of the pertinent documents that deal with the handling of this claim
and all of the issues that are raised . . . under the Insurance Code” and that although
those documents had not been “provided in native format, [they were] provided . . . in
a way that is searchable.” The trial judge decided to allow the topic: “I’m going to
allow [Browning’s counsel] to ask . . . what the process is in order to obtain the
information whenever there are objections that have been asserted that it is unduly
burdensome. . . . So it’s very specific related to objections on requests for production
and/or interrogatories.”
Although State Farm contends that the question is not limited in the trial
court’s order to the specific extent recited by the trial judge at the hearing, as written it
seeks the type of information the Texas Supreme Court has encouraged parties to
obtain, albeit by agreement without court intervention if possible:
[P]rior to promulgating requests for electronic information, parties and
their attorneys should share relevant information concerning electronic systems
and storage methodologies so that agreements regarding protocols may be
reached or, if not, trial courts have the information necessary to craft
discovery orders that are not unduly intrusive or overly burdensome.
The critical importance of learning about relevant systems early in the
litigation process is heavily emphasized in the federal rules. Due to the
“volume and dynamic nature of electronically stored information,”
failure to become familiar with relevant systems early on can greatly
complicate preservation issues, increase uncertainty in the discovery
process, and raise the risk of disputes.
In re Weekley Homes, L.P., 295 S.W.3d 309, 321–22 (Tex. 2009) (orig. proceeding)
(emphasis added). But cf. In re Exxon Corp., 208 S.W.3d 70, 71–77 (Tex. App.––
Beaumont 2006, orig. proceeding) (granting mandamus relief from trial court’s order
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compelling Exxon to produce additional corporate representative, which in that case
could only have been Exxon’s counsel, for deposition on efforts underlying search for
already-produced documents to determine if all pertinent locations outside of
industrial hygiene file room had been searched––after trial court had already allowed
deposition of corporate representative to testify about existence; “electronic creation,
duplication[,] and storage”; location; “organization, indexing[,] and filing;” and
“method of search” for documents in industrial hygiene file room). Additionally,
contrary to State Farm’s assertion, the question does not compel or even authorize the
production of previously produced documents in native format rather than searchable
pdf as provided by State Farm; rather, it seeks more information about where and
how State Farm electronically stores information about a particular claims file. See In
re State Farm, 520 S.W.3d at 607–12 (setting forth case-by-case proportional balancing
test of burden versus need for trial court to consider in determining whether to
compel party to produce discovery in native format).6 Thus, the trial court did not
abuse its discretion by denying the motion to quash as to Question 14.
Conclusion
Because parts of the trial court’s order denying State Farm’s motion to quash as
to Questions 7, 9, and 12 compelled discovery beyond the scope of the Rules of Civil
Procedure, and therefore no adequate remedy by appeal exists, Nat’l Lloyds, 507
6
State Farm also contends that this question impermissibly asks for protected
confidential, trade-secret information. But as it did with Questions 6 and 10, it failed
to meet its burden to show that this privilege applies. See supra note 5.
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S.W.3d at 223, we order the trial court to vacate those parts of its September 27, 2021
order denying State Farm’s motion to quash, without prejudice to the entry of an
amended order allowing similar questions more appropriately limited in scope. See,
e.g., In re Walmart, Inc., 620 S.W.3d 851, 868 (Tex. App.––El Paso 2021, orig.
proceeding [mand. filed]); In re Allstate Fire & Cas. Ins., 617 S.W.3d 635, 648 (Tex.
App.––Houston [14th Dist.] 2021, orig. proceeding); In re Master Flo Valve Inc., 485
S.W.3d 207, 214 (Tex. App.—Houston [14th Dist.] 2016, orig. proceeding). A writ of
mandamus will issue only if the trial court fails to comply with this order.
We deny the Emergency Motion for Temporary Relief as moot.
/s/ Bonnie Sudderth
Bonnie Sudderth
Chief Justice
Delivered: December 9, 2021
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