Court Opinion

ID: 9647172
Source: CourtListenerOpinion
Date Created: 2023-08-23 13:25:31.2762+00
Date Added: 2024-06-11T18:11:46.127929
License: Public Domain

KENNEDY, Justice,
dissenting.
I agree with the majority’s position that Rule 166b(3)(d) involves three analytical prongs:
1) a communication passing between agents or representatives or the employees of any party to the action or communications between any party and his agents, representatives or their employees,
2) that communication must be made subsequent to the occurrence or transaction upon which the suit is based, and
3) that communication must be made in connection with:
a) the prosecution, investigation or defense of the claim or
b) the investigation of the occurrence or transaction out of which the claim has arisen.
The second prong of this Rule establishes a time factor — the date, based on the occurrence or transaction, that determines when communications are exempt from discovery. The first and third prongs are subject-matter factors; i.e., the exemption applies to communications amongst certain persons (prong 1) and about certain matters (prong 3).
I disagree with the majority’s interpretation of what constitutes an “occurrence o’* transaction upon which the suit is based.” The bank officer’s malfeasance occurred between 1975 and 1979. The litigation involving the officer’s malfeasance concluded in May, 1984. Relator denied the bank’s claim under its bond on December 21,1984. The majority concludes that the denial of the claim on December 21, 1984, is the occurrence or transaction upon which the suit is based. I disagree.
The Supreme Court stated in Maryland American General Insurance Co. v. Blackmon, 639 S.W.2d 455, 457-58 (Tex.1982):
*72The protection of a party’s right to defend a suit brought against him is the essence of the proviso in Rule [166b (3)(d) ]1, and the privilege exists so long as that right exists. Regardless of the other reasons which might justify the use of this information, it would be impossible to limit the prejudicial effect of disclosure on [the Surety’s] right to defend the contract cause of action.
In order for First National Bank of Mercedes to recover under its contract cause of action, the Bank must prove its officer was dishonest and that such dishonesty caused losses within the terms of the bond. Id. at 457. Therefore, it follows that the officer’s malfeasance is the occurrence or transaction upon which the suit is based. The surety’s denial of the claim is not the basis for liability under the contract. The dishonest act provides the basis for liability, if any.
The majority’s opinion causes illogical consequences.2 In Maryland American the surety was joined as a defendant in the initial lawsuit claiming dishonesty. The matters sought to be discovered were identical to those before us. The Supreme Court held that the communications were exempt from discovery and would remain so for as long as the surety’s liability on the bond remains undetermined. Id. at 458. The majority’s opinion, in the instant case, allows the bank to lay back, either by refusing to include the surety as a defendant or by failing to make a claim, and effectively whittle away those communications exempt from discovery. However, the surety’s exclusion from the initial suit does not absolve its liability. The surety’s liability on the bond remains undetermined, regardless of whether it has denied the claim or not.
The El Paso Court of Appeals recently ruled on the Rule 166b(3)(d) exemption in Texas Employers’ Insurance Association v. Fashing, 706 S.W.2d 801 (Tex.App.—El Paso 1986) (on writ of mandamus). However, that case is factually different. Ru-bio was an employee of Kessler and injured his back on the job. Rubio filed a claim for workers’ compensation benefits; Kessler fired Rubio; and Rubio brought suit for wrongful discharge against Kessler. Ru-bio sought discovery of Texas Employers’ Insurance Association’s claim file in his suit against Kessler for wrongful discharge. The El Paso court held the insurance files discoverable because “[t]he investigation files generated by the compensation claim were not in any sense prepared in connection with the occurrence of the discharge or the resulting suit.” Id. I agree with this holding. The wrongful discharge is distinct from the worker’s compensation claim. In the case before us, the officer’s malfeasance generated the investigation for which the surety denied the claim.
Rule 166b(3)(d) states that the following matters are not discoverable, and not that the following time-periods are not discoverable. The heart of the discovery exemption is destroyed by concluding that communications involving the officer’s malfeasance are not exempt merely because the surety has not denied the bank’s claim. This encourages a surety to hastily deny the bond claim, thereby subjecting themselves to liability under a “bad faith” claim for failure to properly investigate and make payment under the bond.
The exemption under Rule 166b(3)(d) applies to all the communications before us, and not just those subsequent to December 21, 1984. I respectfully dissent.

. The exemption contained in Rule 166b(3)(d) previously existed in TEX.R.CIV.P. 186a (Vernon 1976).

. Transaction is a word of flexible meaning. It may comprehend a series of many occurrences, depending not so much upon the immediateness of their connection as upon their logical relationship. 1 R. McDonald, Texas Civil Practice § 3.20 (rev. 1981).