Judge Ashley Royal of the United States District Court for the Middle District of Georgia recently held in a case by an insured against its disability insurer alleging bad faith refusal by the insurer to pay disability benefits, that the plaintiff was entitled to discovery of a wide range of documents potentially bearing on the insurer’s “intent” and the circumstances “surrounding” the insurer’s refusal to pay. Central Georgia Anesthesia Services, P.C. v. The Equitable Life Assurance Society of the United States, C.A. No 06-25 (July 25, 2007).
The plaintiff insured had submitted a policy limits claim for $400,000 under its disability income protection policy, but the insurer had paid benefits of only $18,000. The insured brought suit for bad faith failure to pay, alleging that the insurer had incentivized its claims personnel to refuse payment and deny claims because the insurer’s disability income protection line of business was proving unprofitable.
During the case, Plaintiff sought discovery and, upon objection by the insurer, moved to compel production of documents concerning the following: (1) the insurer’s reserve on the claim and its method of calculation of that reserve; (2) the financial performance of the relevant product line; and (3) the insurer’s criteria for compensating claims personnel. Judge Royal ordered production of all three categories of documents, finding them potentially relevant to the “[insurer’s] intent and surrounding circumstances in analyzing the breach of contract/bad faith claims.”