Tennessee Insurance Litigation Blog Honored as One of the Top 50 Insurance Blogs
A month or so ago I was excited to announce that this blog was nominated by the LexisNexis Insurance Law Community as one of the top 50 insurance blogs on the web. I recently learned that we were in fact selected as one of the top 50. Thanks to all of our readers for making this blog a success.
For a full list of the Top 50 Insurance Blogs, click here.
Discovery in Bad Faith and Consumer Protection Act Cases, Part I
In bad faith and Tennessee Consumer Protection Act cases, I routinely run into work product objections during discovery. Often these objections are made even as to reports and documents generated before the claim was denied. I believe work-product objections as to pre-denial materials are improper. As we know, Rule 26.02(3) protects against disclosure of materials prepared in anticipation of litigation. In general, courts seek to distinguish those materials that are generated “in the ordinary course of business” from those prepared “in anticipation of litigation.” The work product doctrine does not protect documents prepared in the ordinary course of business. See Boyd v. Comdata Network, Inc., 88 S.W.3d 203, 225 n.33 (Tenn. Ct. App. 2002) (citing Simon v. G.D. Searle & Co., 816 F.2d 397, 401 (8th Cir. 1987). In light of the above, the obvious question in litigation involving an insurance claim is when the insurance company begins investigating and acting “in anticipation of litigation” as opposed to doing so in the ordinary course of its business. Fortunately, there is case law to help, and I’ve compiled a few helpful citations below for use by lawyers fighting this decades old battle:
- “The investigation and evaluation of claims is part of the regular, ordinary and principal business of insurance companies." Fine v. Bellefonte Underwriters Ins. Co., 91 F.R.D. 420, 422 (S.D.N.Y. 1981).
- “It is . . . well established that insurance companies have an independent obligation to review and follow up on claims, and their reports are thus not protected, although they are usually prepared with an eye toward litigation." Fru-Con Constr. Corp. v. Sacramento Mun. Util. Dist., 2006 U.S. Dist. LEXIS 53763 at *4 fn. 3 (E.D. Cal. July 20, 2006) (citing Harper v. Auto-Owners Ins. Co., 138 F.R.D. 655 (S.D. Ind. 1991)).
- Any investigation, including statements obtained as part of this process, would fall within the insurance company's ordinary business and independent duty to investigate and evaluate claims. Accordingly, it can be presumed that "documents which were produced by an insurer for concurrent purposes before making a claims decision would have been produced regardless of litigation purposes . . . ." Stout v. Illinois Farmers Ins. Co., 150 F.R.D. 594, 605 (S.D. Ind. 1993).
If any Tennessee practitioners have dealt with this issue and received rulings from trial courts, I keep a database of such Orders and would love to hear from you.
Answering Questions Posed About Valuation for Purposes of the Co-Insurance Penalty
We have had some excellent comments and questions on the topic of co-insurance, and specifically whether there can be any “iron-clad” or “black and white” rules as to who is responsible for any undervaluation. Obviously, the readers are concerned as to who, between the applicant/insured and the agent or company, should be held responsible for the valuation of the property.
There may be some “hard and fast” rules in some jurisdictions, but for the most part, the answer as to who will be responsible is – it depends! If an applicant approaches an agent, and affirmatively represents the value of property, and the agent or company takes no step to assess the property’s valuation, then the likelihood is that the insured would be responsible for any undervaluation. This should be true even if the applicant is basing his or her opinion as to the value of the property on a real estate appraisal done in the course of obtaining financing, a tax assessment (which almost always undervalues the property), or any other type of valuation. The point here is that, as between the agent and the applicant, the only person discussing valuation is the applicant.
However, experience shows that agents and companies are often involved in the valuation of property. For instance, most agents today can run a replacement cost calculation based upon the square footage, the type of construction, and the location of the property. If we were to assume that an applicant contacted an agent, and stated that he or she did not know the value of the property (if, for instance, it was inherited),and asked the agent to run a valuation on the property, then who should be responsible if the coverage is issued for that amount,? In my mind, that is going to be the agent’s responsibility, and the carrier is probably going to be estopped to contest the insurance to value of the property, such that the co-insurance is not going to be applied. In another instance, as our readers know, Tennessee’s valued policy law provides a 90 day period during which a company can inspect the property and assign a different value to it than that contained on the application. I have seen his inspection change the value of the insured property on only a few occasions, but the point for consideration here is that a valuation specifically placed on property by the insurance company within 90 days of the issuance of the policy should estop the insurance company from contesting the value of the property when a loss occurs shortly thereafter.
The bottom line is that there is really no rule, in my opinion, that will govern each and every case without regard to the facts. It is extremely important to assess who (as between the applicant and the agent/insurer) placed the value on the property. If the applicant had sole responsibility for placing the value, then the applicant should be responsible for an undervaluation. If the agent or company placed the value, then the company probably should not be able to assert the undervaluation of the property (presuming that the insured provided correct and accurate information). If it was a mixture of the two, it is going to depend on the circumstances.
