In re Nat'l Lloyds Ins. Co.

• Citation: 507 S.W.3d 219
• Decision Date: 28 October 2016
• Docket Number: NO. 15-0452,15-0452
• Parties: IN RE NATIONAL LLOYDS INSURANCE COMPANY, Relator
• Court: Texas Supreme Court

507 S.W.3d 219

IN RE NATIONAL LLOYDS INSURANCE COMPANY, Relator

NO. 15-0452

Supreme Court of Texas.

OPINION DELIVERED: October 28, 2016

Rehearing Denied February 17, 2017

Scot Graves Doyen, Alasdair A. Roberts, Doyen Sebesta, Ltd., LLP, Houston TX, R. Casey Low, Elizabeth K. Marcum, Pillsbury Winthrop Shaw Pittman LLP, Dale Wainwright, Bracewell LLP, Austin TX, for Relator.

Amber Anderson Mostyn, Molly Kathleen Bowen, John Steven Mostyn, The Mostyn Law Firm, Houston, TX, Gilberto Hinojosa, Law Offices of Gilberto Hinojosa & Associates, P.C., Brownsville TX, James C. Marrow, Jennifer Bruch Hogan, Richard P. Hogan, Houston, TX, for Real Party in Interest.

PER CURIAM

In this mandamus action, National Lloyds Insurance Company contends that the respondent judge abused her discretion by ordering National Lloyds to produce "all emails, reports attached to emails, and any follow-up correspondence and information" and by sanctioning National Lloyds for refusing to produce certain information. We hold that the production order is overbroad, and we therefore conditionally grant mandamus relief.

The real parties in interest (referred to here as Plaintiffs) own insurance policies with National Lloyds. Beginning in 2013, Plaintiffs began filing independent lawsuits against National Lloyds, claiming they were underpaid on claims following two hail storms that struck Hidalgo County on March 29 and April 20, 2012. Plaintiffs alleged violations of the Texas Insurance Code, fraud, conspiracy, breach of contract, and breach of the duty of good faith and fair dealing. On April 10, 2013, the Multidistrict Litigation Panel of Texas (MDL Panel) granted the motions of two other insurance carriers seeking to transfer certain cases arising out of the March and April 2012 Hidalgo County hail storms to a pretrial court. See TEX. R. JUD. ADMIN. 13.3, reprinted in TEX. GOV'T CODE , tit. 2, subtit. F app. The MDL Panel appointed the 206th District Court, the respondent in this proceeding, as the pretrial court. See id. 13.5, 13.6. On September 13, 2013, the MDL Panel transferred additional cases arising out of the same two storms, including those brought by Plaintiffs against National Lloyds, to the same pretrial court. In re Nat'l Lloyds Ins. Co. Hurricane Litig. , 422 S.W.3d 926, 932 (Tex. M.D.L. Panel 2013).

Preceding the National Lloyds transfer, the pretrial court appointed a discovery special master to assist in its review of discovery disputes. See TEX. R. CIV. P. 171. On January 14, 2014, the pretrial court adopted a revised master discovery plan approved by the special master. The plan included a single set of institutional discovery requests directed to each insurer, including National Lloyds. On March 11, 2014, Plaintiffs served National Lloyds with requests for production, which National Lloyds responded and objected to on April 25, 2014. The relevant requests stated:

12. All documents regarding the generalized assessment, review, evaluation and/or summary of Defendant's handling of claims arising out of the Hidalgo County hail storms occurring on or about March 29, 2012 and/or April 20, 2012.

13. Any document general in nature which applies to more than one claim created, gathered, or reviewed by Defendant relating to Hidalgo County hail storm claims occurring on or about March 29, 2012 and/or April 20, 2012, including any analysis of the total amount paid on claims, time open, responsiveness, compliance with company policies and procedures, compliance with the Texas Insurance Code, the number of reopened claims, the reason for reopening the claim, and the total amount paid on reopened claims. This request includes any follow-up documents.

National Lloyds initially objected to each request as burdensome and privileged. After twice amending its responses, National Lloyds ultimately withdrew all of its objections and privilege assertions with respect to requests for production 12 and 13.

After reviewing emails produced by National Lloyds, Plaintiffs filed an "emergency" motion to compel production of various National Lloyds system-generated management reports referenced in emails. National Lloyds responded to the motion, explaining that the reports referenced did not concern historical claims and could not be generated for historical data (such as Hidalgo County hail storms years before). Furthermore, to the extent previously generated reports included historical claims, National Lloyds argued that its "network drives were collected, had search terms applied to them, and responsive claim specific and institutional emails have been produced." Plaintiffs later deposed Paul Boswell, National Lloyds's corporate representative, who gave deposition testimony regarding the management reports referenced in emails. Boswell testified that those reports had been generated in real time by National Lloyds employees and were sent by email, in PDF format, to the employees who requested the reports. He testified that the reports are not historical in nature and are not retained, so there is no ability to print past reports. Boswell also reiterated that, even if the reports attached to old emails could be retrieved, the management reports contain global claims, financial, and business information that is not specific to a particular claim or region and would include data spanning other counties in which National Lloyds operates.

Without a ruling from the special master on their motion to compel, Plaintiffs filed a "Motion to Enforce the Court's Prior Orders[,] ... Motion to Compel Defendants to Produce Responsive Documents to Requests for Production, and Motion for Costs" (referred to as Motion to Enforce/Compel) with the pretrial court. In the Motion to Enforce/Compel, Plaintiffs argued that the management reports related to Hidalgo County hail storms attached to emails sent or received by employees of National Lloyds were responsive to Plaintiffs' requests for production and sought sanctions against National Lloyds for its failure to produce the reports. National Lloyds responded, again arguing that the reports sought exceeded the scope of the prior requests for production and that all reports regarding the Hidalgo County hail storms had already been produced. National Lloyds also responded that "[i]n light of the Supreme Court of Texas' recent ruling in [I]n re National Lloyds Insurance Company ... National Lloyds re-asserts its relevancy, overbroad, and unduly burdensome objections as they relate to the production of information related to claims of third parties." At the hearing on the motion, National Lloyds argued that the management reports sought violated this Court's holding in In re National Lloyds Insurance Co. , which held that a trial court had abused its discretion in ordering a defendant insurer to produce evidence related to insurance claims other than the plaintiff's claim. See 449 S.W.3d 486, 489–90 (Tex. 2014) (orig. proceeding) (per curiam).

On November 12, 2014, the pretrial court entered an order compelling National Lloyds to produce six categories of documents, including: "(2) Management Reports and Emails —National Lloyds is ordered to produce all emails, reports attached to emails, and any follow-up correspondence and information related to those reports which were sent or received by a National Lloyds employee or any affiliated adjusting company employees." The pretrial court also assessed sanctions for attorney's fees in the amount of $15,726.25. This portion of the pretrial court's order is the basis of this mandamus proceeding.

Soon after, National Lloyds filed a motion for reconsideration requesting an in camera review to evaluate the responsiveness and relevance of the management reports at issue. In its reply to Plaintiffs' response to its motion for reconsideration, National Lloyds reasserted the argument that the compelled discovery was overbroad, relying on the Court's decision in In re National Lloyds . National Lloyds sought "reconsideration and vacation of part (2) of the Order [pertaining to management reports and emails] pending an in camera review to evaluate the responsiveness and relevance of these reports." At a hearing on the motion, counsel for National Lloyds requested that the pretrial court conduct an in camera review of the documents to aid the determination. Without conducting an in camera review, the pretrial court denied the motion for reconsideration.

The Thirteenth Court of Appeals denied mandamus relief, concluding that National Lloyds waived any objection to the relevance or breadth of the requests for production.

In re Nat'l Lloyds Ins. Co. , No. 13–14–00713–CV, 2015 WL 3751701, at *7 (Tex. App.–Corpus Christi–Edinburg May 29, 2015, orig. proceeding). Even if the objections were not waived, the court of appeals reasoned, the evidence regarding the issue of overbreadth was conflicting and thus within the sound discretion of the pretrial court. Id. The court of appeals did not address the sanctions award because it concluded that the sanctions could be properly reviewed on appeal from a final judgment. Id. Consistent with the court of appeals' opinion, Plaintiffs argue that National Lloyds waived its objection to the discovery request and order at issue.

The Texas Rules of Civil Procedure provide:

A party must make any objection to written discovery in writing—either in the response or in a separate document—within the time for response. The party must state specifically the legal or factual basis for the objection and the extent to which the party is refusing to comply with the request.

TEX. R. CIV. P. 193.2(a). If an objection is not made within the time required, it "is waived unless the court excuses the waiver for good cause shown." Id. 193.2(e).

While National Lloyds ultimately withdrew its objections and privilege assertions to requests 12 and 13, National Lloyds objected from the earliest instance that the reports now being compelled were overbroad, irrelevant, and contrary to this Court's...