James River Ins. Co. v. ESC Consultants, Inc.
James River Ins. Co. v. ESC Consultants, Inc.
2013 WL 12092114 (W.D. Tex. 2013)
July 29, 2013
Mathy, Pamela A., United States Magistrate Judge
Summary
The court denied ESC's motion to compel documents and information from James River, finding that ESC had not met its burden to show that the discovery was relevant to any claim or defense asserted in this lawsuit, or was likely to lead to the discovery of admissible evidence. The court also found that James River had proffered evidence that the burden or expense of the proposed discovery outweighed its likely benefit.
James River Insurance Company, Plaintiff,
v.
ESC Consultants, Inc., f/k/a Engineering Safety Consultants, Inc., Defendant
v.
ESC Consultants, Inc., f/k/a Engineering Safety Consultants, Inc., Defendant
CIVIL NO. SA-12-CA-934-FB
Signed July 29, 2013
Counsel
Roshanak Khosravighasemabadi, Elizabeth Dunn Bradley, Tollefson Bradley Mitchell & Melendi, LLP, Dallas, TX, for Plaintiff.Gregory P. Blaies, James W. Hryekewicz, Blaies & Hightower, LLP, Fort Worth, TX, for Defendant.
Mathy, Pamela A., United States Magistrate Judge
ORDER
*1 Came on this day to be considered:
• defendant ESC Consultants, Inc.'s (“ESC” or “defendant”) motion to compel documents and information and to extend deadline to conduct discovery, contained in ESC's response to plaintiff James River Insurance Company's (“James River” or “plaintiff”) motion for leave to file designation of potential witnesses, testifying experts, and proposed exhibits, filed June 25, 2013;[1]
• plaintiff's response, filed July 9, 2013;[2] and
• defendant's reply, filed July 18, 2013.[3]
On June 19, 2013, the District Judge referred the case to the undersigned for pretrial management.[4]
I. SUMMARY OF PROCEDURAL HISTORY AND ALLEGATIONS
On October 2, 2012, James River filed its original complaint against its insured, defendant ESC, “seek[ing] a declaration of its rights and obligations” in connection with a suit filed by Judith Sosa Ramirez, individually, on behalf of the estate of the decedent, Humberto Ramirez, and as next friend, against W.S. Steel Erection, LLC, SpawGlass Contractors, Inc., and ESC, in cause number 2012-CI-02940 in the 45th Judicial District Court, Bexar County, Texas (the “Underlying Lawsuit”).[5] James River alleges the Underlying Lawsuit arises out of an accident at a construction site that occurred on March 21, 2011, and resulted in the death of Humberto Ramirez.[6] With respect to ESC, the plaintiff alleges it “was hired to ensure compliance with safety rules and failed to ensure that employees received proper training in safety procedures.”[7] The plaintiff has asserted a claim for gross negligence against W.S. Steel and claims for wrongful death and survival against ESC and SpawGlass.[8]
In this case, James River alleges it insured ESC under a professional liability policy, effective from March 31, 2012 to March 31, 2013 on a claims-made basis.[9] James River alleges the insurance “policy includes an exclusion for bodily injury that provides that the insurance does not apply to any ‘Claim’ against the ‘Insured:’ ... [b]ased on or directly or indirectly arising out of any actual or alleged ‘Bodily Injury’ or ‘Property Damage.’ ”[10] James River alleges the claims in the Underlying Lawsuit “arise out of bodily injury allegedly caused by the defendants,” and the “bodily injury” exclusion “precludes coverage, in its entirety, for the present allegations” and “would also preclude any indemnity obligation.”[11] James River represents it is providing ESC with a defense in the Underlying Lawsuit under a reservation of rights.[12] As relief, James River seeks a declaration that
the claims in the Underlying Lawsuit all arise out of bodily injury; that the policy exclusion applies; and that James River owes no defense to ESC and further owes no indemnity for any liability that may be assessed against ESC.[13]
James River also seeks “such other and further relief, at law or in equity, to which it may be justly entitled in law or in equity.”[14]
*2 ESC was served with process on November 5, 2012,[15] and filed an answer on November 27, 2012, in which it generally admits and denies the allegations of the complaint.[16] ESC asks that plaintiff's suit be dismissed with prejudice, and seeks costs, attorneys fees, and “all other relief to which it is entitled, both at law and equity.”[17]ESC's answer includes a jury demand.[18]
After calling for, and receiving, scheduling recommendations, the District Judge entered the scheduling order that governs this case on January 25, 2013.[19] It requires, among other things: the parties to file motions to amend or supplement the pleadings or join additional parties by March 27, 2013; parties asserting claims for relief to file designations of potential witnesses, testifying experts, and proposed exhibits by April 26, 2013; parties resisting claims for relief to file designations of potential witnesses, testifying experts, and proposed exhibits by June 14, 2013; discovery to be completed by June 27, 2013; and dispositive motions to be filed by August 27, 2013.[20]
On June 14, 2013, defendant ESC filed its designation of potential witnesses, testifying experts, and proposed exhibits.[21] On June 18, 2013, plaintiff James River filed a motion for leave to file its designation of potential witnesses, testifying experts, and proposed exhibits out-of-time.[22] The District Judge referred the case to the undersigned for pretrial management on June 19, 2013.[23] On June 25, 2013, ESC filed a response to James River's motion for leave, stating it was opposed to the relief sought, but if the Court granted James River leave to file its designations, the Court
should condition that grant on James River fully and completely answering all of ESC's interrogatories and producing all documents sought in ESC's requests for production[, and] should also extend the deadline for ESC to conduct additional discovery (which may be indicated by James River's interrogatory answers and document production), and extend the deadline for ESC to designate its potential witnesses, testifying experts and proposed witnesses, and to serve its Rule 26(a)(2)(B) materials.[24]
On June 26, 2013, James River filed a motion for summary judgment on its single claim for relief.[25] That same day the Court granted James River's motion for leave to file its designations, and provided that “the designation is deemed filed as of this date.”[26] The order also called on James River to
file a response to those portions of defendant's response that ask the Court to compel plaintiff to respond to defendant's two sets of interrogatories and one set of requests for production (see docket no. 15 at 2-8) and to extend defendant's deadline to conduct discovery as may be indicated by plaintiff's further, amended interrogatory answers and document production on or before Tuesday, July 9, 2013.[27]
James River complied and filed a response to plaintiff's motion to compel on July 9, 2013.[28]
*3 On July 11, 2013, the day after ESC's deadline to respond to James River's motion for summary judgment had passed without ESC filing a response, the Court entered an order directing ESC to (1) show cause by July 18, 2013 why summary judgment should not be granted for the reasons set in the motion, and (2) file a reply in support of its motion to compel.[29] On July 17, 2013, ESC responded to the order to show cause indicating it had made a mistake in calculating its deadline to respond to the motion for summary judgment, and filed its response to the motion.[30]On July 18, 2013, ESC filed its reply in support of its motion to compel.[31] On July 24, 2013, James River filed its reply in support of its motion for summary judgment.[32]
II. STANDARDS
A. Scope of Discovery
Rule 26 of the Federal Rules of Civil Procedure generally addresses the methods and scope of permissible civil discovery, specifying that certain types of information must be initially disclosed without a discovery request and providing for the discovery of additional matters through such methods as written interrogatories, requests for production of documents, and depositions. With respect to the scope of discovery, Rule 26(b)(1) states in part:
Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense—including the existence, description, nature, custody, condition, and location of any documents or other tangible things and the identity and location of persons who know if any discoverable matter. For good cause, the court may order discovery of any matter relevant to the subject matter involved in the action. Relevant information need not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence. All discovery is subject to the limitations imposed by Rule 26(b)(2)(C).[33]
Discovery must not be “unreasonably cumulative or duplicative.”[34] The Court, even on its own motion, also may limit the frequency or extent of discovery if, for example, the movant has had ample opportunity to obtain the information or if the burden or expense of the proposed discovery outweighs its likely benefit.[35]
Rule 26 provides that the parties may obtain additional discovery through written interrogatories or requests for production of documents and other items. Rule 33 of the Federal Rules of Civil Procedure provides that a party may serve upon any other party written interrogatories to discover any information relevant under Rule 26(b).[36]Interrogatories are not to exceed 25 in number including discrete subparts, without first obtaining leave of court.[37]Rule 34 of the Federal Rules of Civil Procedure permits discovery of documents in the “possession, custody, or control” of the party upon whom the request is served.[38]
B. Compelling Discovery
Rule 37(a) of the Federal Rules of Civil Procedure provides that if a party fails to answer an interrogatory or produce requested documents, the discovering party may move for an order compelling an answer.[39] An “evasive or incomplete disclosure, answer, or response must be treated as a failure to disclose, answer, or respond.”[40]
The Fifth Circuit requires a party who objects to discovery to specifically show how each request for production is burdensome or irrelevant.[41] A producing party may request a protective order for good cause to narrow the scope of discovery or limit the dissemination of privileged or confidential information to protect the party from annoyance, embarrassment, oppression, or undue burden or expense.[42] As a general rule, the producing party must show “good cause” for the issuance of any protective order, with the standard of proof varying with the type of information and protective order sought.[43] Courts have identified several factors the producing party may need to address to show good cause, including:
*4 (1) whether disclosure will violate any privacy interests;
(2) whether the information is being sought for a legitimate purpose or for an improper purpose;
(3) whether disclosure of the information will cause a party embarrassment;
(4) whether confidentiality is being sought over information important to public health and safety;
(5) whether the sharing of information among litigants will promote fairness and efficiency;
(6) whether a party benefitting from the order of confidentiality is a public entity or official; and
(7) whether the case involves issues important to the public.[44]
A producing party must support its claim of good cause through specific facts, not conclusory allegations.[45]
C. Attorney Client and Work Product Privilege
The attorney-client privilege generally protects all communications between lawyers and clients regarding matters within the scope of the representation. The privilege is said to belong to the client who may assert or waive it.[48] The term “communications” is broad enough to include not only discussions or conversations between lawyers and clients, but also correspondence between lawyers and clients, documents generated during the course of the legal relationship, and other information.
The work product privilege is intended to balance the need for “[m]utual knowledge of all the relevant facts gathered by both parties” to ensure proper litigation with a lawyer's need to “work with a certain degree of privacy, free from unnecessary intrusion by opposing parties and their counsel.”[49] Work product includes “interviews, statements, memoranda, correspondence, briefs, mental impressions, personal beliefs,” and other work done by the lawyer in preparation of her client's litigation.[50] Unlike the attorney-client privilege, the work product privilege belongs to the lawyers and the client, and either may assert it.[51] The privilege is codified in Rule 26(b)(3) of the Federal Rules of Civil Procedure, which provides that work product is discoverable only if the party seeking discovery “shows that it has substantial need for the materials to prepare its case and cannot, without undue hardship, obtain their substantial equivalent by other means.”[52]
*5 Rule 26(b)(5) of the Federal Rules of Civil Procedure requires a party resisting discovery to notify opponents that it is withholding information subject to the claim of privilege or work product.[53] Rule 26(b)(5) does not attempt to define, for all cases, precisely what information must be provided when a party asserts a claim of privilege or work product protection.[54] But, Rule 26(b) does provide a party can withhold only the information sought to be protected and must serve a response that provides information sufficient to allow the requesting party to evaluate the applicability of the claimed privilege for each item or, if applicable, each group of items withheld.[55] More specifically, the party withholding information under a claim of privilege generally must serve a “privilege log” for the withheld information which, “without revealing information itself privileged or protected, will enable other parties to assess the applicability of the privilege or protection.”[56] On the one hand, cursory descriptions are not sufficient to support a claim of privilege,[57] but, on the other hand, recording details about the information withheld may be unduly burdensome when, for example, voluminous documents are claimed to be protected that might be reported in categories or classifications and requiring too many details to be set out in the log effectively could force a breach the privilege. The level of detail required to identify the information being withheld on a claim of privilege without breaching the privilege is likely a matter that can only be determined on a case-by-case basis. It has been held that, when practicable, the privilege log should generally include a document number (“Bates number”), author or source, recipient, persons receiving copies, date, document title, document type, number of pages, and any other relevant nonprivileged information.[58] A party must seek a protective order if compiling the information for a privilege log would impose an unreasonable burden,[59] after conferring in an attempt to fashion a way of proceeding satisfactory to all concerned parties.
The proponent of the attorney-client privilege bears the burden of showing the applicability of the privilege to the particular information in question.[60] If a party withholds information on a claim of privilege without notice to the other parties, sanctions can be imposed[61] and the privilege or protection may be waived.[62] Similarly, if privileged documents are not listed in a privilege log or are misrepresented as cumulative or duplicative, the privilege may be waived.[63]
III. DISCUSSION
A. Summary of Arguments
1. James River's motion for leave to file designations out of time
James River's designations were due to be filed by April 26, 2013.[64] In its motion for leave to file its designations out of time, James River explained that “[d]ue to a calendaring omission, counsel for James River inadvertently failed to make the designations” and “[c]ounsel became aware of this failure when it received Defendant ESC's designations, on Friday, June 14, 2013.”[65] James River argued its failure to timely file its designations should not surprise or prejudice ESC because its position on the coverage dispute on which the case is based “is set forth in its reservation of rights, and in its complaint” and “James River made its initial Rule 26(a)(1) Disclosures on February 6, 2013, which included the same witnesses and references to the same documents.”[66] James River further asserted “this is a coverage dispute” and “anticipates that the duty to defend will be determined by a comparison of the pleadings in the [Underlying Lawsuit] to the policy issued to ESC.”[67] Finally, James River offered to “agree to an extension of time to allow ESC to respond, if necessary, to the designations and to amend its own designations, or to conduct additional discovery.”[68] James River attached to its motion a copy of the proposed designations and its initial disclosures.[69]
2. ESC's combined response to motion for leave and request to compel
*6 ESC opposed James River's request to file its designations out of time, complaining that James River had objected to written discovery and refused to produce any requested documents and information, which had resulted in “substantial[ ] prejudice[ to] ESC by denying ESC access to important evidence and by forcing ESC to prepare its defense of this case without benefit of James River disclosing any witnesses, exhibits or experts.”[70] By way of background, ESC explained that in the Underlying Lawsuit, the plaintiff had alleged that “ ‘Defendant ESC was negligent and failed to exercise reasonable care and reasonable supervision of safety matters on the worksite;’ ” and that “ESC breached its duty of care by failing to ensure that all workers were properly trained on fall protection and by failing to ensure compliance with legally mandated safety regulations.”[71] ESC contends “[t]hese allegations brought the claim against ESC [in the Underlying Lawsuit] squarely within the insurance policy at issue in this suit,” which “covers the Professional Services of ‘Safety Training, Safety Consultant’ ” and defines a Claim as ‘a written demand for monetary damages arising out of or resulting from the performing or failure to perform Professional Services.’ ”[72] But, ESC argues, James River has taken the position that the claim against ESC in the Underlying Lawsuit “instead arises out of bodily injury or property damage” and is excluded from policy coverage.[73]
With respect to the written discovery, on March 21, 2013, ESC served James River with a first set of interrogatories and requests for production which were intended to determine whether “James River's conduct to date was consistent with its position in this suit;” more specifically, whether “James River had a history of defending and indemnifying its insured against negligence claims that resulted in bodily injury or property damage.”[74] ESC argues that “[o]bviously” such evidence “would be helpful to ESC.”[75] Further, ESC argues:
Similarly, if James River had consistently refused to defend or indemnify insureds such as ESC from any claim that resulted in bodily injury or property damage, that evidence would also be helpful to ESC as tending to prove the fraudulent nature of the policy sold by James River. After all, what type of damages could possibly result “from the performing or failure to perform” “Safety Training, Safety Consultant” other than “bodily injury or property damage”? Indeed, Webster's defines “safety” as “the state of being safe; freedom from the occurrence of risk of injury, danger, or loss.” Webster's Encyclopedic Unabridged Dictionary of the English Language.[76]
On April 30, 2013, after receiving an extension of time, James River served its objections and responses to the first set of discovery, which “consisted entirely of objections and did not [ ] provide any answers or documents.”[77] On May 20, 2013, ESC served James River with a second set of interrogatories “that were specifically limited to the past five years and that only asked James River to state the number of claims and policies, rather than asking James River to identify each claim and policy that fell in the categories at issue.”[78] On June 19, 2013, James River served its objections and responses which again “consisted entirely of objections and did not contain any answers whatsoever.”[79]
ESC also challenges James River's proposed interpretation of the insurance policy in three main points. First, it would “negate the very reason ESC purchased this insurance” (“to obtain insurance that would cover ESC against ‘a written demand for monetary damages arising out of or resulting from the performing or failure to perform Professional Services' ”), which would violate the “well-established principle” that “ ‘[a] court should construe contracts from a utilitarian standpoint, bearing in mind the particular business activity sought to be served and need not embrace strained rules of interpretation which would avoid ambiguity at all costs.’ ”[80] Second, it “runs afoul of the basic tenent of Texas law that ‘under general rules of construction, we avoid strictly construing an instrument's language if it would lead to absurd results,’ ” because “[i]t would be absurd to think that ESC spent almost $15,000 in premiums to purchase an insurance policy that does not cover the type of claims it was purchased to cover.”[81]Third, it ignores the “ ‘settled rule in [Texas] that policies of insurance will be interpreted and construed liberally in favor of the insured and strictly against the insurer.’ ”[82] In sum, ESC argues that “[d]espite these well-established principles of Texas law, James River decided on its own that it did not have to answer ESC's interrogatories and did not have to produce the discoverable documents requested by ESC.”[83] ESC, therefore, asked the Court to deny James River's motion for leave to file its designations out of time, and in the alternative:
*7 [I]f the Court does grant James River's motion, it should condition that grant on James River fully and completely answering all of ESC's interrogatories and producing all documents sought in ESC's requests for production. If the Court does grant James River's motion, it should also extend the deadline for ESC to conduct additional discovery (which may be indicated by James River's interrogatory answers and document production), and extend the deadline for ESC to designate its potential witnesses, testifying experts and proposed witnesses, and to serve its Rule 26(a)(2)(B) materials.[84]
3. June 26, 2013 order
4. James River's response to defendant's motion to compel
In its response to ESC's motion to compel, James River argues ESC's interrogatories and requests for production, “all of which are directed to the discovery of claims involving other policies, other insureds, and other lawsuits,” are not relevant, beyond the scope of discovery, and unduly burdensome.[87] As a threshold matter, James River contends ESC never complained about its responses to the written discovery prior to its filing of its motion for leave to file its designations out-of-time and, in any event, James River has supplemented its discovery responses “to address other claims involving ESC or its affiliates, and to address the single prior case in which James River has litigated the bodily injury exclusion,” and has produced “the nonprivileged, non-exempt portions of the claim file related to the underlying suit.”[88]
With respect to relevance, James River argues this case is a coverage dispute regarding James River's duty to defend and indemnify ESC for the claims in the Underlying Lawsuit.[89] To determine whether a duty to defend exists, James River argues Texas courts merely compare the pleadings in the underlying case to the policy, and any limited exception to this rule for instances in which coverage cannot be determined from the face of the pleadings is not an issue here.[90] To determine whether a duty to indemnify exists, James River argues Texas courts compare “the actual facts to the policy,” but the court does not examine “other polices, policies issued to other insured, or the manner in which other claims were handled.”[91] James River argues established rules of construction will govern “whether an exclusion for claims arising out of bodily injury applies to a wrongful death suit,” and “[t]he existence of other claims, with or without the same exclusion, lends nothing to the policy interpretation.”[92] James River also argues extrinsic evidence is irrelevant because ESC cannot show the policy is ambiguous, and even if the policy is found to be ambiguous, “the interpretation that favors coverage will be adopted, so evidence of other claims is not necessarily relevant.”[93] Moreover, even if relevant, the requested discovery is not tailored to “similar claims under similar policies,” “not limited to Texas, not limited to safety consultants, and not limited to cases where bodily injury was actually at issue,” and “ESC has failed to explain how knowing the number of such policies, cases defended, or claims paid, would have any bearing on its position in the present case.”[94]
*8 With respect to overbreadth, James River argues ESC's assertion that evidence of other claims and policies “may be ‘helpful’ ” fails to show “a nexus between the information it seeks to the claims made by James River in this declaratory judgment action or any defenses ESC has asserted.”[95] James River asserts:
ESC seeks discovery concerning other claims under policies with the same or similar definition of claim (as ‘a written [ ] demand for monetary damages arising out of or resulting from the performing or failure to perform professional services'), and wrongful act (as ‘any actual or alleged act, errr, omission, misstatement, misleading statement, neglect or breach of duty in performing or failure to perform professional services').[96]
But, James River contends, the terms “claim” and “wrongful act” are not at issue and do not require interpretation, so the requested discovery is not relevant, and is overbroad because the terms are common to professional liability policies and the requests are not limited in time, geographic scope, similarity of policy, or type of profession.[97]James River also argues the requested claim files contain material that is covered by the attorney-client privilege or constitutes work product.[98] Furthermore, even though the “bodily injury” exclusion is at issue, ESC has not explained how the identification of claims under other policies including that exclusion are relevant and, with respect to the second set of interrogatories, has not explained how “knowing the number of claims under policies with similar language—regardless of whether that language was at issue—bears any relevance to the present dispute, or could potentially lead to admissible evidence.”[99] Finally, James River asserts the discovery is inappropriate because “[e]ven if James River could isolate cases, involving both the exclusion and a bodily injury, the discovery would then lead to ancillary disputes, over whether the claims are indeed similar, or ... what other factors might have influenced defense or indemnity.”[100]
With respect to burdensomeness, James River argues production of the documents and information requested by ESC would place too significant of a burden on James River given their relative probative value. According to James River, ESC seeks
other claims files, where James River has defended or indemnified an insured under a policy with a similar exclusion (RFP 1, 2; INT 1, 2); definition of “claim” (RFP 3, 4; INT 3, 4)[; and] definition of [“wrongful act”] (RFP 5, 6; INT 5, 6). ESC requests copies, in each category, of:
a. that claim (including all amendments and supplements to that claim); and
b. all documents, electronically stored information, and tangible things that evidence the amount and nature of that claim.[101]
Relying on the affidavit testimony of claims manager Phil Wise, James River contends the diversity and numerosity of its insurance business, customers, and insurance policies it writes, combined with the inability of its electronic storage system to perform specific, targeted searches for the requested information, would make production of the requested documents and information exceedingly burdensome.[102] James River argues, and Mr. Wise testifies:
*9 Even if ESC's requests were limited to professional liability claims alone, in order to comply, James River would have to engage in an individual review of 1,790 professional liability claims submitted from 2003-2013 and make the determination of whether the policy at issue in each of those claims contains the particular exclusion language or claim type referenced in ESC's discovery requests. Depending on the size of the claim files, some of which involve multi-year litigation and are therefore, substantial, an individual review of the claim files could range between 15 minutes to one (1) hour, per file. Therefore, a review of the 1,790 professional liability claim files alone could take from 269 hours to 1,790 hours. All of these files would have to be individually reviewed and evaluated to determine whether the information contained therein is responsive to ESC's discovery requests in this case.[103]
In conclusion, James River asks the Court to deny ESC's motion to compel and “grant a protective order precluding the discovery of other, non-related, claim files;” and in the alternative
should the court discern some basis for discoverability, James River requests that any discovery be abated until a determination has first been made as to whatever the policy language is ambiguous, since that is necessarily a “threshold dispute,” and that ESC be required to limit the scope of its discovery to reduce the burden on James River.[104]
5. ESC's reply in support of motion to compel
The Court's July 11, 2013 order directed ESC to file a reply in support of its motion to compel and extend discovery that
should address why the discovery it seeks to pursue is “relevant to any party's claim or defense” and, in particular, why an extension of time to pursue the discovery at issue is appropriate (that is, whether the probative value outweighs the burden imposed) if judgment is to be entered in favor of James River based on the terms of the insurance policy at issue.[105]
In its reply, ESC argues, in sum, the requested discovery “is relevant to correctly deciding James River's requested [declaratory] relief,” and reasonably calculated to lead to admissible evidence that James River's proposed interpretation of the insurance policy:
(1) “violates public policy because it would render the coverage provided by that policy illusory;”
(2) “violates public policy because it would lead to an absurd result;” and
(3) “cannot co-exist with its course of conduct vis-à -vis other insureds.”[106]
First, ESC argues the insurance policy has unspecified patent ambiguities and latent ambiguities, and in the case of latent ambiguities, parol evidence would be admissible to determine “ ‘the true intention of the parties as expressed in the agreement.’ ”[107] Second, ESC argues “[i]t is also important for the Court to consider the evidence sought in the requested discovery in light of the strong public policy issues implicated by James River's proposed interpretation.”[108] More specifically, ESC argues the law of the Fifth Circuit and the Texas Supreme Court disfavor interpretation of insurance policies which would result in “illusory coverage”[109] and “lead to an absurd result.”[110]
*10 With respect to the burden to James River to search for and produce the information sought by ESC, ESC argues “several of the statement[s] in James River's supporting affidavit strain credulity.”[111] More specifically, ESC challenges James River's contention that proucing the requested discovery would be burdensome because Mr. Wise “admit[s] ... that most of James River's polices are kept in electronic form,” and “both the Insurance Policy and the acknowledgment letter in this case bear the hallmarks of having been prepared on a modern word processing program, and therefore are word searchable.”[112] ESC also offers the following limitations on its discovery requests:
• “to narrow each of its interrogatories and requests for production to the same five-year period referenced in Defendant's second set of interrogatories;” and
• “to narrow the documents to be identified and produced by James River to the following types of documents that are responsive to each request: (a) the insurance policy involved; (b) the petition, complaint or other written demand for money involved; (c) documents sufficient to demonstrate whether James River provided a defense to that insured; and (d) documents sufficient to demonstrate whether James River indemnified that insured.”[113]
In conclusion, ESC argues the requested discovery “will help evidence one way or another whether James River's proposed interpretation of the Insurance Policy violates public policy because it would render the coverage provided by that policy illusory or lead to an absurd result, and whether that proposed interpretation can reasonably co-exist with James River's course of conduct vis-a-vis other insureds.”[114] ESC asks the Court to grant its motion to compel and “extend discovery (incorporating the narrowing of discovery requests set forth above), and grant ESC such other and further relief to which it may be entitled, either at law or in equity.”[115] ESC attaches to its reply a copy of the insurance policy and the letter it received from James River acknowledging ESC's claim under the policy.[116]
B. Analysis
Plaintiff James River has asserted only one claim for relief against ESC: a declaration that
the claims in the Underlying Lawsuit all arise out of bodily injury; that the policy exclusion applies; and that James River owes no defense to ESC and further owes no indemnity for any liability that may be assessed against ESC.[117]
ESC has pleaded no affirmative defenses or counterclaims.[118]
“An insurer's duty to defend is determined by the allegations in the pleadings and the language of the insurance policy.”[119] “In reviewing the underlying pleadings, the court must focus on the factual allegations that show the origin of the damages rather than on the legal theories alleged.”[120] In determining the facts pleaded, courts will not “look outside the pleadings, or imagine factual scenarios which might trigger coverage.”[121] The duty to indemnify on the other hand, “is triggered by the actual facts establishing liability in the underlying suit.”[122] Texas courts interpret insurance policies “according to the common principles governing the construction of contracts, and the interpretation of an insurance policy is a question of law for a court to determine.”[123] “Only where a contract is first determined to be ambiguous may the courts consider the parties' interpretation, and admit extraneous evidence to determine the true meaning of the instrument.”[124]
*11 ESC propounded two sets of interrogatories and one set of document requests. In the first set of interrogatories, ESC seeks identification of claims in which James River has defended or indemnified an insured under a policy containing a similar exclusion for bodily injury/property damage (Interrogatory Nos. 1, 2), a similar definition of “claim” (Interrogatory Nos. 3, 4), and a similar definition of “wrongful act” (Interrogatory Nos. 5, 6). In its requests for production, ESC seeks production of the claim file for each of the identified claims. In its second set of interrogatories, ESC propounded the same interrogatories as the first set, but limited the requests to an identification of the number of claims in each category, as well as the total number of policies James River issued containing the identified terms (Interrogatory Nos. 3, 6, 9).[125]
ESC has not explained how the discovery it seeks is relevant to any claim or defense asserted in this lawsuit. In its response to James River's motion for leave to file designations out-of-time, the bulk of ESC's argument concerns rules of insurance contract construction and interpretation.[126] But, ESC does not explain how evidence of James River policies with other insureds and claims made against those policies is relevant if the contract is to be strictly construed. In its reply, ESC argues the insurance policy suffers from patent and latent ambiguities, and in the case of latent ambiguities, parol evidence is admissible to determine the parties' intention as expressed in the policy.[127]But, ESC's argument ends there and does not explain how the requested discovery is reasonably calculated to lead to the discovery of admissible evidence that would indicate “the true intention of the parties as expressed in the [insurance policy].”
To the extent ESC argues the requested discovery would be “helpful,” those assertions appear to be directed to matters of fraud on the part of James River.[128] But, no party has asserted any fraud-related claims or defenses in this lawsuit. In its reply, ESC argues the discovery is relevant to show “whether [James River's] proposed interpretation can reasonably co-exist with James River's course of conduct vis-à -vis other insureds.”[129] But, ESC provides no further argument or legal authority to support this statement.
Notably, ESC has filed a response to James River's motion for summary judgment, but ESC has not moved for an extension of time to respond to the motion pursuant to Rule 56(d) of the Federal Rules of Civil Procedure.[130] After arguing that James River's assumption of ESC's defense in the Underlying Lawsuit under a reservation of rights “is substantial evidence of James River's own self-doubt and the ambiguity of the provisions at issue in this suit,” ESC states that “[o]n a related note,” the discovery requests “were calculated to adduce, inter alia, additional evidence of James River's actions that are inconsistent with its proposed interpretation of the Insurance Policy.”[131] ESC makes no further argument in its response to the motion for summary judgment concerning what the additional discovery was intended to adduce or how any such discovery would be relevant to ESC's opposition to the motion for summary judgment.
*12 James River has supplemented its discovery responses “to address other claims involving ESC or its affiliates, and to address the single prior case in which James River has litigated the bodily injury exclusion,” and has produced “the non-privileged, non-exempt portions of the claim file related to the underlying suit.”[132] On the record developed thus far, ESC has not met its burden to show the discovery it seeks concerning James River's insurance policies with other insureds, or claims made against those policies, is relevant to any claim or defense asserted in this lawsuit, or is likely to lead to the discovery of admissible evidence. Moreover, James River has proffered, and ESC has not contradicted, evidence that “the burden or 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.”[133] Accordingly, ESC's motion to compel documents and information and extend deadline to conduct discovery is denied.
IV. CONCLUSION
Based upon the foregoing discussion,
IT IS ORDERED that defendant ESC Consultants, Inc.'s motion to compel documents and information and to extend deadline to conduct discovery, contained in ESC's response to plaintiff James River Insurance Company's motion for leave to file designation of potential witnesses, testifying experts, and proposed exhibits, filed June 25, 2013,[134] is DENIED.
ORDERED, SIGNED and ENTERED this 29th day of July, 2013.
Footnotes
Docket no. 15.
Docket no. 18.
Docket no. 22.
Docket no. 14.
Docket no. 1.
Id. at 2-3.
Id. at 3.
Id.
Id.
Id. at 4.
Id. at 5.
Id.
Id.
Id. at 6.
See docket no. 4.
Docket no. 5.
Id. at 3.
Id.
Docket no. 10.
Id.
Docket no. 12. To be clear, ESC, as a party opposing claims, filed its designations even though James River, as a party asserting claims, had not yet filed designations.
Docket no. 13.
Docket no. 14.
Docket no. 15 at 8.
Docket no. 16.
Docket no. 17. See docket no. 23.
Docket no. 17.
Docket no. 18.
Docket no. 19.
Docket nos. 20 and 21.
Docket no. 22.
Docket no. 25.
FED. R. CIV. P. 26(b)(1) (emphasis added).
FED. R. CIV. P. 26(b)(2)(C)(I).
FED. R. CIV. P. 26(b)(2)(C)(ii) and (iii).
FED. R. CIV. P. 33(a) & (c).
FED. R. CIV. P. 33(a).
FED. R. CIV. P. 34(a)(1).
FED. R. CIV. P. 37(a)(3).
FED. R. CIV. P. 37(a)(4).
McLeod, Alexander, Powel & Apffel, P.C. v. Quarles, 894 F.2d 1482, 1485 (5th Cir. 1990). See also SEC v. Brady, 238 F.R.D. 429, 436 (N.D. Tex. 2006).
FED. R. CIV. P. 26(c)(1).
See, e.g., Shingara v. Skiles, 420 F.3d 301, 305-06 (3rd Cir. 2005).
Id. at 306 (citing Glenmede Trust Co. v. Thompson, 56 F.3d 476, 483 (3d Cir. 1995)) (further citation omitted).
In re Terra Int'l, 134 F.3d 302, 306 (5th Cir. 1998) (“Rule 26(c)'s requirement of a showing of good cause to support the issuance of a protective order indicates that ‘[t]he burden is upon the movant to show the necessity of its issuance, which contemplates a particular and specific demonstration of fact as distinguished from stereotyped and conclusory statements.’ United States v. Garrett, 571 F.2d 1323, 1326 n.3 (5th Cir. 1978); see also 8 CHARLES ALAN WRIGHT, ARTHUR R. MILLER AND RICHARD L. MARCUS, FEDERAL PRACTICE AND PROCEDURE § 2035, at 483–86 (2d ed. 1994).”).
Regan-Touhy v. Walgreen Co., 526 F.3d 641, 647 (10th Cir. 2008).
Hastings v. N.E. Ind. Sch. Dist., 615 F.2d 628, 631 (5th Cir. 1980).
United States v. Juarez, 573 F.2d 267, 276 (5th Cir.), cert. denied, 439 U.S. 915, 99 S. Ct. 289 (1978).
Hickman v. Taylor, 329 U.S. 495, 507-10, 67 S. Ct. 385, 392-93 (1947).
Id. at 511, 67 S. Ct. at 393.
In re Grand Jury Proceedings, 43 F.3d 966, 972 (5th Cir. 1994).
FED. R. CIV. P. 26(b)(3)(A)(ii).
FED. R. CIV. P. 26(b)(5); 1993 Advisory Comm. Notes to FED. R. CIV. P. 26 at ¶ 33.
Id.
FED.R.CIV.P. 26(b)(5)(A)(ii); 1993 Advisory Comm. Notes to FED. R. CIV. P. 26 at ¶ 34.
FED. R. CIV. P. 26(b)(5). See, e.g., United States v. Constr. Prods. Res., Inc., 73 F.3d 464, 473 (2d Cir.) (“To facilitate its determination of privilege, a court may require ‘an adequately detailed privilege log in conjunction with evidentiary submissions to fill in any factual gaps.’ ”), cert. denied, 519 U.S. 927, 117 S. Ct. 294 (1996); Estate of Manship v. United States, 232 F.R.D. 552, 561 (M.D. La. 2005) (explaining Rule 26(b)(5) “employs the mandatory term, ‘shall,’ requiring that the responding party prepare a privilege log where a privilege is asserted”), rec. adopted, 97 A.F.T.R. 2d 2006-1068 (Jan. 13, 2006); Newpark Envtl. Serv., L.L.C. v. Admiral Ins. Co., No. Civ. A 99-033, 2000 WL 136006, at *4 (E.D. La. Feb. 3, 2000) (detailed log in support of attorney-client and work product privileges required).
Constr. Prods. Res., 73 F.3d at 473.
See Alleyne v. N.Y. State Educ. Dept., 248 F.R.D. 383, 386 (N.D.N.Y. 2008).
1993 Advisory Comm. Notes to FED. R. CIV. P. 26 at ¶ 35.
Hodges, Grant & Kaufmann v. United States, 768 F.2d 719, 721 (5th Cir. 1985). See also United States v. Rodriguez, 948 F.2d 914, 916 (5th Cir. 1991), cert. denied, 504 U.S. 987, 112 S. Ct. 2970 (1992) (attorney-client privilege must be specifically asserted with respect to particular documents) (citing United States v. El Paso Co., 682 F.2d 530, 539 (5th Cir. 1982)).
FED. R. CIV. P. 37(b)(2).
Dorf & Stanton Commc'ns. v. Molson Breweries, 100 F.3d 919, 923 (Fed. Cir. 1996), cert. denied, 520 U.S. 1275, 117 S. Ct. 2455 (1997); 1993 Advisory Comm. Notes to FED. R. CIV. P. 26 at ¶ 33.
Ritacca v. Abbott Labs., 203 F.R.D. 332, 335–36 (N.D. Ill. 2001); Grossman v. Schwarz, 125 F.R.D. 376, 386-87 (S.D.N.Y. 1989). But see United States v. British Am. Tobacco (Invs.) Ltd., 387 F.3d 884, 890-91 (D.D.C. 2004).
Docket no. 10.
Docket no. 13 at 2.
Id. at 2.
Id. at 2-3.
Id. at 3.
Id., attachments.
Docket no. 15 at 1.
Id. at 2 (quoting plaintiff's second amended petition in Underlying Lawsuit).
Id. (quoting insurance policy at declarations page) (emphasis in response).
Id.
Id. at 2-4.
Id. at 3.
Id. at 2-3, 7.
Id. at 4.
Id.
Id. at 4-5.
Id. at 5 (quoting Reilly v. Rangers Mgmt., Inc., 727 S.W.2d 527, 530 (Tex. 1987)).
Id. at 5-6 (quoting Hemyari v. Stephens, 355 S.W.3d 623, 626 (Tex. 2011)).
Id. at 6 (quoting Providence Wash. Ins. Co. v. Proffitt, 239 S.W.2d 379, 381 (Tex. 1951)).
Id. at 7.
Id. at 15.
Docket no. 17.
Id.
Docket no. 18 at 2.
Id. at 2 n.1.
Id.
Id. at 2 & n.2.
Id. at 2-3.
Id. at 3.
Id. at 3-4 & n.5.
Id. at 4.
Id.
Id. at 5.
Id. at 5-6.
Id. at 6-7.
Id. at 7.
Id. at 8.
Id. at 9.
Id. at 9-13, and exhibit 1 at ¶¶ 4-16.
Id. at 12, and exhibit 1 at ¶ 16.
Id. at 13.
Docket no. 19 at 1-2 (note omitted).
Docket no. 22 at 1-2.
Id. (quoting Nat'l Union Fire Ins. Co. v. CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex. 1995)).
Id. at 2.
Id. at 3-4 (discussing Davis-Ruiz Corp. v. Mid-Continent Cas. Co., 281 Fed.Appx. 267 (5th Cir. 2008)); Tex. Farm Bureau Mut. Ins. Co. v. Sturrock, 146 S.W.3d 123, 134 (Tex. 2004); Atofina Petrochems., Inc. v. Cont'l Cas. Co., 185 S.W.3d 440, 445 (Tex. 2005); Trinity Universal Ins. Co. v. Cowan, 945 S.W.2d 819, 828 (Tex. 1997)
Id. at 4 (quoting and citing Cont'lCas. Co. v. Warren, 254 S.W.2d 762, 765 (Tex. 1953); Hemyari, 355 S.W.3d at 626).
Id.
Id. at 4-5.
Id. at 5.
Id.
Id. at 6.
Id., exhibits 1-2.
Docket no. 1 at 5.
See docket no. 5.
Nat'l Union Fire Ins. Co. of Pitts., Penn. v. Merchants Fast Motor Lines, Inc., 939 S.W.2d 139, 141 (Tex. 1997) (citing Heyden Newport Chem. Corp. v. S. Gen. Ins. Co., 387 S.W.2d 22, 26 (Tex. 1965); Am. Physicians Ins. Exch. v. Garcia, 876 S.W.2d 842, 847-48 (Tex. 1994); Argonaut Sw. Ins. Co. v. Maupin, 500 S.W.2d 633, 636 (Tex. 1973)).
Id. (quoting Merchants Fast Motor Lines, Inc. v. Nat'l Union Fire Ins. Co. of Pitts., Penn., 919 S.W.2d 903, 905 (Tex. App. — Eastland 1996), rev'd per curiam, Nat'l Union Fire, 939 S.W.2d 139).
Id. (citing Houston Petro. Co. v. Highlands Ins. Co., 155 (Tex. App.—Houston [1st Dist.] 1990, writ denied) (“In Texas, an insurer's contractual duty to defend must be determined solely from the face of the pleadings, without reference to any facts outside the pleadings.”)).
Trinity Universal, 945 S.W.2d at 821.
Am. Int'l Specialty Lines Ins. Co. v. Rentech Steel, LLC, 620 F.3d 558, 562 (5th Cir. 2010) (citing N.Y. Life Ins. Co. v. Travelers Ins. Co., 92 F.3d 336, 338 (5th Cir. 1996)).
E.g., CBI Indus., 907 S.W.2d at 520 (citing Sun Oil Co. (Del.) v. Madeley, 626 S.W.2d 726, 732 (Tex. 1981); R&P Enters. V. LaGuarta, Gavrel & Kirk, Inc., 596 S.W.2d 517, 518 (Tex. 1980)).
Docket no. 15, exhibit 3. Notably, ESC attaches the discovery at issue to its opposition to James River's motion for leave to file designations, but ESC does not summarize or characterize the discovery in the body of the opposition or its reply. Its opposition describes the “primary focus of that discovery [as] determining whether James River's conduct to date was consistent with its position in this suit,” docket no. 15 at 2-3, 7; and states the second set of interrogatories “asked for the number of policies and claims James River had in certain categories,” id. at 3, and “asked James River to state the number of claims and policies, rather than asking James River to identify each claim and policy that fell in the categories at issue,” id. at 4. Similarly, its reply states its offer to limit the discovery to “types of documents that are responsive to each request.” Docket no. 22 at 5. But, ESC never explains which categories of claims and policies it seeks.
Docket no. 15 at 5-7.
Docket no. 22 at 2-3.
See docket no. 15 at 3, 7 (“[I]f James River had consistently refused to defend or indemnify insureds such as ESC from any claim that resulted in bodily injury or property damage, that evidence would also be helpful to ESC as tending to prove the fraudulent nature of the policy sold by James River.”).
Docket no. 22 at 5. See id. at 2.
Docket no. 21. Rule 56(d) provides:
When Facts Are Unavailable to the Nonmovant. If a nonmovant shows by affidavit or declaration that, for specified reasons, it cannot present facts essential to justify its opposition, the court may:
(1) defer considering the motion or deny it;
(2) allow time to obtain affidavits or declarations or to take discovery; or
(3) issue any other appropriate order.
FED. R. CIV. P. 56(d).
Docket no. 21 at 13-14.
Docket no. 18 at 2 n.1.
See FED. R. CIV. P. 26(b)(2)(C)(iii).
Docket no. 15.