Texas Court Halts Insurer’s Bad Faith Production of Claim Notes, In-House Counsel Communications

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(USA Herald) – Insurance companies are expected to act in good faith when it comes to settling claims made by policyholders. However, when an insurer’s actions are deemed to be in bad faith, policyholders can face a frustrating and lengthy legal battle to receive the compensation they are owed. In a recent case in Texas, a court has granted relief to an insurer accused of bad faith, halting the production of claim notes and communications with in-house counsel.

The case, In re Mt. Valley Indem. Co., No. 09-22-00207-CV, 2022 Tex. App. LEXIS 8329 (Tex. App. Nov. 10, 2022), involved a first-party bad faith claim, in which a Texas state court compelled production of notes and communications between an outside claim adjuster, his supervisor, and in-house counsel. The insurer sought mandamus relief from the appellate court, which stayed the order compelling discovery and allowed the parties to address whether the at-issue documents were privileged.

The insurer argued that the work product doctrine applied to certain documents created after it advised the insured of an unjustifiable increase in Loss of Use expenses. The insurer also argued that communications between the adjuster, his supervisor, and in-house counsel were for the purpose of obtaining legal advice in relation to the insured’s claim, especially after the insured hired counsel.