Discovery in Insurance Property Litigation: Getting the Evidence You Need

Insurance litigation is fundamentally asymmetric. The insurance company has everything — the claims file, the adjuster’s notes, the internal communications, the expert reports it commissioned, the reserve history, the authority levels, the training manuals, the claims-handling guidelines. The policyholder has almost nothing except their own documents and the memory of what happened. Discovery is the legal process that corrects this imbalance. It is how you force the insurance company to hand over the information it has been keeping from you — and in many cases, that information is what wins the case.

What Discovery Is and Why It Matters

Discovery is the pre-trial phase of litigation where each side has the right to request documents, ask written questions (interrogatories), and take depositions of the other side’s witnesses. In insurance litigation, discovery is where the real battle happens. The carrier’s bad faith is rarely visible from the outside. The insurer does not send you a letter saying “we are intentionally underpaying your claim.” The evidence of bad faith lives inside the carrier’s own files — in adjuster diaries, internal emails, reserve decisions, and communications with the experts the carrier hired to support its position.

Without discovery, a policyholder is litigating blind. With it, the entire picture changes. Discovery has uncovered adjuster notes admitting that a claim was valid but instructing a lowball offer anyway. It has produced internal emails showing that an insurer’s own engineer disagreed with the denial before the carrier hired a different engineer who would say what they wanted. It has revealed reserve histories proving that the carrier internally valued a claim at far more than it offered. These are the kinds of facts that turn an underpayment dispute into a bad faith case.

The Claims File — The Heart of Every Insurance Case

The single most important category of discovery in insurance litigation is the carrier’s claims file. This is the insurer’s own record of how it handled your claim, and it often contains evidence that directly contradicts the carrier’s stated reasons for denying or underpaying.

Adjuster Diaries and Notes

Adjusters are required to maintain diaries — running notes documenting their activity on the claim. These notes often contain the adjuster’s real-time impressions of the damage, candid assessments of coverage, and notations about instructions received from supervisors. The diary frequently tells a very different story than the official correspondence the policyholder received. An adjuster might note that the damage appears to exceed $200,000 in the diary, then send the policyholder an estimate for $85,000 — because the supervisor told them to cut it.

Internal Emails and Communications

Internal emails between the adjuster, the adjuster’s supervisor, the claims manager, and the home office are often the most revealing documents in discovery. These communications show the decision-making process — who decided to deny or reduce the claim, what reasons were discussed internally, and whether anyone raised concerns about the decision. Carriers know these emails are discoverable, so experienced adjusters are trained to be careful about what they put in writing. But the training is not always followed, and candid emails slip through regularly.

Reserve Information and Authority Levels

Reserves are the internal dollar amount the insurer sets aside for a claim — their own estimate of what the claim is likely to cost. Reserve information is powerful evidence because it reflects the insurer’s own assessment of the claim’s value. If the carrier set reserves at $350,000 but offered you $120,000, that gap is difficult to explain away. Authority levels — the dollar amount the adjuster was authorized to settle for — tell a similar story. If the adjuster had authority for $200,000 but offered you $80,000, that raises serious questions about the insurer’s good faith. For more on how reserves and authority work in insurance claims, see our detailed article.

Expert Reports Commissioned by the Carrier

Insurance companies routinely hire engineers, hygienists, and other experts to support their position. The carrier’s claims file should contain all expert reports, including drafts. Draft reports are particularly valuable — they sometimes show that the expert’s initial findings were favorable to the policyholder before the carrier directed changes. The file should also contain all communications between the carrier and the expert, including the engagement letter that defined the scope of the assignment.

Electronic Discovery (ESI) — The Digital Trail

Modern insurance claims handling is almost entirely digital, which means that an enormous amount of evidence exists in electronic form. Electronically stored information (ESI) can reveal things that paper documents cannot — including metadata, system logs, and communications the carrier may not have anticipated would be discoverable.

Claims Management Software Systems

Insurance companies use sophisticated claims management platforms — systems like Guidewire ClaimCenter, Xactanalysis, Symbility, and proprietary internal systems — to track every action taken on a claim. These systems log who accessed the claim, when they accessed it, what changes were made, and what decisions were entered. The system logs can show, for example, that a supervisor overrode the field adjuster’s estimate at 2:47 PM on a Tuesday — a level of specificity that adjuster diaries rarely capture. Requesting data exports from these systems is a critical part of ESI discovery.

Email Archives — Beyond the Adjuster

Discovery of email should not be limited to the assigned adjuster’s mailbox. Request emails from supervisors, claims managers, regional directors, and anyone in the chain of command who was involved in decisions about your claim. Also request emails to and from the carrier’s retained experts — the communications between the carrier and its hired engineer often reveal exactly what the carrier wanted the expert to find.

Text Messages and Instant Messages

Adjusters, especially independent adjusters working catastrophe claims, frequently communicate by text message and internal messaging platforms. These messages are often more candid than emails because the participants do not expect them to be discovered. Text messages between adjusters — or between an adjuster and a supervisor — can contain admissions, complaints about being told to lowball claims, or discussions about how to justify a number the adjuster knows is inadequate.

Recorded Phone Calls

Many insurance companies record phone calls with policyholders. These recordings are discoverable and should be requested. If the carrier took a recorded statement from you, you are entitled to a copy. But also request any internal calls that were recorded — calls between the adjuster and the supervisor, calls with retained experts, and calls with independent adjusting firms. Not all internal calls are recorded, but when they are, the content can be devastating.

Electronic Notes vs. the Formal Claims Diary

Claims management systems often have multiple fields for notes — the formal diary entries that become part of the official claims file, and informal notes, task lists, and status fields that may not appear in the standard diary printout. Requesting the full database export of the claim record — not just the diary — can reveal notes and entries the carrier did not include in its initial production. The metadata associated with these entries (who created them, when, and whether they were edited) adds another layer of evidence.

Independent Adjusters, Engineers, and Other Experts

Insurance companies do not handle everything in-house. They hire independent adjusting firms, engineering companies, industrial hygienists, and other experts to inspect properties and produce reports. These third parties maintain their own files — separate from the carrier’s claims file — and those files are independently discoverable.

The IA Firm’s Own File

The independent adjusting (IA) firm that inspected your property maintains its own claim file. This file may contain the field adjuster’s original notes, photographs, measurements, and — critically — the adjuster’s original estimate before it was revised by the carrier or the IA firm’s desk review team. Subpoenaing the IA firm’s complete file often reveals discrepancies between the field findings and the final report sent to the carrier.

Engagement Letters and Scope of Assignment

When the carrier hires an engineer or expert, it sends an engagement letter defining the scope of the assignment. These letters are critical because they often reveal what the carrier was looking for — and what it told the expert to focus on. An engagement letter that asks the engineer to “evaluate whether the damage is consistent with the reported cause of loss” is very different from one that asks the engineer to “determine whether the damage could be attributed to pre-existing conditions or deferred maintenance.” The framing of the question often predetermines the answer. Your attorney should demand production of every engagement letter, scope of work document, and instruction given to every expert the carrier retained on your claim. For more on this topic, see our article on biased insurance experts.

Draft Reports vs. Final Reports

One of the most powerful areas of discovery involves obtaining draft expert reports. When an engineer or other expert produces a draft report and the carrier requests changes before the final version is issued, that revision history is potentially discoverable. If the engineer’s draft found that the roof damage was caused by hail and the final report attributes it to “wear and tear,” the change speaks for itself. The carrier will assert work product protection over drafts, but courts have increasingly recognized that when the expert is performing a claims-handling function (as opposed to being retained specifically for litigation), the work product doctrine does not apply.

Billing Records and the Financial Relationship

How much money has the carrier’s expert received from this carrier over the past five years? How many assignments has the firm handled for this insurer? What percentage of the expert’s revenue comes from this single carrier? Billing records and business volume data are discoverable and directly relevant to expert bias. An engineer who receives $2 million per year from a single carrier has a financial incentive to produce findings favorable to that carrier — and a jury can evaluate that relationship when assessing the expert’s credibility. This information goes to the heart of the repeat-player expert problem that pervades the insurance industry.

Pattern and Practice Discovery — The Colonial Life Case

One of the most powerful discovery tools in insurance bad faith litigation is the right to obtain information about otherclaim files — not just yours. The landmark California case establishing this right is Colonial Life & Accident Insurance Co. v. Superior Court, 31 Cal.3d 785 (1982).

In Colonial Life, the policyholder (Louise Perry) sued the carrier for bad faith. She sought discovery of the names, addresses, and records of other claimants whose claims were handled by the same adjuster — an adjuster named Sharkey — in order to establish a pattern of unfair settlement practices. Colonial resisted, arguing that the information was irrelevant and that disclosing other insureds’ information would violate their privacy.

The California Supreme Court rejected Colonial’s arguments and allowed the discovery. The Court held that evidence of other instances of unfair settlement practices by the same adjuster or the same carrier is directly relevant to establishing bad faith — and especially relevant to the claim for punitive damages. As the Court explained, a plaintiff may establish a claim by showing either that the acts that harmed her were knowingly committed or were “engaged in with such frequency as to indicate a general business practice.” Discovery aimed at determining the frequency of alleged unfair settlement practices is therefore likely to produce evidence directly relevant to the action.

The Court addressed Colonial’s privacy concerns by allowing the discovery to proceed with appropriate protective measures. Other insureds’ identifying information could be protected, and the court could fashion protective orders as needed. But the carrier could not use privacy as a blanket shield to prevent discovery of evidence showing a pattern of bad faith conduct.

Colonial Lifeand its progeny have established that other-claim-file discovery is relevant to multiple purposes: showing the insurer’s bad faith and past misconduct by the claims representative; showing the insurer’s knowledge of particular facts or relevant legal standards; clarifying ambiguities in the policy by showing how the carrier interpreted the same language in other claims; and — most critically — establishing a basis for punitive damages by showing a course of conduct reflecting malice, oppression, or fraud. In practice, this means your attorney can seek data on every claim the same adjuster handled, every claim where the carrier used the same claims-handling tactics, and every claim where the same expert produced a report minimizing damage.

Privilege Issues in Insurance Discovery

Insurance companies fight discovery at every step, and their primary weapon is privilege. Two doctrines dominate the battle: the work product doctrine and attorney-client privilege. Both are legitimate protections, but carriers routinely overassert them to withhold documents that should be produced.

Work Product Doctrine

The work product doctrine protects materials prepared in anticipation of litigation. In insurance cases, the key question is: when did the carrier transition from investigating and adjusting the claim (a contractual duty) to preparing for litigation? Documents created during the normal claims-handling process are not work product — even if the carrier later uses them in litigation. The adjuster’s initial investigation, the field notes, the damage assessment, the reserve decision, and communications about whether coverage exists are all claims-handling activities, not litigation preparation. Only materials created after the carrier reasonably anticipated litigation, and created primarily for litigation purposes, qualify for work product protection.

Attorney-Client Privilege

Attorney-client privilege protects confidential communications between the carrier and its attorneys. However, the privilege does not attach simply because the carrier routed documents through an attorney. If the carrier sent claims-handling documents to outside counsel for review and then stamped them “privileged,” that does not make them privileged. The communication must be made for the purpose of obtaining legal advice, and the privilege does not cover the underlying facts — only the legal advice itself. Carriers frequently try to cloak ordinary claims-handling decisions in privilege by involving an attorney after the fact. Courts have consistently rejected this tactic.

The “Dual Purpose” Problem

The most contested privilege issue in insurance litigation is the “dual purpose” document — a document created both for claims-handling purposes and in anticipation of litigation. Carriers argue that any document touching on coverage should be protected once litigation is anticipated. But courts have recognized that an insurer has a continuing duty to investigate and adjust the claim even after litigation has been filed. Documents created in furtherance of that duty are not privileged simply because a lawsuit is also pending. The test is the primary purposeof the document — if it was created primarily for claims handling, it is discoverable regardless of whether it also serves a litigation purpose.

The Crime-Fraud Exception

Neither attorney-client privilege nor work product protection applies when the communication or document was made in furtherance of a crime or fraud. In insurance bad faith cases, the crime-fraud exception can pierce privilege if the policyholder can show that the carrier used its attorney to facilitate the bad faith conduct — for example, by having an attorney draft a denial letter that the carrier knew was based on false or misleading grounds. This is a high bar, but when it applies, it strips away the carrier’s most powerful shield.

Depositions in Insurance Cases

Document discovery is essential, but depositions bring the evidence to life. In insurance litigation, there are several key witnesses whose testimony can make or break the case.

Person Most Knowledgeable (PMK) Depositions

A PMK deposition (sometimes called a “person most qualified” deposition) is a deposition noticed under California Code of Civil Procedure § 2025.230. Instead of naming a specific individual, the notice identifies topics, and the carrier must designate the person most knowledgeable about each topic. This is a powerful tool because it forces the carrier to produce a witness who can testify authoritatively about claims-handling procedures, training, guidelines, reserve-setting practices, and the specific decisions made on your claim. The carrier cannot hide behind “I don’t know” — the designated witness has a duty to prepare.

Deposing the Assigned Adjuster

The adjuster who handled your claim is the most important fact witness. The adjuster made the day-to-day decisions — what to inspect, what to document, what to include in the estimate, what to exclude, and ultimately what to offer. In deposition, the adjuster must explain each of those decisions and identify who, if anyone, instructed them to handle the claim in a particular way. If the adjuster was told by a supervisor to cut the estimate or deny coverage, that testimony is directly relevant to bad faith. Your attorney should have the adjuster walk through the entire investigation step by step, comparing the adjuster’s testimony to the claims file and diary entries.

Deposing the Supervisor

The supervisor who set reserves, established authority levels, and reviewed the adjuster’s work is a critical witness. The supervisor’s testimony can reveal the gap between what the carrier internally valued the claim at and what it offered the policyholder. It can also reveal whether the supervisor directed the adjuster to take specific actions — reduce the estimate, deny a portion of the claim, or decline to inspect certain areas. If the supervisor overrode the field adjuster’s findings based on a desk review alone, that testimony is powerful evidence.

Deposing the Carrier’s Expert

The engineer, industrial hygienist, or other expert who wrote a report for the carrier is a key deposition target. The expert must explain their methodology, defend their conclusions, and — critically — disclose their financial relationship with the carrier. How many assignments have they received from this carrier? What percentage of their income comes from insurance company work? Were their findings changed between the draft and final report? Who asked for the changes? These questions go directly to the credibility of the carrier’s expert and the reliability of the report on which the carrier based its coverage decision.

What Policyholders Should Document Before Litigation

Discovery is a litigation tool. But the policyholder’s own evidence starts long before any lawsuit is filed. The best time to begin building your record is the day you file your claim — not the day you hire an attorney. Every piece of documentation you create during the claims process becomes potential evidence if litigation becomes necessary.

• Keep every written communication.Every email, letter, text message, and written notice you send to or receive from the insurance company should be saved. Create a dedicated folder — physical and digital — and file everything chronologically. See our guide on claim negotiation letters for guidance on written correspondence with carriers.
• Document every phone call. For every phone conversation with the carrier, note the date, the time, who you spoke with (get their full name and title), and what was said. Write it down immediately after the call while the details are fresh. Then send a follow-up email to the adjuster confirming what was discussed. This creates a contemporaneous written record that is far more persuasive than trying to remember the conversation months or years later.
• Save every estimate and report.Every damage estimate, engineering report, scope of loss, and repair proposal — whether produced by the carrier, your contractor, or your public adjuster — should be preserved. If the carrier revises an estimate, save both the original and the revision. The changes between versions are often evidence of underpayment.
• Photograph and video everything. Document the damage to your property thoroughly with photographs and video before any repairs begin. Take wide shots and close-ups. Include measurements where possible. Date-stamp everything. This evidence is your baseline and prevents the carrier from later arguing that the damage was less extensive than you claim.
• Track deadlines and response times.California’s Fair Claims Settlement Practices Regulations impose specific deadlines on insurers — 15 days to acknowledge a claim, 40 days to accept or deny coverage, and other time limits. Document every deadline and whether the carrier met it. A pattern of missed deadlines is evidence of bad faith.
• Do not throw anything away.Even documents that seem routine or unimportant during the claims process can become critical evidence in litigation. Preserve everything. Let your attorney decide what is relevant — that is not a decision you can make in the moment.

The combination of the policyholder’s own contemporaneous records and the evidence obtained through discovery of the carrier’s files creates the complete picture of how the claim was handled. One side shows what the policyholder experienced; the other shows what the carrier was doing internally. When those two pictures do not match — when the adjuster’s diary says one thing and the carrier’s formal correspondence says something very different — that inconsistency is the foundation of a bad faith case.

Working With Your Attorney on Discovery

Discovery in insurance litigation is technical, expensive, and contentious. The carrier will resist producing documents, assert privilege over everything it can, and delay at every step. An experienced insurance litigation attorney knows what to ask for, how to fight for it, and how to use it once obtained. The policyholder’s role is to provide the attorney with every document in their possession, identify every person they communicated with at the insurance company, and describe every interaction they had during the claims process. The more information the policyholder provides, the more targeted and effective the attorney’s discovery requests will be.

If you are still in the claims process and have not yet filed a lawsuit, working with a licensed public adjuster can build the factual foundation and contemporaneous record that an attorney will need if litigation becomes necessary. A public adjuster documents the insurer’s conduct in real time — missed deadlines, lowball offers, unreasonable positions, and regulatory violations — all in the normal course of handling the claim. That record becomes invaluable evidence if the case moves to litigation and discovery.