Recently, Florida’s First District Court of Appeals handed down a victory for policyholders when it affirmed a Circuit Court’s order compelling an insurer to produce its underwriting manual in a breach of contract action. In People’s Trust Insurance Co. v. Foster, No. 1D21-845 (Fla. 1st DCA Jan. 26, 2022), the policyholder, Mr. Foster, filed a breach of contract claim against his insurer, People’s Trust, after People’s Trust failed to pay his insurance claim for damage caused to Mr. Foster’s home due to a leaking water pipe. People’s Trust denied Foster’s claim because “Foster’s pipe damage predated the policy’s inception.”
During discovery Foster requested People’s Trusts’ underwriting manual(s) in effect at the time his policy was issued or renewed. People’s Trust objected to the request. In response, Foster filed a motion to compel production of the underwriting manual(s). After a hearing, the Circuit Court granted Foster’s motion and People’s Trust sought a writ of Certiorari from the First District Court of Appeal to quash the order compelling production.
In its petition, People’s Trust argued that it should not have to produce its underwriting manual because the production of underwriting manual(s) is “categorically prohibited in breach of contract cases, like this one, until and unless bad faith litigation commences.” The First DCA disagreed. The court held that “this sweeping characterization” is incorrect and noted that although some courts have quashed premature discovery of insurer’s business practices –including underwriting manuals—in breach of contract actions, “there is no categorical legal rule prohibiting discovery of underwriting manuals in breach of contract cases, especially if they are relevant.”
Foster claimed that some of the inspection related information in People’s Trust’s underwriting manual(s) was possibly relevant to contesting the insurer’s affirmative defense that the pipe damage predated the inception of his policy. The First DCA held that it had “no definitive basis for rejecting” Foster’s assertion regarding the relevancy. Thus, People’s Trust could not meet its high burden of showing a violation of a clearly established principle of law and the court denied Peoples Trusts’ petition for a writ of Certiorari.
The First DCA’s decision in People’s Trust makes clear that a bright line categorical rule precluding underwriting-related discovery in insurance coverage actions is improper. Thus, policyholders should seek discovery of insurers’ underwriting manuals, and other business records, if they can show these documents are relevant to the allegations or defenses raised in the policyholder’s breach of contract case.