ITT Corporation et al v. Travelers Casualty and Surety Company

Filing 67

ORDER granting 17 defendant's motion for protective order. See attached ruling. Signed by Judge Donna F. Martinez on 7/18/12. (Constantine, A.)

UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
ITT CORPORATION AND
GOULDS PUMPS, INC.,
Plaintiffs,
v.
TRAVELERS CASUALTY AND
SURETY COMPANY (FORMERLY
KNOWN AS THE AETNA CASUALTY,
AND SURETY COMPANY),
Defendant.

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CASE NO. 3:12CV38(RNC)

RULING ON MOTION FOR PROTECTIVE ORDER
Plaintiffs ITT Corporation and its subsidiary Goulds Pumps
commenced this action against defendant Travelers Casualty and
Surety Company.

They seek declaratory judgment and injunctive

relief and also allege state law claims.

The defendant moves for

a protective order staying discovery until the court rules on a
pending motion to dismiss. (Doc. #17.)

For the reasons set forth

below, the motion is granted.
I.

Factual Background
The plaintiffs bought excess insurance policies1 from the

defendant

for

"per

policies,

called

occurrence

Excess

and

aggregate"

coverage.

Overlayer

Indemnity

policies

policies), were issued over several decades.

1

The
("XN"

Beginning in 2000,

"An excess policy provides specific coverage above an
underlying limit of primary insurance." 3 New Appleman Insurance
Law Practice Guide § 29A.Ol (Jeffrey E. Thomas et al. eds., 2012).
"Excess coverage generally is not triggered until the underlying
primary limits are exhausted." Id.

the plaintiffs notified the defendant of a number of asbestos
bodily injury claims.

(Compl. ¶24.)

The plaintiffs believe that

they have coverage under the "XN" policies when all their claims combined

-

insurance.
policies

is

reach

the

"aggregate"

limits

of

their

underlying

The defendant disagrees that coverage under the XN
available

when

underlying aggregate limits.

the

combined

(Compl. ¶4.)

claims

exhaust

the

The defendants contend

that each of the asbestos injury claims is a separate "occurrence"
and plaintiffs only have coverage when they incur damages for a
single "occurrence" in excess of the underlying per occurrence
limits.

(Compl. ¶24.)

The plaintiffs allege that over the years the defendant has
changed its position on coverage under the XN policies.

The

defendant's

the

current

policy

interpretation,

according

to

plaintiffs, "materially reduc[es] the scope of insurance protection
that was originally purchased and effectively eliminat[es] coverage
for plaintiff's substantial asbestos liabilities."
The

plaintiffs

maintain

that

the

defendant's

(Compl. ¶4.)
interpretation

contradicts the terms of the XN policies as well as the defendant's
underwriting manual and bulletins. (Compl. ¶26.)
The plaintiffs do not seek coverage for any particular losses.
Regardless of policy interpretation, plaintiffs make no allegation
that their asbestos liabilities have reached the XN policies.
Instead, plaintiffs bring this putative class action on behalf of

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themselves
judgment

and

"that

other
the

XN
XN

policyholders
policies

are

seeking

required

a
to

declaratory
respond

to

liabilities that are subject to the underlying umbrella aggregate
limits and which exceed such aggregate limits" and "an injunction
barring [the defendant] from asserting its improper position as to
its XN policies."
plaintiffs

allege

(Count 1, Compl. ¶47.)
the

defendant

In count 2, the

misrepresented

the

coverage

afforded under the XN policies in violation of Connecticut's Unfair
Insurance Practices Act (CUIPA), Conn. Gen. Stat. § 38a–815 et seq.
and Unfair Trade Practices Act (CUTPA), Conn. Gen. Stat. § 42–110a
et seq.

In count 3, the plaintiffs allege that the defendant

"engaged in procedural bad faith in the handling of the plaintiffs'
asbestos claims in violation of the common law of Connecticut" by
taking "more than nine years to first raise its single catastrophic
occurrence coverage position" which it did despite knowing that its
position was "false, deceptive, and misleading." (Compl. ¶¶54-55.)
The plaintiffs seek compensatory and punitive damages as to counts
2 and 3.
The parties are involved in related litigation in California
state court.

Cannon Electric, Inc. v. Affiliated FM Insurance Co.

et al., No. BC 290354 (Los Angeles County Superior Court).

That

case, filed before this one, also concerns coverage for future
asbestos claims under the XN policies.

There, plaintiffs ITT

Corporation and Goulds Pumps (among others) seek a declaratory

3

judgment

regarding

the

defendant's

obligations

under

the

XN

policies "to defend, reimburse and indemnify plaintiffs in full"
for underlying asbestos claims made against the plaintiffs. (Doc.
#17-3, Fourth Amended Compl. filed 7/14/06, ¶176.)

The case

originally was filed against a number of defendants, but only the
defendant Travelers remains. In 2010, the defendant asserted as an
affirmative defense in the California case its "single occurrence
position,"

the

same

coverage

position

at

issue

here.

See

Travelers' Amended Answer to the Fourth Amended Complaint filed on
August 3, 2010.

The California case is scheduled for a bench trial

in September 2012.
The defendant Travelers argues that this case is duplicative
of the California state court action. Travelers filed a "Motion to
Dismiss, or in the Alternative, to Stay this Case" pursuant to
Colorado River Water Conservation Dist. v. United States, 424 U.S.
800 (1976) (doc. #47), which is pending before Judge Chatigny.

In

the present motion, Travelers asks the court to stay this case
pending the resolution of its Colorado River motion to dismiss.
II.

Discussion
The defendant seeks a protective order staying discovery

pursuant to Fed. R. Civ. P. 26(c).

Rule 26(c) provides, in

relevant part:
The Court may, for good cause, issue an order to protect
a party or person from annoyance, embarrassment,
oppression, or undue burden or expense, including one or
more of the following: (A) forbidding the disclosure or
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discovery.
Fed. R. Civ. P. 26(c)(1)(A).
Rule 26 "is often invoked to avoid potentially expensive and
wasteful discovery during the pendency of a determination which
could potentially reshape pending claims."

Dabney v. Maddock, No.

9:10CV0519 (GTS/DEP), 2011 WL 7479164, at *11 (N.D.N.Y. Nov. 29,
2011). "A request for a stay of discovery, pursuant to Rule 26(c),
is committed to the sound discretion of the court based on a
showing of good cause."

Davidson v. Goord, 215 F.R.D. 73, 82

(W.D.N.Y. 2003). "[A] court determining whether to grant a stay of
discovery

pending

a

motion

must

look

to

the

particular

circumstances and posture of each case," Alford v. City of New
York, No. CV 2011–0622(ERK)(MDG), 2012 WL 947498, at *1 (E.D.N.Y.
Mar. 20, 2012), and "should consider several factors, including the
breadth of the discovery sought, the burden of responding to it,
and the prejudice that would be suffered by the party opposing the
stay." Cuartero v. United States, No. 3:05CV1161(RNC)(DFM), 2006
WL 3190521, at *1 (D. Conn. Nov. 1, 2006).

"[A] court should also

consider the strength of the dispositive motion that is the basis
of the discovery stay application."

Id.

A stay of discovery is

appropriate pending resolution of a potentially dispositive motion
where the pending dispositive motion "appear[s] to have substantial
grounds or, stated another way, do[es] not appear to be without
foundation in law."

Johnson v. New York Univ. School of Educ., 205

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F.R.D. 433, 434 (S.D.N.Y. 2002).
The Breadth of Discovery Sought
The plaintiffs' requested discovery is extraordinarily broad.
The temporal scope of the requests runs from the 1960s, when the
defendant first began issuing the XN policies, to the present.
(Compl. ¶21.)

The types of information sought are also broad.

The

production requests seek all documents and communications regarding
the underwriting, claims handling and marketing of the XN policies.
(Doc. #17-14, Doc. Requests 2-4.)

The plaintiffs also request all

the defendant's communications with reinsurers and state insurance
departments

concerning

Requests 7-8.)

the

XN

policies.

(Doc.

#17-14,

Doc.

The interrogatories are equally expansive, seeking

the identity of all persons who marketed the policies, all XN
policyholders who ever submitted a claim under the policies, and
information regarding all claims paid under the XN policies. (Doc.
#17-14, Interr. 8-10.)
The Burden of Discovery
The

defendant

argues

that

responding

to

the

plaintiffs'

requests, which seek virtually all documents related to the XN
policies for a period of more than forty years, will necessitate
the expenditure of a significant amount of effort and resources.2

2

The defendant did not submit an affidavit but maintains that
the breadth of the requests makes obvious the burden of a response
to the discovery.
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The Prejudice Resulting from a Stay
The defendant argues that plaintiffs would not be prejudiced
by an order staying discovery until the court rules on the pending
motion to dismiss.

The defendant points out that the plaintiffs

make no allegation that they are currently due any money under the
policies.

Even under the plaintiffs' own policy interpretation,

their asbestos claims have not yet triggered the XN policies.
During oral argument, the plaintiffs raised for the first time a
concern that they would be prejudiced from a delay of discovery
because evidence might be lost.

Because the XN policies were

issued so many years ago, they say, witnesses are likely to be
elderly and their testimony could be lost.
The Dispositive Motion
Finally, the court considers the strength of the defendant's
motion to dismiss.

The defendant moves to dismiss or stay this

case pursuant to Colorado River on the grounds that the federal
suit "is duplicative of the State Suit."
in Supp. of Mtn to Dismiss at 5.)

(Doc. #47-1, Def's Mem.

The defendant argues that the

federal case "puts in issue the same Travelers excess insurance
policies, the same underlying asbestos bodily injury claims and the
same coverage issues being litigated in the [California case]."
(Id.)

In the present case, the plaintiffs expressly ask the court

to interpret the XN policies and to find that the defendant's "on
account of any one accident or occurrence" interpretation is

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incorrect.

According to the defendant, the California state court

will decide how the XN policy applies to the plaintiffs' asbestos
claims and which party's coverage interpretation is the correct
one.
This court does not presume to predict the outcome of the
motion to dismiss.

However, on the record before the court, the

defendant's arguments are substantial and "not unfounded in the
law."

Gandler v. Nazarov, No. 94 Civ. 2272, 1994 WL 702004, at *4

(S.D.N.Y. Dec. 14, 1994).
Upon consideration of the particular circumstances and posture
of the case, the factors weigh in favor of granting a stay of
discovery pending the resolution of the defendant's abstention
motion.

The discovery will be time-consuming, burdensome and

expensive.

The defendant's motion is potentially dispositive and

appears to have substantial grounds. The plaintiff's suggestion of
prejudice
defendant's

does

not

motion

countervail
for

a

these

protective

considerations.

order

is

The

granted.

See

Integrated Systems and Power, Inc. v. Honeywell Intern., Inc.,
No. 09CV5874(RPP), 2009 WL 2777076, at *1 (S.D.N.Y. Sept. 1,
2009)(granting stay of discovery based on the breadth of discovery
sought

and

where

the

defendant's

motion

"appears

not

to

be

unfounded in the law"); Niv v. Hilton Hotels Corp., No. 06 Civ.
7839(PKL), 2007 WL 510113, at *1 (S.D.N.Y. Feb. 15, 2007)(granting
stay where defendants' motion "appears not to be unfounded in the

8

law"); Spencer Trask Software and Information Services, LLC v.
RPost Intern. Ltd., 206 F.R.D. 367, 368 (S.D.N.Y. 2002) (granting
stay of discovery where defendants presented "substantial arguments
for dismissal of many, if not all, of the claims asserted in th[e]
lawsuit");

Anti-Monopoly,

Inc.

v.

Hasbro,

Inc.,

No.

94Civ.2120(LMM)(AJP), 1996 WL 101277, at *4 (S.D.N.Y. Mar. 7, 1996)
(granting stay where dispositive motion is "not unfounded in the
law"

and

"appears

to

have

substantial

grounds");

Gandler

v.

Nazarov, No. 94 Civ. 2272(CSH), 1994 WL 702004, at *4 (S.D.N.Y.
Dec. 14, 1994) (granting stay of discovery where defendant's motion
to dismiss is "potentially dispositive and appears to be not
unfounded in the law," "[p]laintiffs have not present any evidence
to suggest that they will be unfairly prejudiced by a stay" and
"the adjudication of the pending motion to dismiss might avoid the
need for costly and time-consuming discovery.")
III. Conclusion
For these reasons, the defendant's motion for a protective
order (doc. #17) is granted.
SO ORDERED at Hartford, Connecticut this 18th day of July,
2012.
_________/s/__________________
Donna F. Martinez
United States Magistrate Judge

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