Great Am. Ins. Co. v. Veteran’s Support Org.
Great Am. Ins. Co. v. Veteran’s Support Org.
2015 WL 10633939 (S.D. Fla. 2015)
August 24, 2015
Seltzer, Barry S., United States Magistrate Judge
Summary
The court denied the Defendant's Motion to Compel with respect to Request No. 8, finding it overly broad and unduly burdensome. Additionally, the court conducted an in camera inspection of two emails identified on Plaintiff's privilege log and found that they were protected from disclosure by the attorney-client privilege.
Great American Insurance Company, Plaintiff,
v.
The Veteran's Support Organization, Richard Van Houten, Michelle Van Houten, Steve Casella, and Robert Cruz, Defendants
v.
The Veteran's Support Organization, Richard Van Houten, Michelle Van Houten, Steve Casella, and Robert Cruz, Defendants
CASE NO. 15–80020–CIV
United States District Court, S.D. Florida
Signed August 24, 2015
Counsel
Daniel Tranen, Wilson Elser Moskowitz Edelman & Dicker, LLP, Edwardsville, IL, James K. Thurston, Wilson Elser Moskowitz Edelman & Dicker, Chicago, IL, Jodi Goldberg Barrett, Rodney Janis, Wilson Elser Moskowitz Edelman & Dicker LLP, West Palm Beach, FL, for Plaintiff.Robert Dewitt McIntosh, Adam B. Cooke, McIntosh Schwartz, P.L., Fort Lauderdale, FL, for Defendants.
Seltzer, Barry S., United States Magistrate Judge
ORDER ON MOTION TO COMPEL BETTER RESPONSES
*1 THIS CAUSE is before the Court on the Motion to Compel Better Discovery Responses (DE 67) filed by Defendants The Veteran's Support Organization, Richard Van Houten, Michelle Van Houten,[1] Steve Casella, and Robert Cruz (collectively, “Defendants”), Plaintiff Great American Insurance Company's Memorandum in Opposition (DE 74), Defendants' Reply (DE 77), and the parties' Joint Status Report (DE 73). The matter has been referred to the undersigned Magistrate Judge pursuant to 28 U.S.C. § 636 and the Magistrate Rules of the Local Rules of the United States District Court for the Southern District of Florida. For the reasons set forth below, Defendants' Motion (DE 41) is DENIED.
Plaintiff Great American Insurance Company (“Plaintiff or Great American”) brings this action against The Veteran's Support Organization (“VSO”) and its officers and directors, including Richard Van Houten (“R. Van Houten”), Michelle Van Houten (“M. Van Houten”), and Robert Cruz (“Cruz”) (collectively the “individual defendants”). Great American issued two “claims-made” Nonprofit Solutions Insurance Policies to VSO, one for the policy period November 8, 2011, through November 8, 2012 (the “First Policy”) and one for the policy period November 8, 2013, through November 8, 2014 (the “Second Policy”). The policies covered VSO and its officers and directors (the individual defendants) for claims made against them for “wrongful acts.”
On September 28, 2012 – during the First Policy period – the Texas Attorney General (the “Texas AG”) served on VSO a Request to Examine. The Texas AG demanded that VSO produce documents (pursuant to 66 separate document requests) related to an investigation that VSO “may be making misrepresentations concerning its non-profit services to consumers and ... [it] failed to disclose certain information to consumers in violation of state and federal laws.” First Amended Complaint ¶ 2 (DE 26). The Request to Examine advised VSO if it failed or refused to produce the documents that it would forfeit its rights to do business in Texas and that its permit or charter would be canceled or forfeited. After VSO (allegedly) failed to respond fully to the Request to Examine, on November 19, 2012, on an unspecified date in December 2013, and on February 13, 2014, the Texas AG contacted VSO demanding the documents it had not provided pursuant to the Request to Examine. On March 19, 2014, the State of Texas, through the Texas AG, brought suit against VSO (and four individual defendants)[3] in Texas state court (the “Texas AG lawsuit”). See State of Texas' Original Petition and Applications for Temporary Injunction and Permanent Injunction (DE 26–2). Some of the allegations in that lawsuit refer to VSO's failure to adequately respond to the Request to Examine. The Texas AG seeks termination of VSO's Certificate of Registration and its cessation of business in Texas.
*2 In the instant case, Great American alleges that the Request to Examine made by the Texas AG was served on VSO (on September 28, 2012) during the first policy period and that the Texas AG lawsuit was filed against VSO (on March 19, 2014) during the second policy period. According to Great American, the Request to Examine constituted a claim under the first policy, pursuant to which VSO was obligated to provide notice of the Request “as soon as practicable” but “in no event later than 90 days after the end of the Policy year” (which ended on November 8, 2012). Great American alleges that because VSO failed to provide timely notice of this claim (Request to Examine) it is not entitled to coverage under the first policy. Further, Great American alleges that the Texas AG lawsuit (which also constitutes a claim) and the Request to Examine involve the same “wrongful acts”; therefore, the claim is deemed to have occurred on September 28, 2012, when the Request to Examine was served on VSO. Great American, therefore, argues that because VSO failed to give timely notice of the claim, it is not entitled to coverage under either the first or the second policy.
Great American further alleges that VSO is not entitled to coverage because the Texas AG lawsuit seeks “civil penalties,” and the terms of the policy expressly exempt such penalties as a “loss.” In addition, Great American alleges that the monetary relief sought by the Texas AG – disgorgement of ill-gotten monies – is not considered a “loss” because the policy exempts “any amounts which may be deemed uninsurable under the law.” Great American also alleges that based on the Texas AG lawsuit two other provisions may apply to limit or exclude coverage under the policies – a personal profit and fraud exclusion and an other insurance exclusion.
Moreover, Great American alleges that is entitled to a rescission of the policy pursuant to Florida Statute § 627.409. That statute, inter alia, permits rescission of insurance policies that contain fraudulent misrepresentations, omissions, concealments of fact, or incorrect statements material to the acceptance of the risk assumed by the insurer, that is, were the true facts known to the insurer it would not have issued the policy or provided coverage for the hazard resulting in the loss. According to Great American, Defendant Michelle Van Houten, on behalf of VSO, misrepresented on the Proposal Form that there had been no civil or administrative proceedings against VSO or its officers and directors either during the prior three years or then pending when, in fact, VSO was involved in an administrative proceeding with the Texas AG who had served a Request to Examine. Great American alleges that this misrepresentation was material to the acceptance of the risk or to the hazard it assumed, entitling it to rescission of the second policy. Based on the same misrepresentation on the Proposal Form for the second policy, Great American also asserts a claim for common law fraud.
In its Amended Complaint, Great American seeks: (1) a declaration that no coverage exists for VSO or the individual defendants under the Great American policies and, hence, it has no obligation to defend or pay for any for loss or costs of defense; (2) a finding that Great American is entitled to rescission of the second policy issued to VSO; and (3) an award of compensatory damages on its fraud claim.
In response, Defendants denied the material allegations of the Amended Complaint, including the following: that Defendants failed to provide notice of any claim; that the Request to Examine by the Texas Attorney General constituted a “Wrongful Act or Related Wrongful Act” or a “claim” as defined by the policies; that their notice of the Texas Attorney General's lawsuit was untimely; and that the Request to Examine constituted a civil, criminal, administrative or arbitration proceeding under the terms of the Proposal Form. Defendants also asserted several affirmative defenses, including that the definitions of “claim” and “Same Wrongful Act or Related Wrongful Act” are ambiguous. Additionally, Defendants brought a counterclaim seeking a declaration that the plaintiff insurance company is obligated to provide a defense and indemnify them in the Texas AG lawsuit. See Defendants' Amended Answer and Affirmative Defenses and Counterclaim to First Amended Complaint for Declaratory Judgment (DE 38).
*3 On June 17, 2015, Defendants filed the instant Motion to Compel Better Discovery Responses (DE 67). The Motion seeks to compel Plaintiff to provide better responses to Requests Nos. 2, 4, 5, 6, 7, and 8 of Defendant's First Request for Production of Documents.[4] It further requests the Court to compel Plaintiff to provide additional information on its privilege log with respect to three emails, so that Defendants can ascertain whether the claimed privilege applies.
After the filing of Defendants' Motion (upon the Court's Order (DE 70)), the parties conferred and were able to resolve almost all the issues raised by the Motion. Accordingly, with respect to the issues raised by Defendants' Motion that the parties were able to resolve, Defendants' Motion (DE 67) is DENIED as moot.
In their Joint Status Report (DE 73), the parties identified only two issues that remain for the Court's consideration – whether Plaintiff should be required to provide a better response to Request for Production No. 8 and whether Plaintiff should be required to produce two emails (dated October 22, 2014, and November 19, 2014), which Plaintiff has withheld under a claim of attorney-client privilege.
Request for Production No. 8 seeks:
All Documents (other than the Policy) generated, maintained, or received by You [GAIC] that define, construe, interpret, comment on the interpretation of, analyze or discuss the meaning or application of the following provisions or exclusions in Great American Policy No. EPP8630941 for Policy Period November 8, 2011–12 (the “first Policy”) and the second Policy for November 8, 2013–14, issued by VSO to Great American the terms of which are expressly incorporated into the Policy:
a. Have there been during the last 3 years, or are there now pending, any civil, criminal, administrative or arbitration proceedings (including any proceeding initiated before the Equal Employment Opportunity Commission) brought against the Organization, its Subsidiaries, the Employee Benefit Plans of the Organizations or its Subsidiaries, or any other person proposed for this insurance in their capacity as either Director, Officer, Trustee, employee, volunteer, or staff member of the Organization or its Subsidiaries.
b. The Insureds shall as a condition precedent of their rights under this Policy, give the Insurer notice in writing of any Claim made during the Policy Period. Such notice shall be given as soon as practicable after the date the President, Executive Director, Chief Financial Officer, General Counsel, or person with equivalent responsibility has knowledge of the Claim and in no event later than ninety (90) days after the end of the Policy Year.
c. If during the Policy Period or Discovery Period, any insured first becomes aware of a specific Wrongful Act and gives notice to the Insurer of: (1) the specific Wrongful Act; (2) the injury or damage which has or may result therefrom; and (3) the circumstances by which the Insured first became aware thereof; then any Claim arising out of such Wrongful Act which is subsequently made against the Insured shall be deemed to have been made at the time the Insurer received such written notice from the Insured.
*4 d. In addition to furnishing the notice as provided in Section VIII A or B, the Insured shall, as soon as practicable, provide the Insurer with copies of reports, investigations, pleadings and other documents in connection therewith, and shall provide all information, assistance and cooperation which the Insurer reasonably requests and do nothing to prejudice the Insurer's position or its potential and actual rights of discovery.
e. Notice to the Insurer as provided in Section VII or B shall be emailed toELDClaims@galc.com or mailed to GREAT AMERICAN INSURANCE GROUP EXECUTIVE LIABILITY DIVISION, CLAIMS DEPARTMENT, P.A. BOX 66943, CHICAGO, IL 60656.
This Requests includes, without limitation, claims manual(s), training material, interpretive materials, best practice guides, memoranda, newsletters, underwriting Documents, sales and marketing materials, articles published in trade or legal periodicals, articles written for claims professionals or seminars, and home office directives and bulletins.
Defendants/Counter Plaintiff's First Request for Production Directed to Great American Insurance Company (DE 67–1).
Defendant objected to Request for Production No. 8 as follows:
GAIC objects to this request on the grounds that it is overly broad, unduly burdensome and seeks information that is not relevant and not reasonably calculated to lead to the production of admissible evidence. This request essentially asks GAIC to review every document in its possession (as stated, any document that was “generated, maintained or received by” GAIC and, in doing so, it asks GAIC [to] make a determination whether any of its documents “define, construe, interpret, comment an [sic] the interpretation of, analyze or discuss the meaning or application of” several long phrases taken from GAIC's policies and application.
To undertake a determination whether such documents even exist, GAIC would have to review all of its electronically and non-electronically maintained documents as this request is not limited in any fashion (scope, time or otherwise). Indeed this request does not even seek a review of particular types of files, and instead, the request would require a review of everything possessed by GAIC. The burdens of undertaking such a search would be enormous.
Moreover, Defendants have never actually identified any ambiguity in any of the long phrases identified in this request and therefore such materials are not clearly relevant to this dispute. Indeed, just because, for example, an underwriter received a newsletter or article from an attorney or broker offering an interpretation of the term “notice” in claims made policies (one of the more than one hundred words contained in the phrases identified in this discovery request), does not make such an interpretation binding on GAIC or its policies. However, such a document would be one of thousands, and perhaps millions of pages of documents that would fall within the scope of this request.
GAIC further objects to this request on the grounds that it is so vague, ambiguous and confusing that a knowing answer is impossible. As written, this request has so many parts that it is extremely difficult to issue a response or provide comprehensive objections. It simultaneously asks for newsletters, articles, training manuals, claims manuals and other documents including “memoranda” and interpretive materials” all of which “construe, define, interpret, etc.” long phrases contained within the polices or the applications. As written, this request is simply too unwieldy for GAIC to make a proper response, and on that basis as well, this request is objectionable.
*5 Subject to these objections and the general objections set forth above, and without waiving them, GAIC has produced the claims and underwriting files associated with the policies and claims made for VSO. These are the written documents maintained by GAIC that are actually associated with the VSO policies and claims made in the underlying lawsuit. In addition, to the extent that this discovery request was actually looking for a “claims manual” (one of the many items listed), GAIC notes that it does not maintain “claims manuals” for the purposes of determining whether to accept or deny coverage for a claim.
Plaintiff's Amended Responses to Defendants' First Request for Production of Documents (DE 67–4).
In their Motion, Defendants assert that Request No. 8 “simply asks for any documents in the possession of Plaintiff which interpret five different provisions or exclusions in the policy at issue.” Motion ¶ 15 (DE 67). Defendants argue that Plaintiff's “overly broad” and “unduly burdensome” objections are without support. Further, Defendants summarily argue that Plaintiffs contention that the documents are not relevant in the absence of any alleged ambiguity is also without merit. Defendants, however, do not elaborate further on these arguments. Finally, Defendants contend that “[t]he test is broad and includes any documents which are reasonably calculated to lead to admissible evidence; the test is not relevancy.”[5] Id.
In response, Plaintiff argues that Defendants' Motion with respect to Request No. 8 should be denied because Defendants have failed to provide any actual analysis to overcome Plaintiff's objections to the Request. Rather, Defendants pose only two arguments: “(1) that Plaintiff's objection regarding overbreadth and burdensomeness is ‘not supported’; and (2) that the absence of an ambiguity in the policy does not matter for purposes of the relevance of the requested documents.”[6] Response at 5 (DE 74). Plaintiff notes that Defendants have failed to make any effort to address the reasons for Plaintiff's objections.
Addressing Defendants' first argument – attacking Plaintiff's “overly broad” and “unduly burdensome” objections – Plaintiff asserts that the burden and overbreadth in complying with Request No. 8 “is manifest upon considering the vast scope and obvious difficulties of having a large insurance company respond by searching for responsive documents.” Response at 6 (DE 74). Plaintiff explains that to comply it “would have to search the files of every claims person and every underwriter within the organization in order to find out whether there are documents that were ‘generated, maintained or received’ by GAIC that makes any reference to any of the terms contained within 5 lengthy paragraphs quoted from the policy and the policy application.” Id. at 5–6. Plaintiff further explains that the “search would then require lawyers to make judgments regarding any document located in these files to determine whether they are responsive to this voluminous request.” Id. at 6.
*6 Addressing Defendants' second argument – relevancy – Plaintiff reiterates its prior objection that the documents sought are neither relevant nor calculated to lead to admissible evidence because Defendants have never suggested that the application provision identified in Request No. 8(a) or the policy provisions identified in Request No. 8(b)-(e) are ambiguous. Indeed, according to Plaintiff, during VSO's deposition, its representative “admitted that it failed to properly answer this application question in light of various state investigations, fines, and administrative proceedings”; VSO acknowledged that it “failed to actually consider whether the various state actions commenced by Tennessee, South Carolina, New Jersey, or Florida, or a civil suit filed against VSO in Tennessee required a different response.” Id. at 6. Additionally, Plaintiff notes that the only ambiguities raised by Defendants are the terms “claim” and “related wrongful act.” According to Plaintiff, Defendants contend that these terms are ambiguous only because the parties view the application of the Texas AG's Request to Examine differently.
In their Reply, Defendants first argue that the Court should not consider Plaintiff's burdensome objection because it has not proffered any affidavits or other evidence establishing an undue burden. See Henderson v. Holiday, CVS, L.L.C., 269 F.R.D. 682, 686 (S.D.Fla.2010) (Johnson, M.J.) (“[T]o even merit consideration ‘an objection must show specifically how a discovery request is overly broad, burdensome or oppressive, by submitting evidence or offering evidence which reveals the nature of the burden.’ ”)[7] (quoting Coker v. Duke & Co., 177 F.R.D. 682, 686 (M.D. Ala 1998)).
Defendants next argue that Plaintiff's objection that the documents sought are not relevant nor calculated to lead to discovery of admissible evidence is without merit. The basis for Plaintiff's argument is that Defendants have not contended that the policy language at issue is ambiguous. Defendants acknowledge that “unambiguous policy language generally cannot be varied by extrinsic evidence.” Reply at 6 (DE 77). But Defendants contend that because the parties interpret the word “claim” differently, they are entitled to discovery that might bear on the two opposing interpretations; Defendants also contend that the term “related wrongful act” is unclear. Additionally, Defendants argue that documents sought by Request No. 8 also “bear on how the five different policy provisions are to be applied in practice, and therefore may bear on the handling of the claim by GAIC and also may bear of the issue of whether or not GAIC was prejudiced by any alleged misrepresentations made by Defendants.” Id. at 6–7. According to Defendants, although the documents sought may not be admissible, they are discoverable.
With respect to Plaintiff's “overly broad” and “unduly burdensome” objections, Defendants assert that Request No. 8 merely “ asks for any documents in the possession of Plaintiff which interpret five different provisions or exclusions in the policy at issue.” Motion ¶ 15 (DE 67). Defendants assertion, however, is too simplistic. The Court finds that Request No. 8 is overbroad on its face. It seeks the production of all documents (other than the policy) “generated, maintained, or received” by Defendant that “define, construe, interpret, comment on the interpretation of, analyze or discuss the meaning of” the policy. It is not limited in scope or time, nor is it limited to interpretations of the subject policy provisions binding on Defendant. Indeed, as written, it would require Defendant to produce unsolicited interpretations of the policy provisions “received” or offered from anybody. The overbreadth of Request No. 8 is illustrated by the burden of complying therewith. To even ascertain whether responsive documents exist, Defendant would be required to review virtually all documents (including electronically maintained documents) in its possession, custody, and control “including without limitation, claims manual(s), training material, interpretative materials, best practice guides, memoranda, newsletters, underwriting Documents, sales and marketing materials, articles published in trade or legal periodicals, articles written for claims professions or seminars, and home office directives and bulletins.” For Defendant, a large insurance company, to undertake such a search and review of documents would be an almost impossible task. The Court, therefore, will not require Defendant to produce documents responsive to Request No. 8.
*7 Having determined that Plaintiff's “overly broad” and “unduly burdensome” objections are well-taken, the Court need not decide whether the documents sought by Request No. 8 are relevant. Even were the Court to find the documents relevant – which the Court does not decide – it would also find that under Federal Rule of Civil Procedure 26(b)(2)(C), “the burden of expense of the proposed discovery outweighs its likely benefit, considering the needs of the case, the amount in controversy, the parties' resources, the importance of the issues at stake in the action, and the importance of the discovery in resolving the issues,” Fed.R.Civ.P. 26(b)(2)(C)(i) and (iii), particularly given that Defendants do not contend that the application form and policy provisions at issue are unclear or ambiguous.
In their Motion, Defendants requested only that the Court compel Plaintiff to provide additional information with respect to three emails identified on Plaintiff's privilege log. Thereafter, when the parties conferred, Plaintiff agreed to (and did) produce to Defendants one of the emails, and Plaintiff provided information as to the general nature of the remaining two emails. In its Response to the instant Motion, Plaintiff maintains that the two remaining emails are protected from disclosure by the attorney-client privilege. According to Plaintiff, the October 22, 2014 email contains an internal discussion within GAIC regarding legal advice that its claim representative received from GAIC's outside legal counsel, and the November 19, 2014 email contains an internal discussion within GAIC regarding questions to be posed to its outside legal counsel, essentially seeking legal advice. In their Reply Memorandum, Defendants requests that Court compel Plaintiff to produce these two emails because the communications at issue were not between an attorney and a client, rather they were between corporate employees and/or officers. Alternatively, Defendants request that the Court conduct an in camera inspection of the emails to determine whether they are protected by the attorney-client privilege.
Upon the Court's directive (DE 80), Plaintiff submitted the two emails at issue for an in camera inspection, together with a statement identifying the sender and recipients of the emails by name, company, and position or role within the company and any other information, such as the purpose of the communications, that would assist the Court in determining whether the attorney-client privilege applies. After reviewing the emails at issue and Plaintiff's statement, the Court finds that the emails are protected from disclosure by the attorney-client privilege. Accordingly, Defendants' request that the Court compel Plaintiff to produce the October 22, 2014 email and the November 19, 2014 email identified on Plaintiff's privilege log is DENIED.
DONE AND ORDERED in Fort Lauderdale, Florida, this 24th day of August 2015.
Footnotes
The case against Richard Van Houten and Michelle Van Houten has been stayed. See July 7, 2015 Order (DE 72).
The “facts” set forth in the background are taken from Plaintiff Great American's First Amended Complaint (DE 26); they, however, are merely allegations and ultimately may not be supported by the evidence.
The individual defendants in the Texas action are the same individual defendants in this action.
The Court notes that Defendants' Motion to Compel is not in the form required by this District's Local Rule 26.1(2). That is, the Motion does not set forth each request for production at issue verbatim followed by the specific objections thereto. Plaintiff argues that the Court, therefore, should deny Defendants' Motion on this ground alone. In the interest of advancing this litigation due to the fast-approaching (extended) discovery deadline and given the preference for deciding motions on the merits, the Court declines to deny the Motion on this basis. The parties, however, are cautioned that any discovery motions filed in the future that do not comport with the Local Rules will be summarily denied.
The Court disagrees with Defendants' assertion that “the test is not relevancy.” Rule 26(b)(1) provides that a party may discovery “any nonprivileged matter that is relevant to any party's claim or defense.... ” Fed.R.Civ.P. 26(b)(1) (emphasis added). Additionally, “[f]or good cause, the court may order discovery of any matter relevant to the subject matter involved in the action.” Id. (emphasis added). Finally, the portion of Rule 26(b)(1) upon which Defendants rely for their assertion reads in full: Relevant information need not be admissible at trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence.” Id. (emphasis added). Hence, the matter to be discovered must be relevant even if it is not admissible. Better stated is that “the test is not admissibility.”
Plaintiff notes that Defendants' Motion fails to address Plaintiff's objection that Request No. 8, as written is so long and so unwieldy that Plaintiff is unable to formulate a response. According to Plaintiff, on that basis alone, the Court should deny the instant Motion or, at least, order Defendants to rewrite it in such a way that Plaintiff can reasonably respond. In their Reply, Defendants contend that this argument “does not even deserve a response except to direct the Court to the plain language of Request number 8.... ” Reply at 7 (DE 77).