Lexington Insurance Company v. Sentry Select Insurance Company, No. 1:2008cv01539 - Document 62 (E.D. Cal. 2009)
Court Description: ORDER Granting Plaintiff's 35 Motion for Protective Order signed by Magistrate Judge Gary S. Austin on 10/29/2009. (Esteves, C)
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Lexington Insurance Company v. Sentry Select Insurance Company Doc. 62 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 LEXINGTON INSURANCE COMPANY, 11 12 13 14 Plaintiff, v. SENTRY SELECT INSURANCE COMPANY, and Illinois Corporation, 15 16 Defendant. 17 ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) 1:08-cv-1539 LJO GSA ORDER GRANTING PLAINTIFF’S MOTION FOR PROTECTIVE ORDER (Doc. 35) 18 19 20 INTRODUCTION Pending before this Court is Plaintiff Lexington Insurance Company’s (“Lexington”) 21 Motion for Protective Order initially filed on August 11, 2009. (Doc. 35). The parties agreed, 22 pursuant to stipulation, to continue the hearing to September 2, 2009. (Doc. 47.) On September 23 14, 2009, Lexington and Defendant Sentry Select Insurance Company (“Sentry”) filed a Joint 24 Statement Re Discovery Disagreement on Plaintiff’s Motion for Protective Order. (Doc. 50.) 25 That same date, Plaintiff filed the Declaration of Annette Ballatore-Williamson in support of the 26 motion. (Doc. 51.) On September 16, 2009, the Court determined the matter was suitable for 27 28 1 Dockets.Justia.com 1 decision without oral argument pursuant to Local Rule 78-230(h).1 The hearing scheduled for 2 September 18, 2009, was vacated. (Doc. 53.) For the foregoing reasons, the motion is 3 GRANTED. 4 PROCEDURAL BACKGROUND 5 A. The Underlying Moran Action 6 During the early morning of July 12, 2005, Bear Trucking employee Robert Knieling 7 (“Mr. Knieling”) parked his long-haul tractor and trailer in an “Emergency Parking Only” portion 8 of a California highway in Ventura County. Erquimedes Moran (“Mr. Moran”) drove a utility 9 truck, swerved off the highway, and collided with the rear of Mr. Knieling’s trailer causing 10 personal injuries to Mr. Moran and fatal injuries to Daniel Torres (“Mr. Torres”), Mr. Moran’s 11 passenger. 12 Prior to the accident, Sentry had issued a primary commercial liability policy (“Sentry 13 policy”) with a $1 million limit of liability for commercial automobile liability coverage to Bear 14 Trucking, Inc. (“Bear Trucking”). Lexington had also issued a stand alone excess liability policy 15 (“Lexington policy”) to Bear Trucking with a $4 million per occurrence limit in excess of 16 Sentry’s $1 million policy’s for automobile liability. 17 Mr. Moran, Jacqueline Torres (Mr. Torres’ widow), and Concepcion Torres (Mr. Torres’ 18 mother) pursued an action in Ventura County Superior Court against Bear Trucking and Mr. 19 Knieling (the “Moran action”). Sentry defended Bear Trucking and Mr. Knieling in the Moran 20 action, and funded a combined $67,000 settlement for Mr. Moran and Concepcion Torres’ claims 21 and workers’ compensation liens prior to trial. 22 Jacqueline Torres pursued her wrongful death claim. A trial was held in April 2007 23 resulting in a $7 million verdict which assessed eighty percent liability against Bear Trucking and 24 Mr. Knieling for a $5.6 million net verdict. On July 9, 2007, the trial court conditionally granted 25 Bear Trucking and Mr. Knieling’s motion for a new trial unless Jacqueline Torres accepted a 26 27 28 1 The Court carefully reviewed and considered all of the pleadings, including arguments, points and authorities, declarations, and exhibits. Any omission of a reference to an argument or pleading is not to be construed that this Court did not consider the argument or pleading. This Court thoroughly reviewed and considered all arguments in this motion. 2 1 remittitur to $2.6 million. The trial court found error in apportionment of more than fifty percent 2 fault to Bear Trucking and Mr. Knieling. On July 13, 2007, Jacqueline Torres accepted the 3 remittitur in the amount of $2.6. 4 B. The Present Lexington v. Sentry Coverage Action 5 In the instant action, Lexington contends that Sentry breached its obligation of good faith 6 and fair dealing in conducting the defense of Robert Knieling and Bear Trucking in the Moran 7 action. In particular, Lexington contends that Sentry breached the implied covenant by failing to 8 accept numerous reasonable settlement offers within its limits, failing to consider all settlement 9 offers, failing to attempt to reach a reasonable settlement, and failing to consider the interests of 10 the insureds equally with its own. On July 20, 2007, Lexington demanded that Sentry fully 11 indemnify its insureds for the entire judgment due to Sentry’s alleged breach of duty of good 12 faith and dealing. 13 In August 2007, Bear Trucking and Mr. Knieling filed an appeal in the Moran action, 14 with Sentry and Lexington posting their respective shares of the appeal bond. A mediation 15 between the remaining Moran action parties, Sentry, and Lexington occurred on November 19, 16 2007. In March 2008, the Moran action settled for $2.25 million, with Sentry Select paying 17 $1,034,968.20 under the Sentry Policy (its remaining policy plus costs) and Lexington paying 18 $1,215,031.80 under the Lexington policy. 19 On September 2, 2008, Lexington filed the instant action in the Fresno County Superior 20 Court (Case No. 08 CECG03015AMC) against Sentry, alleging breach of contractual obligations. 21 Lexington filed a first amended complaint (“FAC”) on September 4, 2008, alleging equitable 22 subrogation and equitable indemnity causes of action based on Sentry’s alleged acts of bad faith 23 in defending Bear Trucking and Mr. Knieling. Lexington is seeking $1,215,031.80 for its share 24 of the settlement contributions, $137,485.90 for prejudgment interest, $10,325.40 for appeal 25 bond premium, and $2,137.50 for mediation costs. The FAC also alleges a third cause of action 26 for declaratory relief. Sentry removed the action on October 10, 2008. 27 28 3 1 2 DISCUSSION Plaintiff filed the instant motion seeking protection from the following discovery requests 3 or notices served by Defendant: (1) the deposition notice of the person most qualified from 4 Lexington and its question categories 5, 7 through 22, and 24 through 38, and document request 5 numbers 3, 5, 6 and 10; (2) the deposition notices of Donna Doyle, Andrea Palmstrom, Sarah 6 Preston and Althea Garvey (same categories & document request numbers); (3) interrogatory 7 numbers 12 and 13 of the special interrogatories, set one; and (4) numbers 39 through 51 of the 8 request for production of documents, set two. (Doc. 50 at 4; see also Doc. 50 at 16-22.) Plaintiff 9 bases its request on the fact that the discovery sought by Defendant is irrelevant to this action, 10 11 and thus, is not a proper subject of discovery. (Doc. 50 at 6-22.) In response to Plaintiff’s motion, Defendant Sentry replies that Lexington has not met its 12 burden of proving it is entitled to a protective order, that the discovery sought is relevant to 13 Sentry’s defenses, and is reasonably calculated to leave to the discovery of admissible evidence. 14 (Doc. 50 at 22-34.) 15 A. 16 Rule 26(b)(1) of the Federal Rules of Civil Procedure provides as follows: 17 20 Parties may obtain discovery regarding any matter, not privileged, which is relevant to the claim or defense of any party, including the existence, description, nature, custody, condition, and location of any books, documents, or other tangible things and the identity and location of persons having knowledge of any discoverable matter . . .. The information sought need not be admissible at trial if the information sought appears reasonably calculated to lead to the discovery of admissible evidence. 21 Plaintiff here seeks a protective order pursuant to Rule 26(c) of the Federal Rules of Civil 22 Procedure, which provides: 18 19 23 24 25 26 Legal Standard A party or any person from whom discovery is sought may move for a protective order in the court where the action is pending - or as an alternative on matters relating to a deposition, in the court for the district where the deposition will be taken. The motion must include a certification that the movant has in good faith conferred or attempted to confer with other affected parties in an effort to resolve the dispute without court action. The court may, for good cause, issue an order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense . . .. 27 28 4 1 Protective orders provide a safeguard for parties and other persons in light of the otherwise broad 2 reach of discovery. Fed. R. Civ. P. 26(c), Advisory Comm. Notes (1970); United States v. CBS, 3 Inc., 666 F.2d 364, 368-369 (9th Cir. 1982). 4 In order to establish good cause for issuance of a protective order, the party seeking 5 protection bears the burden of showing that specific prejudice or harm will result if no protective 6 order is granted. See Beckman Indus., Inc. v. International Ins. Co., 966 F.2d 470, 476 (9th Cir. 7 1992) (holding that broad allegations of harm, unsubstantiated by specific examples or 8 articulated reasoning, do not satisfy the Rule 26(c) test); see also San Jose Mercury News, Inc. v. 9 United States Dist. Court, 187 F.3d 1096, 1103 (9th Cir. 1999) (holding that to gain a protective 10 order the party must make a particularized showing of good cause with respect to any individual 11 document). In determining whether good cause exits for the protective order, the Court must 12 balance the interests in allowing discovery against the relative burdens to the parties and non 13 parties. In re Coordinated Pretrial Proceedings, 669 F.2d 620, 623 (10th Cir. 1982); see also 14 Wood v. McEwen, 644 F.2d 797, 801-801 (9th Cir. 1981). 15 B. 16 Lexington argues that its claims handling with respect to the Moran action is irrelevant 17 and not reasonably calculated to lead to the discovery of admissible evidence, and thus is not a 18 proper subject of discovery. This is so, argues Lexington, because an excess carrier has no duty 19 to participate in the defense of an action unless and until the primary policy has been exhausted, 20 and it is improper for an excess carrier to interfere in the primary insurer’s handling of the matter. 21 Doc. 50 at 6-8. Analysis 22 Sentry contends that “Lexington’s responses may tend to show that Sentry was reasonable 23 in how it handled the underlying Moran action” and that it “expects to introduce evidence that its 24 pattern and practice of dealing with Lexington and other excess insurance carriers” reveals 25 excess carriers predicate involvement on whether or not the excess carrier believes a loss has the 26 potential for exceeding policy limits. (Doc. 50 at 26.) Sentry has failed to specifically identify 27 how its requested discovery is relevant to its defenses. It generally asserts the information will 28 show it acted “reasonable” and, apparently, that Lexington acted with something less. 5 1 2 1. Relevancy Lexington asserts that because Sentry cannot “point to the excess insurer’s handling of a 3 claim prior to exhaustion of the primary insurance as evidence to refute a bad faith action . . . the 4 information is irrelevant because it does not help to establish any defense” for Sentry. (Doc. 50 5 at 11.) Lexington ask this Court to issue a protective order prohibiting Sentry from seeking 6 discovery or asking questions in several noticed depositions concerning Lexington’s internal 7 claims handling, monitoring or evaluation of the Moran action, with the exception of any 8 communication that occurred between Lexington and Sentry during the relevant period. (Doc. 50 9 at 12.) Lexington argued that it will suffer undue burden, as well as significant additional 10 11 expense, if it is denied a protective order as requested. (Doc. 51, ¶¶ 4-5.) As noted above, Sentry contends that the information it seeks is relevant to its defenses 12 because “Lexington’s responses may tend to show that Sentry was reasonable in how it handled 13 the underlying Moran action,” and that Sentry intends to introduce “pattern and practice” 14 evidence concerning Lexington and other excess carriers who determine their own level of 15 involvement in a matter based upon whether or not that excess carrier “believes a case has the 16 potential of a judgment in excess of policy limits.” Sentry also contends Lexington’s arguments 17 are based upon an incorrect legal premise. (Doc. 50 at 23-34.) Sentry’s opposition is unavailing. 18 Generally speaking, each party has the right to discover “any nonprivileged matter that is 19 relevant to any party’s claim or defense.” Fed. R. Civ. P. 26(b)(1), emphasis added. 20 Additionally, and for good cause, a court may permit discovery of information that is “relevant to 21 the subject matter involved in the action.” Ibid. 22 The Court finds the relevance of the information Sentry seeks tenuous at best with regard 23 to any defense Sentry may assert in the instant action. As excess carrier to primary carrier 24 Sentry, Lexington owed no duty related to the Moran action unless and until the primary policy 25 was exhausted. Continental Casualty Company v. Royal Insurance Company, 219 Cal.App.3d 26 111, 118-119 (1990). Therefore, how Lexington may or may not have monitored or otherwise 27 handled its own claim file regarding the Moran action, prior to the exhaustion of Sentry’s policy 28 limits, is irrelevant here. "[T]he standard of relevancy is not so liberal as to allow a party to . . . 6 1 explore matter which does not presently appear germane on the theory that it might conceivably 2 become so." Food Lion v. United Food & Comm 'l Workers Union, 103 F.3d 1007, 1012-1013 3 (D.C .Cir.1997) (internal quotes omitted). Lexington’s internal handling of the claim related to 4 its insureds Bear Trucking and Robert Knieling is not germane to a determination of whether or 5 not Sentry breached its covenant of good faith and fair dealing to the same insureds as the 6 primary carrier. 7 More particularly, Sentry has failed to articulate how Lexington’s adjustment, 8 monitoring, evaluation and valuation, and decisions and conduct regarding rejections on behalf 9 of Bear Trucking, pre-trial settlement negotiations, trial negotiations, communications and 10 reports regarding the Moran action, as well as Lexington’s policies and procedures in place 11 during the pendency of the Moran action, have any bearing on its own duties to its insureds. The 12 “primary carrier controls the litigation” (Continental Cas. Co. v. Royal Ins. Co., 219 Cal.App.3d 13 at 118), thus, the duty that is the subject of the litigation is Sentry’s duty to its insureds, rather 14 any duty of Lexington. In sum, Lexington’s handling, monitoring, evaluation, decisions and 15 conduct in the Moran action are therefore irrelevant until the primary policy - Sentry’s policy - 16 becomes exhausted. 17 A court may limit discovery if it determines that the burden or expense of the proposed 18 discovery outweighs its likely benefit. Fed. R. Civ. Proc. 26(b)(2)(C)(iii). For the foregoing 19 reasons, this Court finds that limiting Sentry’s discovery to matters other than Lexington’s 20 handling of its own claim relative to the underlying Moran action outweighs any likely benefit. 21 CONCLUSION AND ORDER 22 IT IS THEREFORE ORDERED that: 23 1. Lexington’s motion for a protective order regarding the deposition of the person 24 most qualified at Lexington with regard to question categories 5, 7 through 22, 25 and 24 through 38, and document request numbers 3, 5, 6 and 10, is GRANTED; 26 2. Lexington’s motion for protective order regarding the deposition of Donna Doyle 27 with regard to question categories 5, 7 through 22, and 24 through 38, and 28 document request numbers 3, 5, 6 and 10, is GRANTED; 7 1 2 3. Lexington’s motion for protective order regarding the deposition of Andrea 3 Palmstrom with regard to question categories 5, 7 through 22, and 24 through 38, 4 and document request numbers 3, 5, 6 and 10, is GRANTED; 5 4. Lexington’s motion for protective order regarding the deposition of Sarah Preston 6 with regard to question categories 5, 7 through 22, and 24 through 38, and 7 document request numbers 3, 5, 6 and 10, is GRANTED; 8 5. 9 with regard to question categories 5, 7 through 22, and 24 through 38, and 10 11 document request numbers 3, 5, 6 and 10, is GRANTED; 6. 12 13 Lexington’s motion for protective order regarding the deposition of Althea Garvey Lexington’s motion for protective order regarding interrogatory numbers 12 and 13 of the special interrogatories, set one, is GRANTED; and 7. 14 Lexington’s motion for protective order regarding numbers 39 through 51 of the request for production of documents, set two, is GRANTED. 15 16 17 18 19 IT IS SO ORDERED. Dated: 6i0kij October 29, 2009 /s/ Gary S. Austin UNITED STATES MAGISTRATE JUDGE 20 21 22 23 24 25 26 27 28 8
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