Metropolitan Life Insurance Company v. Ogandzhanova

Filing 177

ORDER denying Ogandzhanova's request for reserve information relating to her insurance claims. Signed by Judge G Murray Snow on 4/9/13. (REW)

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WO

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Metropolitan Life Insurance Company, a
New York corporation,

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Plaintiff/Counter-Defendant,

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No. CV-12-372-PHX-GMS
ORDER

v.
Inna Ogandzhanova, M.D.,
Defendant/Counter-Claimant.

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The Court held an informal discovery conference with the Parties on March 21,

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2013. (Doc. 131.) During that conference, the Court instructed the Parties to “brief the

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issue as to whether Dr. Ogandzhanova is entitled to reserve information relating to her

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claims.” (Id.) That briefing was completed on April 4, 2013. (Docs. 153, 168.) After

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review, the Court denies Defendant Inna Ogandzhanova’s request for reserve

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information.

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BACKGROUND

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Plaintiff Metropolitan Life Insurance Company (“MetLife”) brought this action

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seeking a declaration that Ogandzhanova was not disabled under MetLife’s relevant

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policies after July 1, 2011. (Doc. 1.) MetLife also seeks a declaration that it was under no

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obligation to provide disability benefits after July 1, 2011, and that it is entitled to recover

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all benefits paid, among other things. (Id.) Ogandzhanova counterclaimed for breach of

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contract and bad faith. (Doc. 12.) Discovery is underway. During discovery,

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Ogandzhanova requested that MetLife provide her with reserve information relating to

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her claims. MetLife has objected, claiming that such information is irrelevant to the

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claims at issue in this case.
DISCUSSION

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I.

LEGAL STANDARD

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A district court enjoys broad discretion in controlling discovery. Harper v. Betor,

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95 F.3d 1157 (9th Cir. 1996) (internal citation omitted). The scope of discovery is

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governed by Rule 26, which allows “discovery regarding any nonprivileged matter that is

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relevant to any party’s claim or defense.” Fed. R. Civ. P. 26(b)(1). Relevance is construed

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broadly to encompass any matter that bears on, or that reasonably could lead to other

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matter that bears on, any issue that is or may be in the case. See id.; Oppenheimer Fund,

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Inc. v. Sanders, 437 U.S. 340, 351 (1978). Further, “[f]or good cause, the court may order

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discovery of any matter relevant to the subject matter involved in the action.” Fed. R.

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Civ. P. 26(b)(1). District courts have broad discretion in determining relevance for

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discovery purposes. Hallet v. Morgan, 296 F.3d 732, 751 (9th Cir. 2002).

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II.

ANALYSIS

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In an insurance context, the term “reserve” refers to “a fund of money set aside by

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a bank or an insurance company to cover future liabilities.” Black’s Law Dictionary (9th

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ed. 2009). Ogandzhanova asserts that information about MetLife’s reserves on her claim

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is relevant for a number of reasons, all of which concern MetLife’s knowledge and

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beliefs regarding Ogandzhanova’s claim. For example, the amount of and fluctuations in

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reserve totals may reveal when MetLife had sufficient notice of her claim, what effect

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MetLife’s issuance of a reservation of rights might have had, what effect filing the suit

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had, and so forth. In short, Ogandzhanova claims the reserve information would allow her

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a glimpse into what MetLife thought about the factual basis and legality of her claim to

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disability benefits. That, in turn, would assist her in analyzing her bad faith claim,

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because “bad-faith actions against an insurer, like actions by client against attorney,

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patient against doctor, can only be proved by showing exactly how the company
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processed the claim, how thoroughly it was considered and why the company took the

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action it did.” Brown v. Super. Ct., 137 Ariz. 327, 336, 670 P.2d 725, 734 (1983).

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Ogandzhanova’s request for reserve information therefore appears relevant on its

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face. MetLife, as the party resisting that discovery, now has the burden to establish that

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the information falls outside the broad scope of discovery contemplated by Rule 26.

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District courts have come out both ways on this question. See, e.g., U.S. Fire Ins. Co. v.

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Bunge N. Am., Inc., 244 F.R.D. 638, 644 (D. Kan. 2007) (relevant); Bernstein v.

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Travelers Ins. Co., 447 F. Supp. 2d 1100, 1105 (N.D. Cal. 2006) (same). But see, e.g.,

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Imperial Textiles Supplies Inc. v. Hartford Fire Ins. Co., 6:09-CV-03103-JMC, 2011 WL

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1743751 at *4 (D.S.C. May 5, 2011) (irrelevant); Leksi, Inc. v. Fed. Ins. Co., 129 F.R.D.

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99, 106 (D.N.J. 1989) (same).

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Central to the relevance (or lack thereof) of reserve information in a given case is

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the method of calculation. If the insurers can show their calculations do not include

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analysis of the factual or legal merits of the insured’s specific claim, but instead rely on

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automatic factors, then the relevance of reserve information diminishes significantly. See

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Leksi, 129 F.R.D. at 106 (“[T]he setting of reserves is performed by claims personnel

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who know little about Leksi’s policies. I find that the reserve information is only

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tenuously relevant to whether insurance coverage exists in this matter.”). On the other

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hand, courts have granted motions to compel production of reserve information when the

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insurers have failed to produce evidence that the reserve arithmetic does not include

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analysis of the claim’s merit. See U.S. Fire, 244 F.R.D. at 644 (“[T]he Insurers assert

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(without reference to supporting evidence) that their loss reserves, which are required by

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law, are not evaluations of the particular claims, but instead depend on various

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assumptions and business considerations.”) (emphasis added); Bernstein, 447 F. Supp. 2d

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at 1106 (“Travelers does not contend, however, that the reserves it sets in response to

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individual claims are determined only (or even primarily) by such generic considerations.

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Nor does Travelers suggest that circumstances quite specific to individual claims do not

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play a significant role when Travelers’ adjusters decide what the amount of the reserves
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for given claims should be, or at which junctures and under which criteria those amounts

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should be changed.”) In short, when calculation of the reserve amount “‘entail[s] an

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evaluation . . . based upon a thorough factual . . . consideration”, the information will be

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relevant, and vice versa. Gen. Elec. Capital Corp. v. DIRECTV, Inc., 184 F.R.D. 32, 35

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(D. Conn. 1998) (quoting Independent Petrochemical Corp. v. Aetna Cas. & Sur. Co.,

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117 F.R.D. 283, 288 (D.D.C. 1986)).

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MetLife has shown that it does not analyze the factual and legal merit of a claim

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when it sets and adjusts the reserve amount, and did not do so with Ogandzhanova. Enid

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Reichert, a Vice President and Actuary at MetLife, stated that the reserve calculation is a

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factor of assumed average claim termination rates determined by MetLife actuaries from

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multi-year studies and limited claim profile information, such as the date of disability,

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monthly benefit amount, policy terms, and the age of the claimant. (Doc. 168-1, Ex. 1 ¶¶

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2-4.) The reserves “do not take into account any facts specific to the claim . . . .

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Specifically, the reserve does not take into account the merits of the claim, that is whether

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the claim for benefits is strong or weak.” (Id. ¶ 5.) Claims personnel are not involved in

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the calculation of claim reserves. (Id. ¶ 6; Doc. 168-2, Ex. 2 ¶¶ 2-4.) It is an automatic

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calculation divorced from the merits of a specific claim. This is a case where the method

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of MetLife’s reserve calculation takes reserve information out of the realm of relevancy.

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Ogandzhanova requested reserve information related to her claims. The Court has

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determined that such information is irrelevant to the claims at issue. To the extent

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Ogandzhanova sought information about the reserve methodology and that information

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was relevant, MetLife appears to have provided it in its Response and attachments. (Doc.

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168.) Beyond that, the reserves would not shed further light on the issues in this case.

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MetLife has shown that the documents pertaining to loss reserves did not “‘entail an

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evaluation . . . based upon a thorough factual . . . consideration.’” Gen. Elec. Capital, 184

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F.R.D. at 35 (quoting Independent Petrochemical, 117 F.R.D. at 288).

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IT IS THEREFORE ORDERED that Ogandzhanova’s request for reserve
information relating to her insurance claims is DENIED.
Dated this 9th day of April, 2013.

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