Praetorian Insurance Company v. Western Milling, LLC

Filing 97

ORDER DENYING plaintiff and counter-defendant Praetorian Insurance Company's request to file a supplemental expert report. Order signed by Magistrate Judge Erica P. Grosjean on 3/19/2018. (Rooney, M)

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IN THE UNITED STATES DISTRICT COURT
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FOR THE EASTERN DISTRICT OF CALIFORNIA

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PRAETORIAN INSURANCE COMPANY, an
Illinois corporation,
Plaintiff,

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v.

CASE NO.: 1:15-cv-00557-DAD-EPG
ORDER REGARDING PLAINTIFF AND
COUNTER-DEFENDANT PRAETORIAN
INSURANCE COMPANY’S REQUEST TO
FILE SUPPLEMENTAL EXPERT REPORT

WESTERN MILLING LLC, a California
limited liability company,

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Defendant.

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WESTERN MILLING LLC, a California
limited liability company,

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Counter-Complainant,

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v.
PRAETORIAN INSURANCE COMPANY, an
Illinois corporation; and DOES 1-25,
Counter-Defendants.

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Plaintiff and Counter-Defendant Praetorian Insurance Company (“Praetorian”) has requested

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permission to designate an expert witness regarding the reasonableness of Praetorian’s interpretation

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of the subject policies. Praetorian first raised this request in a Joint Status Report on February 14,

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2018. (ECF No. 90). The District Judge referred the matter to the undersigned Magistrate Judge on

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February 16, 2018. (ECF No. 91). The parties held an informal telephonic conference to discuss this

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issue, among others, on March 5, 2018. (ECF No. 93) Per the Court’s request, the parties submitted
supplemental briefing on the issue on March 13, 2018. (ECF No. 95, 96).
Praetorian seeks permission to designate an expert witness regarding the language of the
primary and excess policies and the reasonableness of the interpretation of said policies. Praetorian
concedes that the deadline for expert reports has come and gone, but argues there is good cause for
modification of the scheduling order because “[i]t was not until February 2, 2018, when the Court
granted Praetorian’s motion [holding that the exclusion in the excess policy applied] that Praetorian
could have known that such testimony would be helpful to the jury.” (ECF No. 95, at p. 2)
Specifically, Praetorian argues that “Praetorian could not have known earlier, when expert reports
were originally due last year, that it might need an expert to testify regarding the difference in the
language of the primary and excess policies and the reasonableness of the interpretation of said
policies in light of the Court’s February 2, 2018 Order.” (ECF No. 95, at p. 4). It argues that there is
no prejudice because “[a]ll that will be added to these proceedings is one deposition, and possibly a
second if Western Milling counter-designates an expert of its own.” (ECF No. 95, at p. 4).
Defendant, Counter-Complainant Western Milling, LLC (“Western Milling”) opposes
Praetorian’s request. Western Milling argues that Praetorian raised the issue of the reasonableness of
its coverage interpretation before it designated experts. For example, Western Milling points to
Praetorian’s reply in support of an earlier motion for summary judgment where Praetorian argued that
“withholding of benefits was ‘reasonable,’ and there was a ‘legitimate dispute’ as to Praetorian’s
liability under the Policy.” (ECF No. 62, at p. 18). Western Milling also claims that it will suffer
prejudice because it will be forced to prepare a rebuttal expert report as well as a challenge to the
admissibility of Praetorian’s proposed expert on legal grounds.
The Court issued its scheduling order on May 13, 2016. (ECF No. 35). That order set a date
for initial expert witness disclosures for March 31, 2017. (ECF No. 35, at p. 3). The order also stated
that the dates “will not be modified absent a showing of good cause.” (ECF No. 35, at p. 8)
(emphasis in original). Pursuant to the parties’ requests, and after finding good cause, the Court
extended the deadline for the disclosure of expert witnesses to July 28, 2017 (ECF No. 48), then July
28, 2017 (ECF No. 55, at p. 2), and finally August 18, 2017 (ECF No. 59, at p. 2).

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Federal Rule of Civil Procedure 37(c)(1) provides that “[i]f a party fails to . . . identify a
witness as required by Rule 26(a) or (e), the party is not allowed to use that information or witness to
supply evidence . . . unless the failure was substantially justified or is harmless.” Fed. R. Civ. P.
37(c)(1). See Wong v. Regents of University of California, 410 F.3d 1052, 1062 (9th Cir. 2005)
(applying Rule 37’s “substantial justification” test in holding that the district court did not abuse its
discretion in refusing to permit additional expert witness after date provided in scheduling order).
After consideration of the parties’ positions, the Court denies Praetorian’s request to
supplement its expert disclosure to designate an expert witness on the issue of the reasonableness of
the policies. Praetorian cannot meet either the “good cause” standard provided in the scheduling
order, or the “substantial justification” standard set out in Rule 37. The issue of the reasonableness of
a policy interpretation is a potential issue in every insurance coverage dispute. Indeed, the case
Praetorian cited in its reply brief before expert disclosures, cited above, explains how the issue of bad
faith turns under California law turns in part on the reasonableness of the interpretation denying
coverage. See Tomaselli v. Transamerica Ins. Co., 25 Cal.App.4th 1269, 1280–1281 (1994) (cited by
Praetornian at ECF No. 62, at p. 18) (“The law clearly states that erroneous denial of a claim does not
alone support tort liability; instead, tort liability requires that the insurer be found to have withheld
benefits unreasonably. The mistaken withholding of policy benefits, if reasonable or if based on a
legitimate dispute as to the insurer's liability under California law, does not expose the insurer to bad
faith liability. The insurer must of course consider the interests of its insured, but it is also entitled to
give its own interests consideration.) (internal citations omitted). Praetorian thus knew that the
reasonableness of its interpretation could be an issue when expert reports were due under the
scheduling order. Put another way, the District Court’s recent order on summary judgment did not
cause the issue of the reasonableness of Praetorian’s interpretation to become an issue.
It is also worth noting that the reasonableness of the policy interpretation, as cited above,
refers to the interpretation at the time of the coverage decision, not at the time of trial. After all, this
factor goes to the issue of whether the coverage provider acted in bad faith at the time it denied
coverage. Thus, the District Court’s ruling regarding its own interpretation of the policy on summary
judgment did not change the subject of any expert report on the reasonableness of a coverage

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decision.
The Court also finds that the late disclosure is not harmless. The only outstanding events are
a pretrial conference and trial. Now is the time to be preparing for trial—not handling expert
disclosures and related depositions. Moreover, Western Milling has indicated it will move to exclude
Praetorian’s proposed expert on grounds other than timeliness. Such briefing could further delay the
trial. Supplementation could also interfere with any settlement efforts to avoid trial as such a report
and challenge to it will inject uncertainty into the parties’ positions at trial.
For the foregoing reasons, Praetorian’s request to file a supplemental expert report is
DENIED.

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IT IS SO ORDERED.

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Dated:

March 19, 2018

/s/
UNITED STATES MAGISTRATE JUDGE

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