Washington District Court Finds Insurer Liable for Bad Faith After Repeated Failure to Comply With Discovery Orders

The U.S. District Court for the Western District of Washington has granted an insured’s motion for default sanctions in Wang v. Esurance Insurance Co. The opinion arises from an uninsured motorist insurance bad faith case related to a 2017 motor vehicle collision and resulted in the entry of an adverse liability finding against an insurer.

The plaintiff’s motion for sanctions alleged that the defendant insurer failed to comply with the court’s discovery orders mandating the production of certain claims-handling manuals, reference materials, training materials, and materials from a third-party informational application on which the insurer’s employees rely in their claims-handling process.

Following disputes over the insurer’s conduct in discovery, the court issued a discovery order pursuant to Federal Rule of Civil Procedure 37(a) compelling the insurer to produce “all claims manuals, reference materials, training materials, and complete training logs” and materials from the third-party application. The court’s order demanded that the insurer produce these materials in accordance with the plaintiff’s production requests and irrespective of the insurer’s own determination as to their relevance and proportionality. Following additional motion practice after which the court clarified the broad scope of its order, the insurer once again failed to comply.

Thereafter, the plaintiff moved for a default sanction as to liability on her claims for bad faith, and negligent claim handling, and for her claims under the Insurance Fair Conduct Act and the Consumer Protection Act.

In responding to the plaintiff’s sanctions motion, the insurer claimed that the plaintiff sought irrelevant claims-handling materials, notwithstanding the prior finding of the court that such materials were relevant insofar as they might lead to the discovery of admissible evidence. Further, the insurer claimed to have misunderstood the court’s order with respect to the production of materials related to the third-party claims-handling application.

The court was unpersuaded by the insurer’s claims and found that the insurer’s conduct was prejudicial to the plaintiff’s ability to develop her case through discovery. Noting that the willfulness of the insurer’s prejudicial conduct and the general public interest in trial expediency both militate in favor of harsh sanctions, the court granted the plaintiff’s motion for sanctions.

Accordingly, as a consequence of the insurer’s discovery misconduct, the court found that the insurer acted in bad faith, negligently handled the plaintiff’s claim, unreasonably denied her claim for benefits under the Insurance Fair Conduct Act, and violated the Consumer Protection Act.