Court Opinion

ID: 3122652
Source: CourtListenerOpinion
Date Created: 2015-10-16 14:29:25.229489+00
Date Added: 2024-06-11T09:33:11.829948
License: Public Domain

Opinion issued July 12, 2012.

                                    In The

                             Court of Appeals
                                    For The

                         First District of Texas
                          ————————————
                             NO. 01-11-00816-CV
                           ———————————
          IN RE AMERICAN ZURICH INSURANCE COMPANY

                   On Appeal from the 151st District Court
                           Harris County, Texas
                       Trial Court Case No. 1081742

                       MEMORANDUM OPINION

      This mandamus petition concerns the scope of discovery in a lawsuit arising

out of a workers’ compensation proceeding.      Real party in interest, Cathryn

Thompson, sues relators, American Zurich Insurance Company and its insurance

adjuster, Fai Hensel (collectively, “Zurich”), alleging that Zurich wrongfully

denied and delayed payment of workers’ compensation benefits to her in violation
of the Insurance Code and Deceptive Trade Practices Act, and breached its

common-law duty of good faith and fair dealing.

      Zurich petitions for mandamus relief from the trial court’s September

23, 2011 order, compelling Zurich to produce monthly operational reports

containing aggregate claims data on its Texas workers’ compensation claims from

January 2006 through December 2009. Zurich contends that the discovery is

foreclosed by Texas Mutual Insurance Co. v. Ruttiger. No. 08-0751, 2012 WL
2361697 (Tex. June 22, 2012) (opinion on rehearing), decided after the trial court

issued its ruling. In addition, Zurich claims that the discovery is irrelevant to

Thompson’s claims and overly broad. We conditionally grant mandamus relief

from the trial court’s order in light of the Texas Supreme Court’s opinion in

Ruttiger.

                                  Background

The Underlying Suit

      Thompson alleges that she developed cubital tunnel syndrome while

working for Conn’s as a forklift operator in April 2009. Contending that her injury

entitled her to compensation as a beneficiary of Conn’s workers’ compensation

program, Thompson filed an insurance claim with Zurich, Conn’s workers’

compensation carrier.    Zurich refused Thompson’s claim on the basis that

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Thompson had not demonstrated that she sustained the injury within the course and

scope of her employment.

      In response, Thompson filed an administrative claim with the Division of

Workers’ Compensation (WCD). See TEX. LAB. CODE ANN. § 410.023(a) (West

Supp. 2011) (authorizing WCD to conduct benefit review conferences to resolve

disputed workers’ compensation claims); see also id. § 410.029 (West 2006)

(disputes may be resolved in whole or in part at benefit review conference). After

Thompson and Zurich were unable to reach a settlement at a benefit review

conference, the matter was set for a contested case hearing to determine whether

Thompson had suffered a compensable injury and whether she had been disabled

as a result of her injury. See id § 410.151–.152 (permitting contested case hearing

before qualified hearing officer). The hearing officer issued a Decision and Order,

concluding that Thompson had suffered a compensable repetitive trauma in April

2009 and, as a result of her injury, had been unable to work for a period of time.

      After the WCD found in her favor, Thompson filed this suit in state district

court. Thompson claims that Zurich wrongfully denied and delayed payment of

workers’ compensation benefits due her and, therefore, knowingly violated the

Insurance Code, Deceptive Trade Practices Act and breached its common-law duty

of good faith and fair dealing.

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Discovery Issues

      Thompson served Zurich with requests for production and interrogatories.

Relevant to this appeal, Thompson requested that Zurich produce:

      Request No. 16: Documents demonstrating American Zurich
      Company’s claim denial rate for each year commencing 2006-2010.

      Request No. 18: Your report on the total and average claim cost
      (indemnity and medical); medial claim cost (indemnity and medical);
      number of claim; number of denials (medical and indemnity) for
      2006-2010.

Zurich objected to Requests 16 and 18, contending that the requests were overly

broad, irrelevant, and unlikely to lead to the discovery of admissible evidence.

Zurich also responded that it did not maintain any such data summaries.

      In reply, Thompson moved to compel Zurich to produce documents in

response to Requests 16 and 18. The trial court granted Thompson’s motion and

ordered Zurich to identify “the report(s) provided to [Zurich claims managers] on a

recurring basis . . . that are or may be responsive to [Thompson’s] Request for

Production 16 and 18 . . . .” In accord with the trial court’s order, Zurich identified

(subject to its objections) monthly operational reports that Zurich distributes to its

team managers. The reports contain workers’ compensation claims data reflecting:

(1) the number of new claims filed, (2) sums of actual valuation reserves and

reserve adequacy, (3) the amount in penalties paid, and (4) amounts paid in

benefits. After reviewing the reports in camera, the trial court granted the motion

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to compel and ordered Zurich to produce all operational reports for the months

January 2006 through December 2009.

                               Standard of Review

      Mandamus relief is appropriate only if the trial court abuses its discretion

and no adequate remedy by appeal exists. In re Cerberus Capital Mgmt., L.P., 164
S.W.3d 379, 382 (Tex. 2005) (orig. proceeding) (per curiam); In re Prudential Ins.

Co. of Am., 148 S.W.3d 124, 135 (Tex. 2004) (orig. proceeding); Walker v. Packer,

827 S.W.2d 833, 839–40 (Tex. 1992) (orig. proceeding). An order compelling

discovery that exceeds the proper bounds is subject to mandamus review. In re

Am. Optical Corp., 988 S.W.2d 711, 713 (Tex. 1998) (orig. proceeding) (per

curiam).

                                   Discussion

      Zurich contends that the discovery order constitutes an abuse of discretion

because Ruttiger, decided after the trial court ruled, forecloses Thompson’s claims

in this suit. 2012 WL 2361697, at *11–13, *18–19. Alternatively, Zurich claims

that the trial court’s order is overly broad and requires Zurich to produce

documents that are irrelevant to Thompson’s claims.

      Generally, the scope of discovery is within the trial court’s discretion;

however, the trial court must impose reasonable discovery limits. In re CSX Corp.,

124 S.W.3d 149, 152 (Tex. 2003) (orig. proceeding) (per curiam); see also Dillard

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Dep’t Stores, Inc. v. Hall, 909 S.W.2d 491, 492 (Tex. 1995) (orig. proceeding) (per

curiam). Texas Rule of Civil Procedure 192.3(a) provides:

      [A] party may obtain discovery regarding any matter that is not
      privileged and is relevant to the subject matter of the pending action,
      whether it relates to the claim or defense of the party seeking
      discovery or the claim or defense of any other party. It is not a ground
      for objection that the information sought will be inadmissible at trial if
      the information sought appears reasonably calculated to lead to the
      discovery of admissible evidence.

TEX. R. CIV. P. 192.3(a). “Although the scope of discovery is broad, requests must

show a reasonable expectation of obtaining information that will aid the dispute’s

resolution. Thus, discovery requests must be ‘reasonably tailored’ to include only

relevant matters.” In re CSX Corp., 124 S.W.3d at 152 (citing In re Am. Optical

Corp., 988 S.W.2d at 713).

      Thompson contends that Zurich intentionally or knowingly violated the

Insurance Code in (1) failing to effectuate a prompt, fair, and equitable settlement

of her claim, (2) failing to adopt and implement standards for prompt investigation

of claims arising under its policies, (3) failing to promptly explain why it denied

her claim, (4) refusing to pay her claim without conducting a reasonable

investigation, and (5) misrepresenting the terms of the insurance policy under

which Zurich provides workers’ compensation coverage. See TEX. INS. CODE ANN.

§ 541.060(a) (West 2009) (prohibiting unfair settlement practices, including failing

to attempt in good faith to effectuate prompt, fair, and equitable settlement of claim

                                          6
where insurer’s liability has become reasonably clear; failing to provide to

policyholder reasonable explanation for denial of claim; and refusing to pay claim

without conducting reasonable investigation); id. § 542.003 (prohibiting carriers

from engaging in unfair settlement practices); id. § 541.061(1)–(3) (providing that

misrepresentation an insurance policy by act or omission is unfair method of

competition or deceptive practice in insurance business).

      In Ruttiger, the Texas Supreme Court held that, in light of the procedures

and provisions detailed in the amended Texas Workers’ Compensation Act, the

legislature did not intend to provide for separate causes of action for unfair

settlement practices against workers’ compensation carriers under sections 541.060

and 542.003 of the Insurance Code. 2012 WL 2361697, at *11–13. Given the

extensive statutory framework for workers’ compensation cases, the Court further

held that an injured employee may not assert a common-law claim for breach of

the duty of good faith and fair dealing against a workers’ compensation carrier,

overruling Aranda v. Insurance Co. of North America, 748 S.W.2d 210 (Tex.

1988). Id. at *18–19. We conclude that Ruttiger forecloses Thompson’s claims

under sections 541.060 and 542.003 of the Insurance Code and her claim for

breach of the duty of good faith and fair dealing. Thus, the trial court had no

discretion to order discovery directed to those claims. See id. at *11–13, *18–19

(holding that no action may be brought by insured against workers’ compensation

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carrier under sections 541.060 or 542.003 of the Insurance Code based on delay or

denial of workers’ compensation benefits and concluding that claim for breach of

duty   of   good    faith   does     not   obtain   in   light   of   amendments   to

workers’ compensation scheme).

       Ruttiger does not foreclose Thompson’s claims that Zurich misrepresented

its workers’ compensation policy in violation of section 541.061 of the Insurance

Code and engaged in deceptive trade practices in violation of the DTPA. We next

consider whether the operational reports are within the scope of permissible

discovery with respect to these claims.

   1. Section 541.061 of the Insurance Code

       A plaintiff may sue her insurer for misrepresentations about the scope of

coverage under the Insurance Code and the DTPA. See TEX. INS. CODE ANN.

§ 541.061 (prohibiting misrepresentations of insurance policies); see also Brown &

Brown of Tex., Inc. v. Omni Metals, Inc., 317 S.W.3d 361, 381 (Tex. App.—

Houston [1st Dist.] 2010, pet. denied). Thus, evidence supporting allegations of

misrepresentation is discoverable.

       Discovery of the operational reports, however, is not reasonably calculated

to lead to evidence that supports Thompson’s remaining claim under these

provisions. The reports are internal communications distributed to Zurich’s Team

Managers. They contain monthly data summaries, revealing the number of new

                                           8
claims filed, Zurich’s claims reserves, penalties paid, and amounts paid in benefits.

The reports do not interpret, represent, or analyze Zurich’s workers’ compensation

policies generally.   Thompson does not contend that the reports contain any

representation regarding her workers’ compensation policy individually. Nor does

she allege that Zurich misrepresented its workers’ compensation policy to her

based on information contained in these reports—they instead reflect general

claims handling for all of Zurich’s Texas workers’ compensation claims for a

three-year period. Because the reports sought relate neither to Thompson’s claim

or injury specifically, nor to interpretation of the insurance policy generally, we

conclude that the operational reports are not relevant to Thompson’s section

541.061misrepresentation claim. As the reports are not relevant to Thompson’s

misrepresentation claim, the request for discovery of the reports to prove an

intentional or knowing violation of the Insurance Code based on Zurich’s alleged

misrepresentation of its workers’ compensation policy’s coverage is similarly

overbroad at this stage of the proceedings. See TEX. INS. CODE ANN. § 541.152(b)

(authorizing damages for knowing violations of Insurance Code); see also In re

Allstate Cnty. Mut. Ins. Co., 227 S.W.3d 667, 670 (Tex. 2007) (per curiam)

(granting mandamus relief when trial court ordered claims-handling information

that was overbroad as to time, location, and scope).

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   2. Deceptive Trade Practices Act

      As pleaded, Thompson’s DTPA claim turns on whether or not Zurich

misrepresented its insurance policy in violation of section 541.061 of the Insurance

Code. See TEX. INS. CODE ANN. §§ 541.061, 541.151 (authorizing action under

DTPA for Insurance Code violation, including misrepresentation of insurance

policy); see also TEX. BUS. & COM. CODE 17.46(b) (West 2011). Because we

conclude that the operational reports are not discoverable as they do not relate to

Thompson’s claim under section 541.061 of the Insurance Code, we likewise hold

that the reports are not relevant to her DTPA claim. See Ruttiger, 2012 WL
2361697, at * 14 (dispensing of DTPA claim in workers’ compensation case when

claim depended on Insurance Code misrepresentation claim and evidence was

insufficient to support finding that carrier misrepresented policy).

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                                     Conclusion

      In light of the Texas Supreme Court’s intervening decision in Ruttiger, we

conclude that ordering discovery of claims handling operational reports was error.

We therefore conditionally grant mandamus relief and direct the trial court to

vacate its discovery order. We are confident that the trial court will promptly

comply, and our writ will issue only if it does not.

                                               Jane Bland
                                               Justice

Panel consists of Justices Bland, Massengale, and Brown.

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