State Farm Mut. Auto. Ins. Co. v. Superior Court In and For County of Maricopa

• Decision Date: 22 January 1991
• Docket Number: CA-SA,No. 1,1
• Citation: 804 P.2d 1323,167 Ariz. 135
• Parties: STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, an Illinois corporation, Petitioner, v. SUPERIOR COURT of the State of Arizona, In and For the COUNTY OF MARICOPA, the Honorable Armando de Leon, a judge thereof, Respondent Judge, Denise MIEL, Real Party in Interest. 90-244.
• Court: Arizona Court of Appeals

Page 1323

804 P.2d 1323

167 Ariz. 135

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, an Illinois corporation, Petitioner, v. SUPERIOR COURT of the State of Arizona, In and For the COUNTY OF MARICOPA, the Honorable Armando de Leon, a judge thereof, Respondent Judge Denise MIEL, Real Party in Interest.

No. 1 CA-SA 90-244.

Court of Appeals of Arizona Division 1, Department C.

Jan. 22, 1991.

O'Connor, Cavanagh, Anderson, Westover, Killingsworth & Beshears, P.A. by

[167 Ariz. 136] Ralph E. Hunsaker and Lisa M. Sommer, Phoenix, for petitioner.

The Langerman Law Offices by Richard W. Langerman, Amy G. Langerman and JoJene E. Mills, Phoenix, for real party in interest.

OPINION

GERBER, Judge.

This special action arises from a discovery dispute between State Farm Mutual Automobile Insurance Company (State Farm) and Denise Miel, real party in interest. Petitioner State Farm alleges that the trial court abused its discretion in granting plaintiff Miel's motion to compel discovery. The petition presents an important issue of state-wide significance because this discovery issue is involved to some extent in virtually every bad faith suit in Arizona. Furthermore, a trial court's grant of a motion to compel answers to interrogatories and production of documents is not an appealable order. Cornet Stores v. Superior Court, 108 Ariz. 84, 492 P.2d 1191 (1972). Therefore, we previously accepted jurisdiction of this special action and indicated that an opinion would follow. This is the opinion.

FACTS AND PROCEDURAL HISTORY

Denise Miel and Michael McKenzie were involved in an automobile accident. McKenzie was insured by State Farm under an automobile insurance policy with liability limits of $25,000.00.

Through her attorney, Miel contacted State Farm regarding her claim against McKenzie. Cindy Hoekstra was the State Farm claims adjuster assigned to handle Miel's liability claim. Miel's attorney sent a letter to Hoekstra which stated in pertinent part:

[B]ased on the understanding that there is only $25,000.00 of coverage available, Denise has authorized me to make an offer of settlement of her case as follows:

1. That State Farm confirm in writing no later than May 19, 1989, that $25,000 is the full coverage available to Michael Gregory McKenzie from any source that would be applicable to cover the accident of December 14, 1988;

2. That State Farm provide an affidavit from Michael Gregory McKenzie no later than May 19, 1989, that his State Farm coverage was the only insurance available to cover the accident of December 14, 1988;

3. That Michael Gregory McKenzie provide a financial statement or a sworn statement under oath concerning his financial condition no later than May 19, 1989; and

4. That no later than May 19, 1989, State Farm agree to tender the full policy proceeds within five days of request by Denise Miel. [Emphasis added.]

Hoekstra was aware that she should immediately refer policy demands for settlement to her supervisor. She failed to forward Miel's letter and also failed to respond within the time requested. The parties dispute whether her conduct was intentional or if it was an oversight. She later received authorization to offer McKenzie's policy limits in full settlement of Miel's claim. Twelve days after the deadline imposed by the plaintiff, Hoekstra sent a letter to Miel offering policy limits.

On the same date, Miel filed a lawsuit against McKenzie alleging negligence. State Farm retained counsel to represent McKenzie and did not assert policy defenses or reservation of rights. Miel and McKenzie eventually entered into a settlement agreement. McKenzie assigned Miel all potential claims against State Farm arising from the automobile accident. The settlement agreement was approved by the trial court. Judgment was entered in favor of Miel for $75,000 pursuant to Rule 16.1, Arizona Rules of Civil Procedure.

Miel then filed a second lawsuit against State Farm, alleging that "[d]efendants acted negligently, intentionally, in bad faith and/or with an evil mind, and breached the contract of insurance with Michael Gregory McKenzie." The essence of this bad faith claim was that State Farm's 12-day delay in responding to Miel's demand letter was part of a strategy to defeat payment.

Miel noticed non-uniform interrogatories and requests for production. ¹ Miel's interrogatories sought information regarding nationwide lawsuits involving State Farm. Miel requested "any and all" documents regarding: (1) punitive damage aspects of excess decisions, (2) failure to pay demands within the policy limits, (3) strict liability for failure to settle, (4) effects of offers of policy limits after prior refusal to pay within time limit, (5) all State Farm publications within the prior five years regardless of content, topic, or the issues in this lawsuit, and (6) all State Farm publications concerning excess liability claims published at any point in time.

State Farm objected to the discovery requests on the grounds that the requests were irrelevant, immaterial, oppressive, unduly burdensome, broad and vague. In response Miel merely modified the word "refusal" to "failure" in interrogatory numbers 23, 25, and 26. When State Farm did not file what Miel deemed to be a satisfactory response, Miel filed a motion to compel.

State Farm's response to the motion to compel reiterated objections of irrelevancy, overly burdensome and privilege. State Farm filed the affidavit of its Arizona claims superintendent who avowed that State Farm annually handles over 175,000 claims in Arizona. He stated State Farm does not keep any type of computer record to indicate which claims involve bad faith. He stated that State Farm would have to pull each file, review it and make a file-by-file determination. He stated that reviewing State Farm's house publication, Obiter Dictum, would require checking thousands of issues. This superintendent concluded it was not feasible for State Farm to review all these publications in order to respond to plaintiff's request.

In its minute entry addressing this discovery dispute, the trial court directed the parties to meet for four hours to attempt to resolve the dispute themselves. Pursuant to the trial court's order, both parties met and recertified their inability to resolve the dispute.

The trial court then granted Miel's motion with only minor limitation and overruled all State Farm's objections. ² This special action followed.

DISCUSSION

The trial court's broad discretion in discovery matters will not be disturbed on appeal absent an abuse of discretion. Brown v. Superior Court, 137 Ariz. 327, 670 P.2d 725 (1983).

In this court State Farm asserts that the trial court abused its discretion by granting Miel's discovery requests seeking nationwide information without limitation. State Farm argues that the discovery requests are overbroad and reach far beyond the scope contemplated by Hawkins v. Allstate Ins. Co., 152 Ariz. 490, 733 P.2d 1073 (1987). State Farm also argues that the burden of responding to these discovery requests is extreme in light of the facts of the case.

We agree with State Farm's position. The trial court here abused its discretion. Under the 1984 Amendments to Rule 26, judges are encouraged to take an active role to identify and remedy discovery abuse. Rule 26, Arizona Rules of Civil Procedure (State Bar Committee Notes, 1984 Amendments). Discovery abuse has become a major problem in civil litigation because of its expense and extortionate effect. See Comm'n on the Courts, Report of the Task Force on Court Productivity, p. 63 (1989). The Commission on the Courts found that:

... a "discovery industry" has developed, and it is flourishing. The result has been a dramatic increase in the cost of civil litigation and a growing concern over that phenomenon. The public, the bench, and even lawyers who reap the rewards of discovery-induced increases in fees are expressing concern about the escalating cost involved. The cost of legal services, excluding the cost of in-house counsel and government attorneys, increased 244% between 1973 and 1983 and the trend continues unabated. Even most lawyers agree that the expense of the discovery process is disproportionate to the value of the information it yields. Thus, it is not surprising that the national legal community's concerns that the discovery process is in fact abused by "wild fishing expeditions" are shared by Arizona attorneys and laypeople as well.

Id. at 66. (Footnotes omitted.) Discovery in civil cases should be controlled and managed by the court from the onset, not perfunctorily relegated to the parties for resolution.

a. Relevance

The discovery rules, we acknowledge, should be liberally construed to permit discovery of information "relevant to the subject matter in the pending action." Rule 26(b)(1), Arizona Rules of Civil Procedure. The information sought need only be "reasonably calculated to lead to the discovery of admissible evidence." Id. The goal of broad discovery is to facilitate mutual knowledge of all relevant facts gathered by the parties, promote efficient and speedy resolution of disputes and avoid surprise at trial. See Hickman v. Taylor, 329 U.S. 495, 67 S.Ct. 385, 91 L.Ed. 451 (1947). We do not quarrel with these principles but find that they must be interpreted in a realistic context of relevance.

Miel contends that the information sought is relevant to the bad faith claim. In Hawkins, a leading bad faith case, the Supreme Court considered the admissibility of the testimony of Boettcher, a former Phoenix claims representative. 152 Ariz. at 498, 733 P.2d at 1081. The Hawkins court did not consider the scope of discovery in bad faith actions.

Boettcher's testimony was offered to...