RDR, LLC v. Selective Insurance Company of South Carolina

Filing 39

MEMORANDUM ORDER denying 20 MOTION for Protective Order MOTION to Seal Document: 1 Notice of Removal. Signed by Judge Sue L. Robinson on 12/19/2016. (nmfn)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

RDR, LLC,

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) Civ. No. 16-472-SLR

Plaintiff,

v.
SELECTIVE INSURANCE COMPANY
OF SOUTH CAROLINA,
Defendant.

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MEMORANDUM ORDER

At Wilmington this 19th day of December, 2016, having reviewed defendant's
motion to redact plaintiff's complaint and for a protective order, and having reviewed the
papers filed in connection therewith;
IT IS ORDERED that said motion (D.I. 20) is denied, as follows:
1. Background. This insurance coverage lawsuit has its genesis in a
commercial property insurance claim by plaintiff, RDR, LLC, and the partial denial of the
claim by its insurer, defendant Selective Insurance Company of South Carolina. The
claim related to damage to the insured premises and its contents arising out of a water
main break that occurred at an intersection adjacent to the insured premises. After
receipt of defendant's coverage determination, plaintiff filed a complaint with the State
of Delaware Department of Insurance, Consumer Services Division ("the Department"),
seeking to overturn defendant's position. Thereafter followed an exchange of
correspondence between the Department and defendant. (D.I. 22) The Department

did not refer plaintiff's complaint for a formal process: "Your dispute with Selective is a
coverage dispute and the Delaware Insurance Code does not provide the Department
with the statutory authority to compel Selective to make additional payments to you.
Your recourse at this point is to file a complaint in an appropriate state court." (Id., tab
6) Plaintiff did so, which suit was removed by defendant to this court based upon
diversity of citizenship.
2. Analysis. Defendant argues that the pertinent regulations issued by the
Department support its view that the complaint at bar should not include references to
the administrative record, nor should plaintiff be permitted to rely on such (or pursue
discovery related to such) in connection with the instant dispute. The regulations are
not as clear as defendant suggests in this regard. As provided in the record,
"Regulation 907" of the Department's regulations provide in relevant part as follows:
3.0 Definitions
"Complaint" shall mean any expression of a grievance against an
insurer made in any form to the Delaware Department of Insurance ....
******
"Founded," with respect to a complaint, means:
• that the insurer's act, acts, omission, or omissions did not
comply with a provision of Title 18 of the Delaware Code,
regulations promulgated by the Department, or other
applicable Delaware statute or regulation; or
• that the insurer's act, acts, omission, or omissions
contravened or were inconsistent with a rate filing, form
filing, or other filing made with the Department; or
• that the insurer's act, acts, omission, or omissions
contravened or were inconsistent with a provision or
provisions of the agreement to which the individual making
the complaint was a party or third party beneficiary; or
• that the insurer's act, acts, omission, or omissions
contravened or were inconsistent with formal standards or
practices of the insurer which were relied upon by the
insurer in satisfying the requirements [of] any examination

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conducted by the Department, alone or in conjunction with
the Insurance Departments of other states.
******

6.0 Resolution of Complaints
Complaints shall be resolved in one of the following manners:
6.1 Complaints Lacking Merit. The Department may determine
that the complaint did not have merit in which case it shall not be deemed
to be founded.
6.2 Resolved in Favor of Consumer. The Department, through
negotiation or mediation, may resolve a complaint, absent any formal
proceeding, with some benefit accruing to the consumer. Any resolution
in favor of the consumer shall be considered a complaint resolved in favor
of the consumer.
6.3 Referral for Formal Process. The Department may initiate
a proceeding to make a formal determination as to whether the complaint
is founded. The Department shall provide a 60 day written notice to the
insurer that the complaint has been received and that the complaint will
be referred for a formal determination under section 7.0 of this regulation
unless the complaint is otherwise resolved within 60 days .... Any
resolution in favor of the consumer shall be considered [a] founded
complaint. ...
6.4 Other. The Department shall classify complaints resolved in
a manner other than those listed in subsections 6.1 through 6.3 as "other"
in which case the complaint will not be considered founded.
******

8.0 Publication of Findings
The Department shall make available to the public the following
information:
8.1 The details of each founded complaint and action taken by
the Insurance Department in response thereto, with information related
to the identity of the complaining party deleted;
(D.I. 22, tab 2) In promulgating the above regulations, the Insurance Commissioner
recognized the Department's obligation "to provide public access to public records not
exempted by law," pursuant to the Delaware Freedom of Information Act ("FOIA"). (Id.)
Indeed,
[m]embers of the public generally and the insurance consumer in particular
have a vested interest in having that information available that will allow the
consumer to make an informed and knowledgeable decision about insurance
coverage .... This regulation merely takes an inherent right of the

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Commissioner and creates a standardized methodology to minimize the
potentially harmful consequences that concern the insurers when it comes to
publicizing information related to their performance. In that regard, the
regulation creates a very discrete category of founded complaints so that
complaints upon which there is a good faith basis for the insurer to contest
and which ultimately get resolved are not subject to inclusion in the founded
complaint computation. As a further protection for all involved, a contested
claim is referred for a hearing with all of the Title 18 Chapter 3 protections
before the complaint can be considered founded.
(Id.)

4. Having reviewed the record, the court concludes that Regulation 907 recited
above (18 Del. Admin. Code 907) regulates the Department - not the insurance
consumer - in terms of what information the Department is legally obligated to provide
to the public, e.g., under a FOIA request. Therefore, regardless of how plaintiff's
administrative complaint was characterized by the Department, Regulation 907 does
not govern plaintiff's conduct at bar.
5. Even if this were not so, the record is at best ambiguous in this regard. On
the one hand, Regulation 907 seems to encompass complaints relating to insurance
contracts ("the insurer's act, acts, omission or omissions contravened or were
inconsistent with a provision or provisions of the agreement to which the individual
making the complaint was a party or third party beneficiary") (id.). Ultimately, however,
the Department in this case determined that it did not have the authority to resolve
plaintiff's "coverage dispute" with defendant. It is just as reasonable to conclude from
this determination that Regulation 907 does not apply to the litigation at bar, as it is that
the complaint should be characterized as unfounded under Regulation 907, section
6.4 .. Therefore, the court declines to seal (or redact from) the complaint the documents
that relate to the Department and its interaction with defendant.

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6. With respect to the second issue presented in defendant's motion, the
Delaware General Assembly has not exempted the targeted documents from discovery
or use at trial as is provided, for example, under the medical peer-review statute. 24
Del. C. § 1768(b) (a hospital's peer-review records "are not public records and are not
available for court subpoena, nor are they subject to discovery."). Nevertheless, as a
matter of practice, the court has considered as inadmissible hearsay such
administrative findings as, e.g., those made by the Equal Employment Opportunity
Commission or by the Delaware Department of Labor. See, e.g., Burris v. Richards
Paving, Inc., 461 F. Supp. 2d 244, 251 n.9 (D. Del. 2006). At the very least, "[t]he Third
Circuit has adopted the principle that the admissibility decision regarding [such]
determinations is to be made by the trial court in the exercise of its discretion." See
Waters v. Genesis Health Ventures, Inc., 2005 WL 61450, at *3 (E.D. Pa. Jan. 10,
2005). Consequently, the court concludes that any further discovery regarding the
administrative proceedings in the Department (and any use of such evidence at trial)
will be vetted in a more specific discovery conference or motion practice.

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