In an underinsured motorist (UIM) case, USAA challenged the plaintiff’s deposition notice for a corporate representative on multiple grounds, and the trial court denied USAA’s motion to quash. USAA ultimately sought mandamus relief from the Texas Supreme Court. In In re USAA General Indemnity Co., 624 S.W.3d 782 (Tex. 2021) (orig. proceeding), the Court ruled on the propriety and scope of the deposition of an insurer’s corporate representative’s in a UIM case where the plaintiff had settled with the underinsured motorist.
The Court initially discussed the discovery rules and case law defining the permissible parameters of corporate representative depositions. Generally, as with most discovery, a corporate representative may be deposed on issues that are relevant and not privileged, even if the evidence obtained ultimately is not admissible at trial.
Courts, however, must limit discovery requests if (a) they are unreasonably cumulative or duplicative, or obtainable from some other source that is more convenient, less burdensome, or less expensive; or (b) the burden or expense of the proposed discovery outweighs its likely benefit, taking into account the needs of the case, the amount in controversy, the parties’ resources, the importance of the issues at stake in the litigation, and the importance of the proposed discovery in resolving the issues. Tex. R. Civ. P. 192.4. The Court refers to this as a “proportionality” standard that must be applied on a case-by-case basis.
Next, the Court reiterated the framework of a UIM case. UIM coverage allows an insured to recover additional amounts when his actual damages exceed the limits of an at-fault motorist’s liability insurance. When triggered, such coverage contractually requires the UIM carrier to pay its insured the difference between the damages the insured is “legally entitled to recover” from an at-fault motorist and the amount recovered or recoverable from the motorist’s insurer. A carrier’s contractual duty to pay UIM benefits arises when the insured obtains a judgment establishing the liability and underinsured status of the other motorist.
If the insured settles with the other motorist, he may litigate those issues directly against the UIM carrier. And where, as here, the UIM carrier stipulates that the plaintiff was insured for UIM benefits and the accident was a covered occurrence under the policy, the coverage trial resembles a “typical car wreck” case involving the other motorist’s liability for the underlying car accident and the existence and amount of the insured’s damages. If the liable motorist’s insurance coverage is insufficient to compensate the insured for those damages, the contractual duty to pay UIM benefits arises.
In this UIM case, Wearden was the insured and Bernal was the allegedly negligent driver/defendant. Wearden sought a corporate representative deposition on the following topics:
1. Any policy(ies) of insurance issued or underwritten by USAA applicable to the wreck made the subject of this suit;
2. The occurrence or non-occurrence of all condition(s) precedent under the contract, including, but not limited to, collision with an uninsured motorist; and compliance by Wearden with the terms and conditions of his policy(ies);
3. Any facts supporting USAA’s legal theories and defenses;
4. The amount and basis for the USAA’s valuation of Wearden’s damages;
5. Whether Bernal was an uninsured/underinsured motorist at the time of the collision;
6. USAA’s contention that Wearden has failed to comply with all conditions precedent to recovery;
7. USAA’s claims and defenses regarding Wearden’s assertions in this lawsuit;
8. USAA’s contention that it is “entitled to offsets, including any recovery by Wearden from other parties or their insurance carriers”;
9. USAA’s affirmative defense that there are “contractual provisions with which Wearden has failed to comply.”
The Court then addressed whether the trial court erred in denying USAA’s motion to quash. The Court first recognized that the fact that a corporate representative may not have personal knowledge of the particulars of the car wreck at issue did not mean that the corporate representative possessed no relevant information. A lack of personal knowledge does not necessarily equate to a lack of relevant knowledge. And personal knowledge is not required for depositions under the civil procedure rules.
Further, USAA had conceded some facts regarding coverage but disputed its insured’s liability for the underlying accident and the amount of the plaintiff’s damages. Because the Court assumed USAA possessed information to support those positions, it held that information was discoverable unless privileged, even if not admissible at trial.
Nonetheless, the Court confirmed that the discovery could not exceed the bounds of the claims at issue in the lawsuit. Wearden had not asserted any bad faith claims. Thus, Wearden could not obtain discovery on unasserted, abated, or unripe bad-faith claim under the guise of investigating a claim for benefits.
The Court next made its case-by-case proportionality determinations about whether the discovery was cumulative, unduly burdensome, available from other sources, etc. The Court did not agree with USAA’s assertion that a deposition is inherently more burdensome than written discovery. And, the Court said, the rules do not favor one discovery method over another or require that those methods be enlisted in any particular order.
The Court permitted discovery encompassing topics 3, 5, and 7 because these topics on their face were limited to the disputed issues in the lawsuit. Information pertaining to these topics was discoverable unless privileged, whether sought through written discovery or deposition.
Topics 1, 2, 6, and 9, which encompassed a general inquiry into the UIM policy, Wearden’s compliance with the policy’s “contractual provisions,” and the occurrence of and compliance with “all conditions precedent to recovery,” exceeded the relevant subject matter of the suit and were improper. They also would serve to unnecessarily lengthen the deposition and add to its cost.
As to topic 8, USAA’s entitlement to offsets, the Court recognized it comes into play only after a jury determines Bernal’s liability and Wearden’s damages in excess of liability-policy limits. Therefore, inquiry into offsets was premature at this “car crash” phase of the case.
Finally, the Court agreed with USAA that inquiry into extracontractual matters such as the claims-handling process was improper before entitlement to benefits under the policy has been established. The Court recognized “that the line between a proper inquiry for relevant information and an improper inquiry into the claims-handling process may be a fine one, particularly given that whatever information USAA possesses was presumably gathered in the course of handling Wearden’s claim.” But USAA was not required to produce privileged information.
This discussion was relevant to the Court’s ruling on topic 4: the amount and basis for USAA’s valuation of Wearden’s damages. The Court said, to the extent questions on this topic sought to delve into issues like USAA’s reasons for denying Wearden’s claim, the investigation process, USAA’s work product, and USAA’s privileged communications with its attorneys, such questions were improper and subject to an instruction by counsel not to answer.
But, because the amount of Wearden’s damages was disputed, the topic was not wholly irrelevant or cloaked in privilege. Thus, to the extent USAA possessed information that was not privileged and that bore on the existence and amount of those damages, that information was discoverable.
With these limits, the Court held that the deposition of USAA’s corporate representative was permissible under the discovery rules. So limited, it sought relevant information and, on the record before the Court, was not out of proportion to the needs and circumstances of the case. USAA, therefore, was entitled to partial mandamus relief to the extent discussed in the opinion.