Plaintiffs should also network with other counsel litigating similar actions against the company and use the other actions to develop pattern and practice evidence. The United States Supreme Court’s
decision in TXO Production Corp. v. Alliance Resources Corp. (1993) 509 U.S. 443, 460-461 [113 S.Ct. 2711], provides an interesting example of one way to obtain pattern-and- practice evidence. Although not an insur- ance bad-faith case, the court affirmed a punitive damage award in part because “TXO’s pattern of behavior could potential- ly cause millions of dollars in damages to other victims.” The court concluded that although the punitive damages award was large, “in light of … the bad faith of peti- tioner, the fact that the scheme employed in this case was part of a larger pattern of fraud, trickery and deceit, and petitioner’s wealth, we are not persuaded that the award was” grossly exces- sive. (509 U.S. at 462, emphasis added.) There is nothing in the Supreme
Court decision that explains what evi- dence was in the record that supported these statements about the defendant’s “larger pattern” of misconduct. However, that evidence is detailed in the decision of the West Virginia Supreme Court, in TXO Production Corp. v. Alliance Resources Corp. (1992) 187 W. Va. 457 [419 S.E.2d 870]. In that opinion, the court explains that the plaintiff’s “pattern and practice” evidence consisted of the videotaped dep- osition testimony from four attorneys who had represented other oil producers who had dealt with the defendant and had been forced to file suit to obtain the roy- alties they thought they were owed. Specifically, the plaintiff in TXO had
accused the defendant of knowingly recording a false deed to create a cloud on plaintiff’s title to oil and gas wells, and to use that cloud as a basis to reduce the royalty payments TXO had agreed to pay for the production on those wells. One of TXO’s affirmative defenses at trial was good faith and lack of malice. To rebut this defense, the plaintiff introduced the testimony by the four attorneys, to establish a lack of good faith. The first attorney testified that he rep-
resented an elderly, functionally-illiterate woman in Louisiana. TXO’s employees
had visited his client and tricked her into signing a lease by telling her that unless she signed “some papers” TXO could not continue to pay her neighbors any royal- ties for gas. They also told her that she did not need to speak to her attorney about their visit. TXO settled the suit. (419 S.E.2d at 881.) The second attorney testi- fied that he owned oil wells in Texas and TXO had refused for over a year to pay him any royalties on the production from the wells, citing various excuses, including purported uncertainties about the title. TXO ultimately agreed to pay. (419 S.E.2d at 882.) The third attorney testified that he represented a group of well owners in a suit against TXO for its refusal to pay royalties, which TXO ultimately settled. (Ibid.) The fourth lawyer testified about ongoing litigation against TXO in Oklahoma. He explained that the suit alleged that TXO had misrepresented to a group of landowners that it had the right to drill on their land. As a result of its improper tactics, one landowner gave TXO permission to drill on his land. TXO then was able to use this permission to gain the right to drill under the entire tract. In essence, it was able to bootstrap its lie about its right to drill into permis- sion to drill. (419 S.E.2d at 882, 883.) The West Virginia Supreme Court
found that this evidence was sufficient to dis- prove TXO’s defense of good faith, “and to show that this case was but part of a pattern and practice of deception and chiseling by TXO.” (419 S.E.2d at 883.) The court also found that this hearsay testimony was admis- sible under the “catchall” hearsay exceptions of the West Virginia Rules of Evidence, (which parallel the Federal Rules of Evidence.) Since TXO was represented by counsel in each deposition, and since it knew well in advance that plaintiff would be seek- ing to admit the deposition testimony, it had every opportunity to rebut or discredit the testimony. Hence, the testimony was deemed sufficiently credible and reliable to be admit- ted in evidence. (419 S.E.2d at 885, 886.)
Anticipating defendant insurers’ objections to pattern-and-practice discovery Insurers generally object to pattern
and practice discovery on the ground that
producing the information would be bur- densome and oppressive and that it would violate third-party insureds’ privacy rights. They routinely submit declarations indi- cating that it will cost hundreds of thou- sands of dollars to produce the informa- tion. For example, in Mead Reinsurance Co. v. Sup. Ct. (City of Laguna Beach) (1986) 188 Cal.App.3d 313, 317 [232 Cal.Rptr 752, 754], the court found pattern-and- practice discovery burdensome and oppressive where it would require produc- tion of over 13,000 claim files without allocating the costs of producing the files. To preempt this problem, before you
serve the discovery, depose the insurer’s custodian of records and person most knowledgeable regarding information technologies to determine how the insurer maintains its files and data. Then you can craft your discovery requests to minimize the burden on the insurer. Of course, if you are willing to pay for the insurer’s costs associated with the discovery courts are more inclined to allow the discovery. Insurers also object on the ground
that the discovery would violate policy- holders’ right to privacy under Insurance Code section 791.01 and/or the Constitutional right to privacy. When you serve your discovery, you should send the insurer a form letter that it can send to its insureds to obtain their consent to pro- duce their information. The letter should include a brief description of the bad-faith allegations and explain that the insureds’ records may be relevant to the case. If rel- evant, also include a description of any unfair business-practice allegations. If insureds understand that they may be a victim of the insurer’s bad faith or unfair business practices, they will be more likely to release their records. Importantly, the policyholder must date and sign the letter within one year of the production of the information. Alternately, at the time you propound document discovery, offer that all personally identifying information can be redacted from produced documents. Then, after reviewing the produced docu- ments and if those documents support a claim that your client was injured by a pat- tern and practice of unreasonable or ille- gal claims-handling practices, you can
JUNE 2011 The Advocate Magazine — 39
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96