Texas Supreme Court Hears Argument On Whether Insureds Can Discover Insurer's Own Attorneys' Fees
Time 2 Minute Read
Categories: Bad Faith

The recovery of attorneys' fees is an important issue in almost every lawsuit, and especially for policyholders in litigation against their insurer.  In almost every case, the policyholder and its insurer will dispute whether the policyholder's attorneys' fees are reasonable and necessary, with insurer arguing that they are not.  On Tuesday, February 7, 2016, the Texas Supreme Court heard oral argument in In re National Lloyds Insurance Company, Wardlaw Claims Service, Inc., and Ideal Adjusting, Inc., Case No. 15-0591, regarding whether a policyholder seeking recovery of its attorneys' fees should be permitted to discover its insurance company's attorneys' fee information—such as hourly rates and time spent on the matter.

The case arose from a state multi-district litigation proceeding in which Plaintiffs asserted they had been underpaid on their property damage claims following hailstorms.  In connection with those claims, Plaintiffs also sought to recover their attorneys' fees, which the insurers challenged on the bases of reasonableness and necessity.   Plaintiffs then moved for additional discovery about the insurers' own attorneys' fees, in order to compare those fees to their own allegedly "unreasonable" attorneys' fees.   The insurers objected, arguing that their own fees were irrelevant (since they were not seeking recovery of them from Plaintiffs), and that disclosure of those fees would violate the attorney-client and work-product privileges.

The trial court granted Plaintiffs' request for discovery, but allowed the insurers to redact privileged information.  The insurers appealed via a writ of mandamus, arguing that the trial court had abused its discretion because their own attorneys' fees are irrelevant to the underlying dispute.  The Corpus Christi Court of Appeals affirmed the trial court's ruling that the insurer's attorneys' fees were discoverable – a decision the Texas Supreme Court will now consider.

We will monitor the In re National Lloyds Insurance Company case and keep you posted on the outcome.  At present, the case serves as an important reminder that what is good for the goose may be good for the gander; in other words, discovery requests to the opposing party may open up the requesting party to discovery on the same issue.    It is important to understand how your argument will play out if you are forced to turn over similar or same information.


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