When pursuing a bad faith claim against an insurance company, a policyholder’s attorney will seek information that helps establish how the insurer failed to properly handle and/or pay the claim. Last week, I wrote about How to Discover Information about Unfair Practices in Other Insureds’ Similar Claims and how that type of information can be helpful. This week, I would like to address the importance of requesting information about prior similar claims filed by other insureds. When faced with these requests, insurers usually object, claiming the requests are overly broad and burdensome. In this day and age, however, it becomes increasingly difficult for a carrier to assert such objections when taking into consideration the advances in technology and software that enable businesses, to maintain and organize a tremendous amount of information and pull it up with a push of a button.

In The Fantasy of "the Good Ole Days" When Insurance Companies Adjusted Claims Fairly and Paid on Time, I wrote about how software programs have virtually taken over the adjustment of claims within and insurance company’s claims department. Computers and software programs pretty much run claims adjusting. As a result, carriers are no longer using just paper files to keep track of information on each claim. So, when a policyholder’s attorney receives an objection that a request for prior similar claims information is burdensome, this objection must be challenged.

This can be done by obtaining the computer manuals and/or claims processing manuals for the claims department to determine if other similar claim files can be identified.

Discovery in Insurance Bad Faith Cases, Part II, Charles Miller, Insurance Law Center.

The Superior Court of Arizona in Maricopa County addressed this very issue in Stephen T. Russell v. UNUM Life Ins. Co. of America, et al. In Russell, one of the interrogatories to UNUM, the insurer, sought information regarding UNUM’s handling of other insureds’ claims that were similar to Russell’s (the insured plaintiff) claim. UNUM objected as follows:

The information is not easily and readily available through the computer system…and that it [UNUM] did not have a central filing system of all lawsuits filed against it of computerized records containing the information requested.

UNUM added that in order to comply with the request, it would have to have someone manually review the files pertaining to each lawsuit in order to pull together the information requested. The Court appointed a special master who exercised his authority to retain a computer expert to access the insurer’s computer database and evaluate its capabilities. The special master and computer expert reported to the Court that UNUM had misled the Court with regard to UNUM’s computer system’s ability to provide the information at issue – information regarding other insureds’ similar claims.

UNUM argues that its computer systems could not have accurately and completely answered the interrogatory and all its subparts in 1996 (or even now); that its employees made “inartful” but not intentionally misleading statements to the Court and Discovery Master; that the Discovery Master and his computer expert should have tested UNUM’s system in situ; and that the “functional equivalents” analysis used by the Discovery Master was flawed. The Court rejects all such arguments for reasons which were developed and/or stated on the record at the hearing. UNUM’s conduct is and should be sanctionable.

Minute Entry, Judge Pendleton Gaines, Superior Court of Arizona, Maricopa County, December 17, 2001.

The trial court ordered UNUM to produce the requested information and sanctioned UNUM for its conduct. When challenged by UNUM, the sanctions were upheld by an appellate court.

Based on the Superior Court of Arizona’s Minute Entry in Russell, Maricopa County, there are few things to keep in mind:

  • Policyholders’ attorneys should not be discouraged by carefully crafted objections asserted by insurers to discovery requests;
  • Information regarding other insureds’ claims was determined to be discoverable; and
  • The Court can and will impose sanctions against a carrier that improperly asserts meritless objections and misrepresents its ability to produce responsive, relevant and non-privileged information and/or documents.

Please tune in next week for an extended post on obtaining information on other insureds’ similar claims and an insured’s prior claims.