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In re United Fire Lloyds

Court of Appeals of Texas, Twelfth District, Tyler

April 24, 2019

IN RE: UNITED FIRE LLOYDS, RELATOR

          Panel consisted of Worthen, C.J., Hoyle, J., and Neeley, J.

          MEMORANDUM OPINION

          Greg Neeley Justice

         United Fire Lloyds filed this original proceeding in which it challenges Respondent's decision to quash Lloyds's depositions on written questions with subpoena duces tecum to non-parties.[1] We conditionally grant the writ in part.

         Background

         Inner Pipe Pipeline, LLC, the Real Party in Interest, owned a Commercial Property, Commercial Auto, and Inland Marine insurance policy issued by Lloyds. When Inner Pipe's property was damaged by fire, Inner Pipe filed a claim with Lloyds. Alleging that Lloyds refused to cover the damage and denied Inner Pipe's claim, Inner Pipe subsequently sued Lloyds for fraud, breach of contract, breach of the duty of good faith and fair dealing, and violations of the Texas Deceptive Trade Practices Act and the Texas Insurance Code.

         In its answer, Lloyds alleged that Inner Pipe's principal, Edward D. Dailey, "intentionally set the fire or otherwise caused the fire to be set" and had the "motive, opportunity and means to set the fire, and there is substantial other evidence linking Dailey to the fire." Lloyds alleged that Inner Pipe's "coverage is void and/or otherwise excluded as a result of fraud and/or misrepresentations committed by [Inner Pipe], acting by and through [Dailey]," including the following:

(1)In committing arson by intentionally setting the fire in issue or causing it to be set;
(2)In concealing and failing to disclose, after directly asked, that previous businesses of which he had an interest had previous fire claims, when in truth he had multiple previous fire losses involving equipment belonging to DaileyCo, including one in which he was paid $80, 000 in 2007, and another in which he was paid $140, 000 in 2008;
(3)In failing to provide key documents to [Lloyds] in its investigation, including, but not limited to the invoice from Vermeer dated March 22, 2016, less than two months before the fire, documenting serious conditions to one of the pieces of equipment requiring replacement or repair, for which [Inner Pipe's] principal chose not to make, instructing Vermeer to re-install as is. Dailey provided other repair invoices to one of [Lloyds's] agents, but failed to provide the March 22, 2016 invoice;
(4)In making false claims in his sworn proof of loss, including, but not limited to, making a claim for three bear mounts with a value of $9600, as well as other animal mounts; in claiming he had a Rolex watch valued at $6500, kept in a bed side drawer which was destroyed by the fire; in claiming to have lost in the fire two F-5 Locators, valued at $10, 500 each; and in claiming to have lost a $3000 Drone as a result of the fire; and
(5)In providing false testimony in his examination under oath.

         Lloyds asserted arson and fraud, and denied liability on grounds that the fire resulted from an "incendiary origin," and Dailey intentionally set the fire or otherwise caused the fire to be set.

         Lloyds also sought discovery of information regarding allegedly fraudulent tickets. According to an affidavit from Dailey's former bookkeeper, Darlene Estes, Dailey purchased blank tickets from Lufkin Printing with the name "Far South Mining," completed the tickets with false information indicating materials purchased from Far South, and submitted the tickets to Pumpco, Inc. for payment. She further averred that this occurred during her employ with both DCI Construction, which she maintained was owned by Edward and Debra Dailey, and Inner Pipe. Thus, Lloyds sought to take depositions by written questions with a subpoena duces tecum of the custodians of records for Pumpco, Far South Mining, Western Gas Partners, L.P., Lufkin Printing, and Gabriel/Jordan Ford.[2] The notices requested various documents, such as tickets, from January 1, 2012 or 2013 through July 1, 2016. Inner Pipe filed a motion to quash and for protection from discovery. After a hearing, Respondent concluded that the discovery was overly broad, overly burdensome, and not reasonably calculated to lead to admissible evidence. He granted Inner Pipe's motion to quash.

         On December 12, 2018, Lloyds signed new deposition notices to the custodians of records for Far South, Western Gas, Lufkin Printing, and Pumpco. Lloyds asked the four non-parties to provide information regarding a range of ticket numbers that Lufkin Printing printed for Dailey, some of which Lloyds believed Dailey later fraudulently submitted for payment. From Far South, Lloyds sought "[a]ll invoices, tickets and/or statements pertaining to: Far South Mining Ticket Nos. 10851-10897 and 71502-77000." Western Gas was asked to provide "[a]ll invoices, tickets, checks and/or statements pertaining to: Inner Pipe Pipeline, LLC and/or DCI Timber Inc. dba DCI Construction referencing Far South Mining Ticket Nos.10851-10897 and 71502-77000." The notice to Lufkin Printing requested "[a]ll records pertaining to the purchase of Far South Mining Receipt Books (Reference No. 143267) purchased by Inner Pipe Pipeline, LLC and/or Edward Dailey." And the notice to Pumpco sought the following:

1.All invoices, tickets, checks and/or statements pertaining to: Inner Pipe Pipeline, LLC and/or DCI Timber Inc. dba DCI Construction referencing Far South Mining Ticket Nos. 10851-10897 and 71502-77000
2.All invoices, tickets, checks and/or statements pertaining to: Inner Pipe Pipeline, LLC and/or DCI Timber Inc. dba DCI Construction referencing Tuleta Stone Ticket Nos. 6200-6417

         On December 19, Inner Pipe filed another motion to quash and for protection. Inner Pipe asked Respondent to prohibit or severely limit the requested discovery in scope and time. At the hearing on Inner Pipe's motion, Lloyds's counsel explained that the range of tickets requested was based on the number printed by Lufkin Printing at Dailey's request and the range could not be narrowed down any further because of uncertainty regarding which tickets Daily submitted that were fraudulent. Counsel further explained that the evidence would be admissible to prove intent, absence of mistake, and motive or scheme. According to counsel, Lloyds discovered numerous false acts allegedly committed by Dailey and Dailey's business was in ...


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