Several groups, including the biggest business federation in the world, have recently filed law suits in the Texas Supreme Court, claiming trial lawyers are abusing the legal process of discovery to compel frivolous claims against carriers to settle.
In November,
State Farm Lloyds filed two petitions for what is called a writ of mandamus in the high court, trying to overturn a district judge's determination to enforce a protocol for the generation of electronically stored information (ESI for short) in a hailstorm suit.
"A new but important battleground has emerged in Texas including an unprecedented amount of suits against insurance carriers, with plaintiffs asserting bad faith underpayment of property damages following hail and wind storms," State Farm's request reads.
"This new battleground calls for a number of plaintiffs' lawyers who regularly sue on behalf of insureds after basically every Texas thunderstorm and seek to leverage the worth of cases by demanding wide-ranging and invasive discovery which is disproportionate to the value of the claims."
The mass filing of suits against Texas insurance companies started after hailstorms in 2012, which is forcing huge costs on insurers trying to defend, what they claim to be, spurious lawsuits.
Insurance litigators, including Houston lawyer Steve Mostyn, who made numerous millions suing insurance companies in the wake of Hurricane Ike, advertise after every major storm in search of customers. (One of Mostyn’s clients, a Mr Nouri, is currently suing the high profile lawyer for malpractice, claiming that his attorney ditched his case when the carrier started to fight back)
Around a third of the coverage claims submitted following the recent Hidalgo County hailstorms morphed into litigations, prompting the introduction of a multidistrict litigation panel to deal with the thousands of suits.
Before the 2012 thunderstorms, just 1 to 2 percent of coverage claims blossomed into suits, Insurance Council of Texas figures show.
Mostyn represents the plaintiffs.
The civil rules compel courts to require the creation of ESI in formats which are burdensome for the defendants and end up costing the carriers many thousands.
"In short, (Reyna's) order permits the Plaintiffs to dictate the whole way and procedure where State Farm, as the responding party, must gather, process, review, and create electronic documents and data based only on what the Plaintiffs need," the petition states.
"If the pretrial court's protocol is enabled to stand, State Farm is going to be confronted with reprogramming its systems, which are already made to react to litigation requests in state and federal courts across the united states, to create special formats in every single case," TCJL's statement on the case reads.
"The only reason for the protocol, as far as we are able to tell, would be to make use of the discovery process to ratchet up the resolution values of every suit."
"Where the discovery prices overwhelm the possible worth of the underlying litigation, it is not any surprise that defendants are often compelled to settle even meritless claims," the Chamber's brief states, including the high court should give State Farm's request so "Texas courts tend not to become a forum for exploitation of its own discovery rules that enforce a disparate economical effect on American businesses doing business in Texas."
TCJL says given the possible size of the monetary reward of making blanket discovery requests within an effort to leverage resolutions and filing mass numbers of suits, trial courts should be particularly alert about issuing pretrial orders giving an undue advantage to a side.
"In this instance the pretrial court's protocol for discovery of ESI provides the plaintiff carte blanche to demand discovery in a ineffective, unnecessary, and burdensome type.”
Nouri’s suit against Mostyn is ongoing “In their reports, Mostyn’s experts indiscriminately identified any and all potential repairs to the building, regardless of whether the damage was caused by the hurricane,” The suit states. “[The experts’] reports identified only $339,914.31 in damage, raising the question as to why Mostyn made a $3.2 million demand prior to suit.”
