A Stake Into the Heart of the Vampire
A STAKE INTO THE HEART OF THE VAMPIRE:
TAKING THE ADJUSTER’S DEPOSITION
For the trial lawyer, there are very few experiences more satisfying than the smoking gun evidence and/or witness. While the adjuster is not typically considered a smoking gun witness, his testimony can rival the smoking gun situation, especially where adverse testimony to the insurer is coming from the very person who is handling the claim. In simple terms, the adjuster can become your witness who can establish critical proof in support of your claim, or at the least, give the jury a face to evaluate for credibility.
Rarely will an adjuster help the insurer’s case. More frequently than not, they make bad witnesses, write things in the claims file which are prejudicial to the insurer and/or the defendant, draw conclusions not supported by the investigation, reveal biases, and tend to be unprepared for their deposition.
No matter whether the case involves liability, coverage, and/or bad faith, most adjusters are not only helpful to plaintiff’s case, but critical. This paper will explore not only how to take an adjuster’s deposition, but how to prepare for the deposition, the purposes of taking such a deposition, the strategy in taking an adjuster’s deposition, and how to use a claims representative’s deposition.
II. WHY TAKE THE ADJUSTER’S DEPOSITION
Unfortunately, many counsel bypass taking the adjuster’s deposition because of cost, the belief that their testimony is somehow privileged (a myth), that such testimony cannot be used at trial for fear of interjecting insurance (liability cases), that such testimony is only allowed in bad faith cases, and adjusters have nothing to offer because they toe the company line. This negative reasoning forfeits a source of evidence or discovery to the insurer.
The reasons to take an adjuster’s deposition are many and substantive:
1. The adjuster possesses discoverable information, particularly in liability/uninsured/underinsured cases where the adjuster engineered, compiled, gathered, prepared, and/or took part in an investigation;
2. The adjuster can establish the road map of what happened in/to the claim, including providing a chronology, as well as what information the insurer had when it made its decisions;
3. Putting life into the claims file by having a face explain the claims file content and activity;
4. Creating conflict, both material and perceptional, on the insurer’s position/procedures versus what the adjuster believes and/or did;
5. Using the adjuster’s testimony to lead to other discoverable information, including names of witnesses, who actually made the claims’ decisions, and whether there is relevant information not documented in the claims file;
6. Whether the adjuster was actually authorized/licensed to handle a claim in the specific jurisdiction at issue;
7. Regardless of what the organizational representative testifies to, establishing what the hands on, day-to-day person, who handles the claim did and did not do;
8. Establishing and/or exposing the insurer’s thought process, state of mind, and mindset;
9. Determining the role of the adjuster, such as liability adjuster, coverage adjuster, or both;
10. In a Stowers case, revealing the insurer’s strategy and/or adjuster’s reasons in defending the case; and
11. When the adjuster is a Defendant, establishing her liability.
There are reasons not to take the adjuster’s deposition:
1. To harass, annoy and/or intimidate the claims representative and/or insurer;
2. When you have not attempted to obtain the claims file; and
3. When the damages do not justify the expense (the exception, not the rule).
Regardless, counsel should think through strategy in taking the adjuster’s deposition, such as timing, order of depositions, and purpose. Taking this type of deposition without consideration and
preparation is not only wasteful, but counterproductive.
III. THE CLAIMS FILE, STUPID (BORROWED FROM THE CLINTON STRATEGY OF “THE ECONOMY, STUPID”)
One cannot emphasize enough that when taking the claims representative’s deposition, obtain the claims file beforehand. Then study it, review it, and study it again.
The claims file is the roadmap and the focus of an adjuster’s deposition. It will tell you what was done, when it was done, often why it was done, and how it was done. The main purpose of the claims file is to document what has transpired with the claim, including compiling information, reports, facts, opinions, evaluations, a to-do list, strategy, witness statements, logs and/or adjuster notes, etc. The claims file shows a progression of the claim, the state of mind of the insurer (particularly the claims representative), the gaps and/or deficiencies in handling the matter, and purportedly justification and support for the ultimate decision(s) on the claim. Theoretically, the insurer’s representatives (particularly claims management) should be able to access the claims file to be able to make decisions on the claim. Thus, if a claim’s representative is replaced, a new adjuster should be able to review the file to determine the next step.
The claims file is often a gold mine, not only for the adjuster’s deposition, but for the entire lawsuit. It will tell who reviewed the file, whether there is factual support for the claims decision in the file, whether there is a predisposition of the claims representative in handling the claim, and the quality and quantity of information obtained. The list is endless.
Having defense counsel hand you the claims file at the adjuster’s deposition compromises your ability to prepare and effectively obtain the adjuster’s deposition. Reviewing the file on the fly does not enable counsel to grasp the completeness of the file, a chronology of events, the state of mind of the adjuster, and the specifics of the file. This approach should be avoided.
Rather and almost without exception, every request for production sent to a defendant should include a request for a complete unredacted copy of the claims file to include log, diary, and/or adjuster notes, reports, witness statements, evaluations, memorandums, correspondence, photographs, videos, surveillance, etc. The easiest way to get a jump on this material is to attach a request for production to the original petition.
No doubt you will receive objections of every type and kind. When you receive these objections and regardless if the defendant states information or documents are being withheld or not, request a privilege log. Once that is received, compel production of the claims file and request the defendant’s objections be overruled. Do not accept the insurer mantra that every investigation is undertaken because of anticipation of litigation. See generally In Re Ford Motor Co., 988 S.W.2d 714, 719 (Tex. 1998); Dunn Equipment v. Gayle, 725 S.W.2d 372, 374-375 (Tex. App. – Houston [14th Dist.] 1987, orig. proceeding).
Additionally, when noticing the adjuster’s deposition, attach a duces tecum requesting the same material, to cover items that were, of course, accidentally omitted
from the original production. You may question the adjuster directly from the duces tecum, thereby putting the burden of complete production on him/her. A duces tecum circles the wagons and prevents an escape opportunity for the adjuster. Moreover, if materials are omitted, the adjuster is left to explain why, which is a negative for the insurer defendant.
In conclusion, GET THAT CLAIM FILE!
IV. THE CLAIMS HANDLING MANUAL AS A BONUS
In conjunction with the duces tecum requesting the claims file, another item to be included is the claims handling manual, claims handling guidelines, and/or similar type of reference material. This item often will describe how claims are to be handled i.e. insurer standards, expectations, and/or guidelines. The production of this item may likely enable counsel to grade the adjuster’s conduct and performance with particular reference as to whether the adjuster’s actions satisfied the insurer’s own standards, requirements, and/or guidelines.
When seeking the claims manual, tailor the request narrowly to that portion dealing with the particular claim at issue and a finite time period. Seeking this material broadly will aid the insurer’s argument that counsel is merely fishing and discredits the purpose of seeking this material.
V. PREPARE, PREPARE, AND PREPARE AND THEN PREPARE MORE
If you intend to make the adjuster’s deposition not only successful, but useful, counsel must prepare, prepare and prepare. Mastery of the claims file is an absolute; in fact, you should make yourself so familiar and knowledgeable of the claims file that you have a far superior grasp of its content than both the adjuster and opposing counsel. You must identify the file’s strengths, deficiencies, gaps, reasoning, logic, strategy, access, and potentially missing items.
Setting aside the obvious, adjusters’ depositions frequently come in two flavors: unprepared adjusters who have little recall of the file’s contents or are purposely evasive and prepared adjusters who are prone to embellishment and masking flaws in the file and claim. Fortunately, it is the prepared adjuster who is the exception. Nevertheless, to expose and exploit the poorly or unprepared adjuster and his file, counsel must know the claims file to demonstrate a concise and directed presentation on how and why the insurer was not just wrong, but deliberately biased.
In addition to the claims file, investigation of the adjuster should also be included. A Google search and a PublicData report are quick and inexpensive sources of information. A visit to the Texas Department of Insurance (TDI) web site will give licensing information, including whether the adjuster is licensed to handle a claim in Texas or other jurisdictions, as well as disciplinary history. The use of various listservs can also provide valuable information.
Another area for preparation is exhibits that an adjuster can prove up, such as a chronology. Research has proven that juries find chronologies helpful and positive. Preparation of a chronology can provide a useful tool for opening statements, strategy for trial, and admissions.
In the case of the well prepared adjuster, preparation will permit counsel to expose embellishments and potential sugarcoating of the adjuster’s questionable conduct. Most adjusters are loaded with files and spread thin. It is almost a given that no matter how well the claims representative is prepared or how good a witness he appears to be, it is almost a certainty that every adjuster has material deficiencies in their conduct and claims file. Winging the adjuster’s deposition will predictably enhance the insurer’s defense, thereby compromising the client’s recovery.
VI. RULES OF THE ROAD
The following are some suggestive rules when taking the adjuster’s deposition:
1. Do not be rude, demeaning, harassing, arrogant or sarcastic. Adjusters are people, too (hard to believe, isn’t it?), and juries rarely view mistreating a witness positively, even if the witness presents poorly or is obviously not credible. Let the witness become frustrated and self destruct;
2. Develop a theme based on a review of discovery, including the claims file. Use the theme in deposing the adjuster;
3. Prepare an outline for the deposition and use it. The outline should include a chronology which can illustrate how the insurer reached its decision;
4. Send a duces tecum, including a request for the claims file and claims handling manual that applies;
5. Notice the deposition for videotape. Nonverbal responses and reactions can be just as revealing as the actual content of answers. If the adjuster
performs poorly at deposition, he may well be better prepared and/or presentable at trial. Without video to capture a witness’s lack of credibility, a jury cannot grasp the adjuster’s demeanor and poor performance;
6. Be very familiar with the necessary facts to prove the claim, as well as the legal principles that control. Adjusters may not be per se experts, but they certainly have a greater understanding of claims and legal principles than the average person. They know what to look for, what to consider, and how the law typically applies. Establish their “superior” knowledge and have them own up to it. Insist the adjuster use that knowledge in his claims handling and demonstrating his conduct was not accidental, but deliberate;
7. Identify any inconsistencies between what the insurer did and what the investigation revealed. Likewise, differences between claims management and claims representatives should be identified where claims management made a decision on the claim, but apparently did not review the file. These instances should be emphasized in questioning the adjuster; and
8. Establish and identify the basis for the claims decision. Explore whether the adjuster is relying on “advice of counsel” as a defense to bad faith. This may well open up the discovery of attorney-client communications.
These rules are by no means exclusive. Without a doubt, counsel must be prepared, then even more prepared.
VII. THE BOY (INSURER) WHO CRIED “WOLF”
It is both predictable and axiomatic that seeking the claims file, claims manual, and/or deposition of the claims representative causes the insurer to pucker up, deny relevance, claim privilege of anticipation of litigation, file a motion to quash and/or for protection, claim the adjuster has no personal knowledge, argue it interjects insurance into a liability case, and attempts to bust a privilege. Other excuses abound.
Rather than be surprised or unprepared, anticipate the insurer throwing up every roadblock possible to keep you from deposing the adjuster and getting to the claims file and the adjuster. Insurance companies are run by very smart people and represented usually by skilled lawyers who know that an adjuster’s deposition and production of the claims file is not a positive development in defending a case. Insurers and attorneys who represent them know that adjuster’s depositions can take a case from defensible to ugly in just a few hours of deposition. The amount of resistance you receive is likely directly proportional to the perceived damage the adjuster’s deposition may cause.
Here are a few of the arguments you will likely encounter in opposing your deposition of the adjuster, including requesting the claim file, and suggested responses.
1. This is just a “contract case” and there is no relevance to taking the adjuster’s deposition. This response is part of the defense mantra and it is simply not true. In many contract cases, one has to prove liability for coverage (UM, UIM, homeowners, etc.). The adjuster’s investigation can be particularly helpful in identifying witnesses, issues, and even witness statements. In a duty to indemnify the case, the adjuster may provide facts helpful to proving that duty. In a coverage case, where it may be close or unclear, the adjuster can be forced to acknowledge ambiguities, prior cases involving similar issues, and/or that the insurer has taken a contrary position in other cases.
This excuse often sounds good, but stripped away of its rhetoric, it has so many holes that its usefulness can readily be exposed.
2. The adjuster and the claims file is shielded by anticipation of litigation exception and/or by work product. If insurers had their way, every investigation conducted would be exempted from discovery. But this point of view has been repeatedly rejected.
Just like any other case, the insurer to maintain this privilege, must meet the test set out in National Tank Co. v. Brotherton, 851 S.W.2d 193, 201 (Tex. 1993). There is both an objective and subjective test. Id. at 203-204. Remember the Ford case generally holding a claims file and logically an adjuster’s deposition are discoverable. In Re Ford Motor Co., 988 S.W.2d at 719.
And do not forget that noncore work product, such as the claims file and/or adjuster’s deposition, can be obtained if the requesting party can show undue need and substantial hardship. This exception may take on a greater role for an attorney who enters his appearance long after the claim was denied or litigation commenced. See generally State v. Lowry, 802 S.W.2d 669, 673 (Tex. 1991); Dillard Dept. Stores v. Sanderson, 928 S.W.2d 319, 321-322 (Tex. App. – Beaumont 1996, orig. proceeding). See also In Re Bexar County Criminal
District Attorney’s Office, 224 S.W.3d 182, 188 (Tex. 2007).
3. An attorney compiled much of the work in the claims file and on which the adjuster relies, so the file and knowledge of the adjuster is privileged.
So goes the argument that an attorney who provides much of the contents of the claims file on which the insurer relies keeps the claims file privileged and the adjuster (maybe attorney) from being deposed. Under this argument, whatever the attorney touches makes it protected.
But not so fast says the Wizard to the Tin Man. This automatic privilege argument has been expressly rejected. In Re Texas Farmers Ins. Exchange, 990 S.W.2d 337 (Tex. App. – Texarkana 1999, orig. proceeding). In the Texas Farmers case, the court found an attorney who was not acting as attorney, but rather an investigator was not shielded from discovery or protected by the attorney client privilege. Id. at 341. This case certainly compromises the defense’s argument to prevent discovery. See also In Re Subpoena of Curran, 2004 WL 2099870 (N.D. Tex. 2004).
These are not the only excuses one will hear. But no matter what the argument is, break it down, look for legal authorities, establish exceptions and relevance, and be prepared to not only argue your position, but brief it as well.
VIII. THE ADJUSTER AS A DEFENDANT
With increased frequency and especially in light of case law making them a proper defendant under the Texas Insurance Code, the adjuster as a defendant may well be no different than an insurer defendant. Making the adjuster a defendant can enable the plaintiff to exploit and highlight egregious conduct. But if used poorly or improperly, you can make the adjuster a sympathetic witness.
All the suggestions and rules that have been discussed previously apply with equal vigor when taking the adjuster’s deposition as a defendant. However, additional work and preparation is necessary.
Initially, establish with the adjuster that not only are the insurer’s actions governed by statute, but the adjuster’s conduct is equally dictated by law, including the Texas Insurance Code and the Texas Deceptive Trade Practices Act. In simple terms, get the claims representative to acknowledge that if the insurer has violated a statute and the adjuster has also, there is no reason not to hold the adjuster equally accountable.
Demonstrate the conduct of which you complain is directly prohibited by statute by having the regulation before you. Know the specific conduct that is prohibited; in other words, know the statutes that apply to the claims representative. Distinguish any individual conduct that is different than that of the insurer.
If possible, attempt to have the adjuster grade his actions. Whether the adjuster exaggerates or criticizes her claims handling, you are helped. Either you show a lack of credibility or obtain an admission with the claims representative’s own testimony.
Explore the materials the adjuster reviewed in preparation for the deposition.
If you do not have them, ask for them. Show that but for the adjuster’s review of same, he would have no recall or would not be able to give testimony.
If the adjuster signed the denial letter but someone else made the claims’ decision, inquire as to what the person who made the claims decision actually reviewed. Determine why the adjuster signed the letter rather than someone with authority.
Remember Prepare, Prepare and Prepare.
IX. USING THE ADJUSTER’S DEPOSITION
The adjuster’s deposition can be used in a number of obvious ways and for other creative purposes, as well. Think outside the box.
For example, the adjuster’s testimony can be used to bind the insurer regardless of what an organizational representative may say. Under Tex. R. Evid. 801(e)(2)(D), the statements of an adjuster may be used as admission by a party opponent where the statement made is within the scope of the agency or employment. An admission of liability by an adjuster in a car wreck case can be binding on the individual defendant.
Another opportunity for use is in the context pitting the insured against the insurer or the defendant and his counsel. Reciting the adjuster’s testimony to an insured to illustrate how the adjuster was dropping the insured in the grease may help gain the insured as an ally.
Use of an adjuster’s deposition may also be used to demonstrate a conflict of interest. Where coverage is an issue and there is a liability suit ongoing, the adjuster who handles the liability claim and coverage has an obvious conflict.
Contemplate the use of the adjuster’s deposition before the deposition and after.
If you get an opportunity to take the adjuster’s deposition at his office, TAKE HIM UP ON IT. It is not only strategic, but educational. You can get a feeling of the adjuster’s working environment, the neatness and organization of the adjuster’s office, signage that might appear such as motivational communications, and what equipment the adjuster has available.
Question the adjuster’s background, including family and employment history. Look for other members in the family who are employed in the same company and insurance business. Look for prior insurance experience and how many times the adjuster has been deposed and sued.
Examine the adjuster’s appearance. If the defense has her dressed up like someone on the six o’clock news, you might inquire if that is their regular work attire.
Do not be afraid to inquire about medical and marital history to establish or test credibility, impairment, distractions, and work load. An adjuster who has health problems may explain the void or incompleteness of a claims file or handling.
Do not accept the explanation that each claim stands on its own facts and thus there is no specific way to handle the claim. One need only ask them “So, you have no standards, guidelines, manual, procedures, and/or rules that you are to follow in handling this claim.” The answer will, of course, be that there are.
Establish early the claims representative’s claims handling philosophy. If they do not have one, then that will reflect negatively. If they do, compare and contrast that philosophy with the handling of the claim at issue.
Inquire about the adjuster’s rate of pay and how he is paid. Is there a bonus system? How is the adjuster’s performance evaluated? Look for compensation incentives especially ones that are designed to pay less on claims or encourage claims denials or minimum payments. Ask about written evaluations given to the adjuster.
Another fertile ground is the selection of experts by the claims representative. Seek how the consultant/expert was chosen – from a list, prior experience, accepted vendors, etc. Determine how often that expert has been used by the adjuster and insurer. Pursue admissions that the choice of experts can influence the outcome of a claim.
Taking of the adjuster’s deposition should be a positive development for the insured’s case. However, success depends on preparation, preparation, and preparation and obtaining the claims file well in advance of the deposition.
Anticipate opposition at every turn and determine the purpose(s) in taking the deposition. Finally, do not harass, annoy, or be disrespectful to the adjuster.