Woods et al v. ProBuilders Specialty Insurance Company et al

Filing 179

ORDER granting 162 Motion in Limine Regarding Underlying Defense and Arbitration by Judge Christine M. Arguello on 3/27/14.(dkals, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Christine M. Arguello
Civil Action No. 11-cv-02151-CMA-KMT
BRIAN WOODS, individually, and
d/b/a LOG AND TIMBER HOMES OF SOUTHERN COLORADO,
Plaintiff,
v.
NATIONBUILDERS INSURANCE SERVICES, INC. d/b/a NBIS, and
PROBUILDERS SPECIALITY INSURANCE COMPANY,
Defendants.

ORDER GRANTING MOTION IN LIMINE

This matter is before the Court on the Motion in Limine Regarding Underlying
Defense and Arbitration filed by Brian Woods d/b/a Log and Timber Homes of Southern
Colorado (“Woods”). (Doc. # 162.) Defendants Nationbuilders Insurance Services, Inc.
d/b/a NBIS, and Probuilders Specialty Insurance Company (collectively “ProBuilders”)
responded to the motion on March 21, 2014. (Doc. # 170.) For the following reasons,
Plaintiffs’ motion is granted.
I. BACKGROUND
In April of 2007, Plaintiff contracted with Arthur Thilquist Construction LLC
(AThilquist Construction@) to provide services related to the construction of a log and
timber single-family home, on a property owned by Haythem and Melissa Dawlett
(Athe Dawletts@). (Doc. # 2, & 10; Doc. # 47-1 at 1.) On June 5, 2007, Arthur Thilquist

(AThilquist@) passed away from injuries he sustained the day before while working on
construction on the Dawletts= home. (Doc # 16 at 3, & 1.) On June 3, 2009, Thilquist=s
estate filed a complaint against Woods, Mailly, et al. v. Brian Woods, et al., Case No.
2009CV99, in the District Court, Gunnison County, Colorado. (Doc. # 16-3.) By letter
dated July 8, 2009, ProBuilders denied coverage to Woods of any claim relating to
Thilquist=s death. (Doc. # 16-5 at 1-2.) In approximately June of 2011, Woods entered
into a settlement agreement with Thilquist=s estate in the underlying case, whereby
Woods agreed to arbitrate the issue of damages in the underlying case and enter the
arbitrator=s award as a judgment in the lawsuit. (Doc. # 16 at 5, & 12.) After the
arbitrator awarded Thilquist=s estate $2,085,953.25, the state court confirmed the award
and entered it as a judgment on August 2, 2011. (Doc. # 16-8 at 2.)
Meanwhile, on July 5, 2011, Woods initiated the instant lawsuit, claiming that
ProBuilders breached its contract with Woods by failing to defend him in the state suit.
Woods also asserted claims of bad faith breach of insurance contract and unreasonable
delay or denial of payment of a claim for benefits owed. (Doc. # 2.) On September 27,
2012, this Court granted Wood’s motion for partial summary judgment, finding that
ProBuilders had a duty to defend Woods. (Doc. # 60.)
II. DISCUSSION
As a threshold matter, ProBuilders ask that Woods’s motion in limine be
construed as a motion for summary judgment and denied as untimely. The Court
disagrees that the relief requested in Woods’s motion is inappropriate for a motion in
limine.

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Woods argues that ProBuilders waived their right to challenge Woods’s defense
of the underlying case and seeks to limit evidence pertaining to his defense.
ProBuilders argues that it may submit evidence consistent with its affirmative defenses
that the underlying judgment was unreasonable or a product of collusion. The Court
acknowledges that Colorado courts allow an insurer to contest a stipulated judgment as
unreasonable and the product of collusion or fraud. See, e.g., Nunn v. Mid-Century Ins.
Co., 244 P.3d 116, 123 (Colo. 2010). DC-10 Entm't, LLC v. Manor Ins. Agency, Inc.,
308 P.3d 1223, 1227 (Colo. App. 2013); Flatiron Co. of Boulder v. Great Southwest Fire
Ins. Co., 812 P.2d 668, 671 (Colo. App. 1990).
However, this does not end the Court’s inquiry. Woods also alleges that
ProBuilders “refused to provide factual basis for the collusion defense” (Doc. # 162,
at 19) and “refused to provide the factual basis for its reasonableness challenge”
(id., at 17) during discovery. To learn the grounds for this defense, Woods propounded
a 30(b)(6) deposition requiring ProBuilders to produce a witness with knowledge of the
facts and circumstances underlying this defense. In response, ProBuilders produced
Sherrianne Hanavan for a Rule 30(b)(6) deposition in which she, on behalf of
ProBuilders, refused to provide the requested information by invoking the attorneyclient privilege when asked about the basis for these defenses:
Q:

Does ProBuilders contend that this damages award is unreasonable?

A:

Yes.

Q:

Why?

A:

Those reasons were discussed with counsel.

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Mr. Patterson: Okay. Then I’ll interpose the attorney-client privilege then.
Q:

Okay. And I’m not asking for communications between you and counsel or
anything like that. Is there any factual information that you can provide to
me that supports your – the company’s position that this arbitration award
is somehow unreasonable separate and apart from any communications
that you may have had – with your counsel?

A:

Not that I can discuss because the issues have been discussed with
counsel as a part of the strategy of the case.

Woods argues that attorney-client privilege does not apply and therefore,
ProBuilders should be precluded from offering evidence pursuant to Fed. R. Civ. P.
37(c). ProBuilders replies simply that “the Rule 30(b)(6) witness’s entire knowledge
of Defendants’ affirmative defenses came from that which was told to her by counsel.
As a result, her entire knowledge of these facts was counsel’s own work product.” (Doc.
# 170 at 7.) However, this does not address ProBuilders’ obligation pursuant to Rule 26
to disclose “the name . . . of each individual likely to have discoverable information—
along with the subjects of that information— that the disclosing party may use to support
its claims or defenses . . . .” Fed. R. Civ. P. 26. (a) (emphasis added).
Where a party fails to comply with Rule 26, the opposing party has recourse in
Rule 37, which provides, in relevant part: “If a party fails to provide information or
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 on a motion, at a hearing, or at a trial, unless
the failure was substantially justified or is harmless.” Fed. R. Civ. P. 37(c)(1). The
Tenth Circuit has identified four factors that courts consider in determining whether
the failure to disclose is substantially justified or harmless: (1) the prejudice or surprise
to the impacted party; (2) the ability to cure the prejudice; (3) the potential for trial
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disruption; and (4) the erring party’s bad faith or willfulness. Woodworker’s Supply, Inc.
v. Principal Mut. Life Ins. Co., 170 F.3d 985, 993 (10th Cir. 1999). The non-moving
party has the burden of showing that they were substantially justified in failing to comply
with Rule 26(a)(1). Nguyen v. IBP, Inc., 162 F.R.D. 675, 680 (D. Kan. 1995).
Even after being requested by Woods to identify witnesses and facts that would
support its affirmative defense, ProBuilders apparently failed to disclose this information
to Woods. In its briefing, ProBuilders fails to identify for this Court any specific
document or witness that evidences its compliance with its Rule 26 obligations.
Moreover, ProBuilders makes no argument as to why it was substantially justified in
failing to comply with Rule 26, and such conduct does not appear to be justifiable,
much less substantially justified in this case. Trial is scheduled to begin in less than two
weeks. This Court has reviewed the Final Pretrial Order and has no idea what witness
or witnesses identified by ProBuilders in the Final Pretrial Order would testify as to
these issues or as to what the testimony would be. ProBuilders’ failure to comply with
its Rule 26 obligations and its refusal to allow its Rule 30(b)(6) witness to substantively
answer all questions related to this affirmative defense has deprived Woods of the
ability to conduct discovery into the factual basis for this affirmative defense. The
failure to disclose this evidence is not harmless and, should the Court allow ProBuilders
to offer testimony of any witnesses as to this defense, Woods will suffer prejudice due to
ProBuilders’ failure to disclose this information or follow up the Rule 30(b)(6) deposition
with information compliant with Woods’s questions. Because trial is scheduled to begin
in less than two weeks, disclosure by ProBuilders at this late date would not cure such

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prejudice. Under these circumstances, the Court finds that, pursuant to Fed. R. Civ. P.
37(c)(1), ProBuilders is precluded from introducing any information that should have
been, but was not, disclosed as support for this defense. Furthermore, ProBuilders
is precluded from having any witness testify as to this defense.
Based on the foregoing, it is ORDERED that Plaintiff’s Motion in Limine
Regarding Underlying Defense and Arbitration (Doc. # 162) is GRANTED to the extent
set forth in the prior paragraph.
DATED: March 27, 2014
BY THE COURT:

_______________________________
CHRISTINE M. ARGUELLO
United States District Judge

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