If the adjuster has been presented as a corporate representative, the
impact is even more dramatic. The testimony is binding. It is a judicial
admission, and if the appropriate objections are made at trial, it cannot be
controverted, nor can inconsistent evidence be introduced.
This article and the ones to follow provide an outline of areas to focus
on, whether taking or defending the deposition of the adjuster. There is no
source for the presentation of the materials in this series. It did not come
from a book or from case law on discovery in insurance coverage and bad faith
cases. It is rather the product of taking and defending adjuster depositions
for more than 30 years and seeing what works and what doesn't.
It should also be pointed out that the scope of this series is limited to
the depositions of adjusters, not underwriters. That is an entirely
different topic that should be addressed in a different paper. However, no
coverage or bad faith suit should be prosecuted by an insured without the
deposition of the underwriter. In many occasions, the ground is as fertile
if not more fertile than taking the deposition of the adjuster. The topics
and approaches are different. Because of that, this topic will not be
addressed here.
Can and Should the Adjuster's Deposition Be Taken?
The first question that must be addressed is whether the adjuster's
deposition should be taken at all. Is it relevant to any issue in the case?
If so, what is the issue? Is the issue to be tried before the court a
question of fact or law? If representing the insurer, be sure that there is
a fact issue to be tried before presenting the adjuster for deposition.
If the question before the court deals with the duty to defend, it is
doubtful that the deposition of the adjuster is proper. The duty to defend
is governed by the eight-corners rule. See D.R.
Horton-Texas, Ltd. v. Markel Int'l Ins. Co., 300 S.W.3d 740 (Tex.
2009). As such, it generally is a question of law for the court based on a
reading of the petition and the insurance policy. That being the case, what
the adjuster says or doesn't say is irrelevant in many cases involving the
duty to defend. If the issue before the court is truly one of applying the
eight-corners rule, counsel for the insurer should object to presenting the
adjuster for a deposition because nothing he or she can say will be relevant
or admissible in the determination of the duty to defend.
This, however, is not true in all cases. If a party (i.e., the insured)
has pled ambiguity, then the testimony of the adjuster may become relevant.
However, just because ambiguity has been pled does not necessarily mean that
a fact issue has been created. The court must first apply the plain meaning
rule. If, after the application of the plain meaning of the policy language,
there can be given a specific or definite legal meaning or interpretation,
then the provision is unambiguous and the court will interpret it as a
matter of law. See Texas Farm Bureau Mut. Ins. Co.
v. Sturrock, 146 S.W.3d 123 (Tex. 2004). The court must apply the
accepted rules of interpretation in applying the plain meaning rule. If,
after applying the rules regarding the meaning of words in reviewing the
policy, the intent is clear, the court interprets the policy as a matter of
law, and the inquiry ends.
The duty to defend issue is not the only issue in which the question may
be a question of law for the court and not a question of fact. The law in
Texas is quite clear that the duty to indemnify is determined by the actual
facts and not the pleading. See D.R. Horton-Texas,
supra. If the case is one that has been tried, the fact finder is
generally limited to the evidence on which the underlying jury made its
decision. See Swicegood v. Medical Protective Co.,
2003 U.S. Dist. LEXIS 16556 (N.D. Tex. Sept. 19, 2003). On the other hand,
if the case has been settled, the evidence is much broader and can include
things such as pleadings, discovery, depositions, and documents produced in
the case. See Enserch Corp. v. Shand Morahan & Co.,
Inc., 952 F.2d 1485 (5th Cir. 1992). In cases where the underlying
facts are undisputed or are limited to the facts of the underlying case, it
is doubtful that the adjuster's testimony would be relevant to any issue in
the case. Anything he or she might say would be inadmissible under the rules
governing the admission of evidence and should not be received into
evidence.
Bad Faith Cases
Generally, the testimony of the adjuster is relevant on the issue of bad
faith and the manner in which the claim was handled. On this issue, there
perhaps is no more relevant evidence than the testimony of the adjuster.
However, because there is a claim for bad faith or violations of the
insurance code does not necessarily mean that the adjuster's testimony
should be taken. Under Texas law, there can be no bad faith or violations of
the insurance code unless there is coverage. See
Republic Ins. Co. v. Stoker, 903 S.W.2d 338 (Tex. 1995).
Even if the claim was handled improperly, if there is no coverage, then
the conduct of the insurance company or the adjuster cannot be a proximate
or producing cause of the insured's damages if there was no coverage
initially. In many bad faith cases, and in many other areas of the law, the
court will order separate trials where one issue is dependent on the finding
of another part of the case, and the evidence to be introduced in the second
part of the case would be prejudicial. For example, in a negligent hiring
case, in many instances, the court will try the issue of whether the
employee was negligent in the first place before going to the second phase
of the negligent hiring because the testimony in the second phase could be
prejudicial to the trial in the first. And, unless there is a finding of
negligence on the part of the employee, as a matter of law, there can be no
negligent hiring.
The same is true for bad faith cases. If the coverage part of the case is
closely and hotly contested, the trial court may be required to order a
separate trial on the issue of bad faith until there has been a
determination of coverage. The same logic would apply in this situation. The
evidence in the bad faith portion of the case could be extremely prejudicial
to the coverage portion, and the trial court may be required under the rules
governing separate trials to order a separate trial. If a separate trial is
appropriate, the question is raised as to whether discovery in the second
phase should be stayed as well. In this situation, defense counsel may want
to object to the deposition of the adjuster going forward on the issue of
bad faith.
Part 2 of this series addresses preparation of the adjuster for the
deposition or, if one is taking the deposition, preparation of the attorney
to take the deposition. This indeed is the key to a successful deposition,
whether defending the adjuster or taking the adjuster's deposition. It
cannot and must not be overlooked. It is so important, that this is the
topic of
Part 3 as well.
Part 4 covers the appearance of the adjuster, as well as objections and
privileges that can be asserted at the deposition.