Broad discovery requests to prove pattern and practice of Bad Faith

Eastern District of Pennsylvania issued a 27 page opinion that affirmed a Magistrate Judge’s orders requiring insurers to answer broad discovery requests related to their business practices, procedures, and policies for claims handling. In Saldi v. Paul Revere Life Ins. Co., No. Civ. A. 99-6563, 2004 WL 1858403 (E.D.PA Aug. 13, 2004).

The order requires the production of documents relating to, inter alia, insurer goals to terminate claims and benefits, profitability studies, policy drafting information, personnel files, evaluations, bonus awards, bonus programs, training materials, staffing and retention problems, studies, manuals, reports, internal studies, and information relating to other bad faith claims.

Thomas Saldi purchased private long-term disability insurance. When Saldi applied for long-term disability benefits under his policy, the insurers at first determined that he was entitled to such benefits and began making payments; seventeen months later, however, Saldi was informed that his benefits were being terminated.

Saldi sued alleging, inter alia, that the decision to terminate his benefits was a part of a national pattern and practice to boost corporate profitability by terminating valid disability benefits for pretextual reasons. A Magistrate Judge ordered the insurers to respond to broad discovery in the case and the District Court affirmed.

The insurers argued that the discovery was irrelevant and burdensome and that under State Farm Mut. Auto. Ins. Co. v. Campbell, 123 S. Ct. 1513 (2003), Saldi must show that there is a nexus between the insurer’s other actions for which discovery was sought and the specific harm suffered by the plaintiff.

The Court found enough evidence had been presented by the plaintiff to justify the broad discovery sought.

It further held that “when a bad faith policy or practice of an insurance company is applied to the specific plaintiff, the plaintiff is entitled to discover and ultimately present evidence of that policy or practice at trial in order to prove that the insurer intentionally injured the plaintiff and to show the insurer’s reprehensibility and recidivism in order to assist the jury in calculating appropriate punitive damages.” Moreover, the Court held that there is no requirement that Saldi provide specific types of evidence to show that there is a sufficient nexus between the actions of the defendant and the specific harm to the plaintiff.

The case is certain to be cited by plaintiffs seeking broad discovery in bad faith lawsuits.

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