Deposition Outline: Good Faith Reliance on Counsel

This deposition outline suggests lines of inquiry to establish whether the insurer is asserting a valid a defense to bad faith of good faith reliance on the advice of counsel. It may be downloaded in Word or WordPerfect and customized by doing a “find and replace” for the following terms: &Client& means the defendant/policyholder/client; &ClmAgt& means the insurer’s claims agent; &Date& means that a date needs to be designated; &DependentCounsel& means insurer appointed defense counsel who was selected by and represents the interests of the liability insurance company; &IndependentCounsel& means the client’s independent counsel; &InsCo& means the client’s insurance company; &Lawsuit& means &Plaintiff& v. &Client&; &Plaintiff& means the plaintiff who sued the defendant/policyholder/client; &PlaintiffCounsel& means the plaintiff’s independent counsel.

If counsel for the insurer objects to this line of questioning, ask for a stipulation that &InsCo& may not introduce at trial any evidence that it consulted with counsel in making any decisions in the investigation and processing of this claim. If the stipulation is declined, these questions may be relevant. Communications with counsel may become discoverable.

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Attorney-Client Relationship

Did you seek legal advice of any kind regarding plaintiff’s claim? Identify the attorney. Did &InsCo& have an attorney-client relationship with this lawyer? Did &InsCo& receive legal advice regarding plaintiff’s claim from &InsCo&’s attorney? What qualifications did &InsCo&’s attorney have to give you advice regarding the plaintiff’s claim? Describe &InsCo&’s history with this attorney including all personal interests the attorney had to give an evaluation favorable to the insurer.

Claim Standards

California Insurance Code §790.03(h) requires insurers “to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under insurance policies.” When you denied the plaintiff’s claim, were you aware of this requirement? Did you adopt and implement standards for the prompt investigation and processing of claims? What are those standards? How were those standards communicated to the people who handled the plaintiff’s claim? Did &InsCo&’s standards guide you to a decision to deny the plaintiff’s claim? How?

Investigation

What facts did you disclose to &InsCo&’s attorney? Did &InsCo& withhold any facts from &InsCo&’s attorney? Did &InsCo&’s attorney conduct an investigation of the facts? What did &InsCo&’s attorney discovery that &InsCo& did not?

Advice

Did &InsCo& receive legal advice from &InsCo&’s attorney regarding plaintiff’s claim? Did &InsCo&’s attorney advise &InsCo& whether the claim was covered? What is the substance of the advice &InsCo& received from &InsCo&’s attorney? Do any writings exist expressing the advice &InsCo& received from &InsCo&’s attorney? Describe all such documents? Was any of the advice &InsCo& received from &InsCo&’s attorney based on facts &InsCo& did not previously know? (If yes) Why had &InsCo& not previously investigate those facts? (If no) Are all facts upon which &InsCo& decided to deny the plaintiff’s claim documented in the claims file? Was any of the advice &InsCo& received from &InsCo&’s attorney based on law that &InsCo& did not previously know? (If yes) Why had &InsCo& not previously that law? (If no) Did all of the advice &InsCo& received from &InsCo&’s attorney differ from &InsCo&’s claims handling standards? (If yes) Have &InsCo& changed &InsCo&’s standards as a result of the advice &InsCo& received from &InsCo&’s attorney? (If no) Why do &InsCo&’s claims handling standards fail to address the plaintiff’s claim? Did &InsCo&’s attorney’s advice consider the interests of the policyholder equally with the interests of the insurance company? Did &InsCo& receive this advice before or after denying plaintiff’s claim?

If before –

After receiving that legal advice, did &InsCo& then deny this claim? How did the advice &InsCo& received from &InsCo&’s attorney differ from &InsCo&’s own analysis of coverage? Did the advice &InsCo& received from &InsCo&’s attorney differ from the claims handling standards adopted by the insurance company?

If after –

Why did &InsCo& seek and receive legal advice after &InsCo& had already denied the claim? Did &InsCo& seek legal advice simply to paper the file or to rubber stamp the decision &InsCo& already made?

Knowledge of Plausibility

Did &InsCo& know that the legal advice &InsCo& received did not accurately reflect California law? Was it creative lawyering? Provides indefensible analysis of coverage? Provides an implausible interpretation of coverage?

Reliance

Did &InsCo& rely upon the attorney’s advice to decide to deny the plaintiff’s claim? Were &InsCo& willing to reconsider &InsCo&’s denial of the plaintiff’s claim when &InsCo& knew that the attorney’s advice was incorrect? When &InsCo& learned that the attorney’s advice was incorrect, what did &InsCo& do about it?

Good Faith

California regulations §2695.7(b) requires &InsCo& to “immediately, but in no event more than forty (40) calendar days later, accept or deny the claim, in whole or in part. A denial shall be in writing “and shall provide . . . a statement listing all bases for such . . . denial and the factual and legal bases for each reason given. . . . [including each] specific policy provision, condition or exclusion.

Did &InsCo& comply with this regulation in deciding to deny the plaintiff’s claim?

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