Illiana Surgery and Medical Center LLC v. Hartford Fire Insurance Company
Filing
258
OPINION AND ORDER The Motion to Correct Errors DE 243 is GRANTED IN PART and DENIED IN PART, and the Motion Requesting Oral Argument With Respect to Its Motion to Correct Errors DE 244 is DENIED. Signed by Magistrate Judge Andrew P Rodovich on 8/8/12. (kjp)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
HAMMOND DIVISION
ILLIANA SURGERY AND MEDICAL
CENTER LLC nka Heartland
Memorial Hospital LLC,
iHEALTHCARE, INC.,
Plaintiffs
v.
HARTFORD FIRE INSURANCE
COMPANY,
Defendant
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Case No. 2:07 cv 3
OPINION AND ORDER
This matter is before the court on the Motion to Correct
Errors [DE 243] and the Motion Requesting Oral Argument With
Respect to Its Motion to Correct Errors [DE 244] filed by the
defendant, Hartford Fire Insurance Company, on May 8, 2012.
For
the reasons set forth below, the Motion to Correct Errors [DE
243] is GRANTED IN PART and DENIED IN PART, and the Motion
Requesting Oral Argument With Respect to Its Motion to Correct
Errors [DE 244] is DENIED.
Background
On December 9 or 10, 2004, Illiana Surgery and Medical
Center’s medical management computer system was destroyed.
Illiana held an insurance policy with Hartford Fire Insurance
Company that provided coverage for lost business, personal
property, and electronic vandalism.
Illiana tendered a claim to
Hartford, and Hartford retained the law firm of Fisher Kanaris.
The insurance policy had a two year limitation for filing a
lawsuit.
Near the end of the two year limitation, Illiana filed
a complaint with this court, alleging breach of the insurance
contract and bad faith.
Discovery commenced, and Illiana requested all documents
related to the adjustment of its claim.
At the April 4, 2007
pretrial conference, the court ordered Hartford to produce its
insurance policies, examinations under oath (EUOs), and claim
files.
Hartford proceeded to produce its insurance policies, two
EUOs, and a set of documents presented as its claims file.
Hart-
ford contemporaneously produced a privilege log listing the
documents it was withholding. On April 8, 2008, Harford sent
Illiana an amended privilege log and additional documents that
previously were withheld.
On April 17, 2008, Illiana filed a motion to compel the
production of certain documents withheld by Hartford.
In re-
sponse, Hartford objected that the documents were shielded from
discovery by the attorney-client and work product privileges.
The court determined that the Fisher Kanaris attorney, Kevin Pugliese, was serving as outside claims adjuster rather than as
legal counsel and that the attorney-client and work product
2
privileges did not apply.
This court ordered production of the
documents, and the decision was affirmed by the district court.
While Illiana was preparing to depose Hartford’s lead claims
adjuster, Steve Palazzolo, it determined that additional documents had not been produced.
Illiana sent an additional document
request on May 1, 2009, to ensure that all the documents in Hartford’s claims file either had been produced or would be produced
prior to Palazzolo’s deposition.
Illiana supplemented its May 1
document request with a list of the documents Illiana believed to
be missing from the file.
After some discussion, Hartford agreed
to supplement its document production.
On July 15, 2009, Hart-
ford produced 797 new documents, and on July 22, 2009, it produced 333 more.
Following the production of these documents, Illiana requested the attachments to several emails that were omitted and
served an additional document request.
the entire file had been produced.
Hartford represented that
However, 53 documents con-
sisting of 330 pages were produced immediately before the deposition of Jack Keeley, Hartford’s computer consultant.
Hartford
also produced an additional 441 documents days before the deposition of Kevin Pugliese, the Fisher Kanaris attorney who performed
most of the firm’s work for Hartford.
Illiana complained that
none of the documents produced prior to Pugliese’s deposition
3
were listed in Hartford’s privilege log and that Illiana had no
way of knowing the documents existed or that the entire claims
file had not been produced.
Hartford maintained that these
documents and the 797 documents produced on July 15, 2009, and
333 produced on July 22, 2009, were not part of the claim file
and were maintained in separate files by third-parties.
The court sanctioned Hartford for failing to comply with the
April 4, 2007, June 30, 2008, and November 18, 2008 Orders, finding that Hartford failed to produce the discovery it was ordered
to turn over, did not perform a diligent search for the requested
documents, and continued to withhold documents.
This court
limited the evidence Hartford could introduce at trial.
Both
parties moved to have the district court reconsider the sanctions
imposed.
Judge Joseph Van Bokkelen held a hearing and asked
Hartford "[W]ithout being – splitting hairs as to what belongs in
a claim file and does not belong in a claims file, has everything
that Hartford or its subsidiaries or people working for Hartford
or people connected to this file in any way or the other, has
that all, every document been produced at this point." Hartford’s
counsel answered affirmatively.
The district court limited the
sanctions to attorneys' fees and re-opened discovery so Illiana
could gather the remainder of the information which it had been
seeking.
4
In response to Judge Van Bokkelen’s order, Illiana issued
new discovery, including a supplemental document request, a
deposition notice, a subpoena to Buchanan Clarke and Schlader, a
subpoena for documents to Guidance Software, Inc., and a subpoena
for documents to Fisher Kanaris.
Hartford moved to quash the
subpoenas, arguing that they were untimely, exceeded the scope of
the court order, and requested privileged information.
This
court rejected Hartford’s privilege argument for the same reasons
cited in its Order granting Illiana’s motion to compel and ordered production of the requested discovery information.
Hartford now objects to numerous statements in the court’s
Opinion and Order denying its motion to quash.
Specifically, the
court stated that Illiana’s computer system was destroyed by an
unknown person.
Hartford now purports to know the identity of
the individual who destroyed the computer system. Hartford also
challenges the court's statement that after attempts to settle
the insurance claim, Illiana filed a complaint "fearing the two
years would expire without a coverage determination."
Hartford
complains that Illiana filed suit after refusing to toll the two
year contractual limitation.
Hartford also protests that many of
the discovery documents that were turned over in July and August
2009 were not part of the claim file. Rather, they were part of
files maintained separately by third-parties assisting with the
5
investigation.
Hartford also states that Illiana is to blame for
the delays in discovery because it requested a six month stay
after filing bankruptcy and that the court incorrectly stated
that all the Fisher Kanaris attorneys were acting as claims
adjusters, arguing that the April 2008 Order only found that
Kevin Pugliese of Fisher Kanaris acted as a claims adjuster.
Hartford filed a motion to correct these errors, to which Illiana
objects.
Discussion
Federal Rule of Civil Procedure 60(a) states that "[t]he
court may correct a clerical mistake or a mistake arising from
oversight or omission whenever one is found in a judgment, order,
or other part of the record."
The courts have interpreted
"clerical error" and "mistake" to encompass a variety of errors,
such as filing dates, mathematical computations, ages, and misnomers. Rule 60(a) is intended to make the judgment or record
speak the truth and is not a vehicle to make substantive changes
to the record.
American Trucking Association v. Frisco Transpor-
tation Co., 358 U.S. 133, 146, 79 S.Ct. 170, 177, 3 L.Ed.2d 172
(1958) ("the power to correct inadvertent ministerial errors may
not be used as a guise for changing previous decisions because
the wisdom of those decisions appears doubtful").
Rule 60(a) may
not be employed to change decisions that were litigated and
6
deliberately decided.
American Trucking Association, 358 U.S. at
146, 79 S.Ct. at 177; HyperQuest, Inc. v. N’Site Solutions, 632
F.3d 377, 386 (7th Cir. 2011).
Rather, Rule 60(a) is used to
correct the judgment to reflect what the court originally intended.
HyperQuest, 632 F.3d at 386; Blue Cross and Blue Shield
Association v. American Express Co., 467 F.3d 634, 637 (7th Cir.
2006) ("Rule 60(a) cannot be used to change language that was
poorly chosen, as opposed to incorrectly transcribed.").
"The
past cannot be rewritten; Rule 60(a) allows a court to correct
records to show what was done, rather than change them to reflect
what should have been done."
Blue Cross, 467 F.3d at 637.
Illiana first objects to Hartford’s motion as being procedurally deficient, arguing that the amendments are sought not to
change clerical errors, but to change the substance of the
Opinion and Order.
Illiana argues that Hartford should have
raised its arguments under Federal Rule of Civil Procedure 72(a),
which provides a tool for seeking review of a magistrate judge's
decision by the district court within 14 days of the Order.
Be-
cause Hartford waited 62 days from the March 7, 2012 Order to
file the present motion, Illiana argues that Hartford’s objections are untimely.
Both Rule 72 and Rule 60(a) provide a vehicle for amending
decisions.
However, the court’s power under Rule 72 is broader
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and permits substantive changes to the judgment.
Because the
time to appeal under Rule 72 has expired, the court will evaluate
each of Hartford’s requested amendments to determine if they
affect the substance of the judgment or address clerical errors,
which may be corrected under Rule 60(a) within one year of the
court’s decision.
First, the court inadvertently stated that the law suit was
commenced on December 7, 2010, although the complaint was filed
on December 7, 2006.
This is the type of misstatement that falls
clearly within the ambits of Rule 60(a).
The date was tran-
scribed incorrectly and should be amended to reflect what the
court intended – the date the law suit actually was commenced.
The court GRANTS Hartford’s motion with respect to this error.
Next, Hartford challenges the court’s statement that "an
unknown person accessed and destroyed Illiana Surgery and Medical
Center’s medical management computer system."
Hartford complains
that the identity of the individual who caused the loss is known.
However, the court did not conclude that the identify of the
individual could not be established.
At the time the order was
entered, the identity had not been established and was unknown to
the court.
This statement will not preclude Hartford from
establishing the identity of the individual at later stages of
these proceedings through competent evidence.
8
Illiana stated that the identity of the individual who
destroyed the computer system was unknown in its response brief.
Hartford did not object or suggest otherwise in its reply.
A
Rule 60(a) motion is not intended to supplement the record and
allow amendments to consider evidence not before the court at the
time it made its ruling.
Hartford has not shown that the court
overlooked any information that was available at the time of the
decision warranting this amendment.
Hartford’s third challenge concerns the court’s statements
that Fisher Kanaris "assisted" with the adjustment of the loss
and that Kevin Pugliese "performed most of the adjusting and
investigation of the Illiana claim."
Hartford argues that the
only evidence before the court shows that Palazzolo was solely
responsible for the adjustment of the claim and that Fisher
Kanaris provided only legal advice with respect to the claim.
The court has found on multiple occasions that Pugliese, an
attorney at Fisher Kanaris, assisted with the adjustment of the
claim.
Hartford now makes the same argument it has raised in
response to the motion to compel and motion for sanctions that
the court has rejected.
If the court were to make this amend-
ment, it would affect the substance of not only the Order on
Hartford’s motion to quash, but also the previous orders on
Illiana’s motion to compel and motion for sanctions.
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In its
previous Opinions, the court rejected the attorney-client privilege that Hartford raised in response to Illiana’s discovery
requests and ordered production of the documents because of
Fisher-Kanaris’ role in the adjustment of the claim.
The court
did not make this statement out of error or oversight.
Rather,
it is a finding the court relied on in support of its decision
and speaks directly to the substance of its orders.
This amend-
ment exceeds the scope of Rule 60(a), and Hartford failed to
raise this objection with the district court under Rule 72 within
14 days.
Similarly, Hartford complains that Fisher Kanaris never
"launched an investigation into the claim," asking the court,
again, to amend its order to state that Fisher Kanaris’ involvement was limited to providing legal advice.
This is the same
litany that the court repeatedly has rejected.
The Opinion and
Order states what the court intended and cannot be amended under
Rule 60(a).
In the Opinion, the court stated that "fearing the two years
would expire without a coverage determination, Illiana filed a
complaint on December 7, 2006."
Hartford contests that Illiana
filed suit only because it refused to agree to a tolling agreement to suspend the two year contractual suit limitation.
It is
not clear why the impetus for Illiana to file suit is relevant.
10
The record reflects that the parties discussed a possible tolling
agreement, but because no agreement was reached, the two year
contractual limitation was set to expire near the time Illiana
filed its complaint.
This statement did not bear on the court’s
opinion, and it is not clear why Hartford seeks this amendment.
In any case, the court stated what it intended, regardless of how
Hartford would like it phrased.
The record is clear that Illiana
filed suit at the end of the two year contractual limitation.
Hartford next complains that pages 2-3 of the court’s
Opinion and Order incorrectly state that Hartford caused delays
during the initial document discovery in 2007-2008.
Hartford
contends that the delays were due to Illiana filing for bankruptcy and asking the court to stay discovery.
The bankruptcy
trustee requested a six month stay to resolve issues with the
bankruptcy court before it could proceed with discovery.
On pages 2-3 of the court’s Opinion, the court simply set
forth the facts as they occurred.
The court explained that
Hartford was ordered to produce its insurance policies, EUOs, and
claim files.
Hartford served some of this information along with
a privilege log.
In 2008, Illiana filed a motion to compel.
The
court determined that the Fisher Kanaris attorneys were serving
as outside claims adjusters and rejected the attorney-client and
work product privileges Hartford raised.
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Illiana learned that
all the documents had not been produced and sent an additional
request on May 1, 2008.
Hartford supplemented its responses with
797 new documents on July 15, 2009, and 333 on July 22, 2009.
At no point did the court say that Hartford was solely
responsible for the pace of discovery.
Rather, the court set
forth the facts as they occurred during the relevant time period.
Hartford delayed discovery by failing to produce relevant information despite court orders.
Hartford does not challenge whether
the Opinion accurately reflects the facts, rather it wants to
place some responsibility for the delay on Illiana in an effort
to shift the blame for its delays in producing information.
The
court has included an accurate recitation of the relevant facts
and finds that the requested amendment was not due to any mistake
or oversight.
Next, Hartford argues that it did not produce any claim file
documents on July 15, 2009.
Hartford explains that the 797
documents produced on this date were obtained from Wright Capital
Partners, a private equity company that purchased Illiana in 2006
and renamed it Heartland Memorial Hospital.
Because Illiana had
not received discovery from Wright Capital, Hartford represents
that it forwarded the discovery to Illiana on this date, and that
the documents never were made part of its claim file.
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The court adopted this statement from its June 13, 2011
Opinion and Order recommending sanctions.
In its brief support-
ing the motion for sanctions, Illiana represented that Hartford
produced 797 new claims file documents on July 15, 2009.
Hart-
ford responded that it "produced to Plaintiffs Wright Capital
documents, which were requested by Plaintiff."
Hartford did not
challenge whether the Wright Capital documents were made part of
the claims file, nor did it state that the documents were maintained in a file separate and distinct from the claim file.
Rule
60(a) is not a vehicle for amending orders because of a party’s
failure to set forth its position.
The court did not overlook
evidence as it was not clear that the documents were not made
part of the claims file.
Moreover, Wright Capital assisted with
the investigation, and the documents in dispute pertain to Wright
Capital’s investigation of Illiana’s claim.
The court has warned
Hartford not to "split hairs" and has adopted a broader definition of the claim file to include the documents that were part of
the investigation and adjustment process.
Hartford also complains that all materials produced on
August 26, 2009, were maintained in a separate file by Jack
Keeley, an employee of Con-Tech, and were not part of the claim
file as the court stated.
Con-Tech was a third party hired to
assist with the investigation.
Keeley maintained his own sepa-
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rate file, which contained the 331 documents that Hartford
produced on August 26, and which never were made part of Hartford’s claim file.
Hartford argues that Con-Tech’s actions
cannot be imputed on it.
Again, the court adopted this statement from the facts set
forth in the motion for sanctions.
This is not something the
parties disputed in the context of the motion to quash.
Hartford
did not object or challenge this statement in the motion for
sanctions, yet challenges the court’s statement in the motion to
quash.
Hartford has not pointed to any evidence the court over-
looked that was presented in support or defense of the motion to
quash.
Rather, its arguments go back to the evidence submitted
with Illiana’s motion to compel and motion for sanctions and ask
the court to make the record consistent with that evidence.
In its response to the motion for sanctions, Hartford stated
that the relevant documents were maintained by Con-Tech in a
separate file.
This court rejected the argument, finding that
all documents related to the investigation and adjustment of the
claim should have been produced and that Hartford should have
understood that these documents were part of the claim file
regardless of where they were located.
Hartford had promised to
search for and produce documents pertaining to Keeley’s work on
Illiana’s claim, but a year passed before Hartford produced any
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such documents, which conveniently were produced immediately
before Keeley’s deposition.
Hartford’s objection goes to the heart of the court’s motion
for sanctions.
Although it does not bear directly on the sub-
stance of the Motion to Quash, what Hartford is challenging is a
substantive decision that the court has heard and decided.
The
court has not overlooked any evidence submitted with the Motion
to Quash, and Hartford’s argument seeks to change a substantive
decision that the court has reached.
This type of challenge
exceeds the scope of Rule 60(a).
Hartford next complains that the Opinion and Order incorrectly states that "[w]hile Illiana was preparing to depose
Hartford’s lead claims adjuster, Steve Palazzolo, it determined
that Hartford failed to produce certain documents contained in
the claim file."
Hartford argues that the documents that had not
been produced by this time were maintained by Fisher Kanaris in a
separate file and were not part of the claim file.
However, in
the June 30 and November 18, 2008 orders, the court determined
that Fisher Kanaris was acting as an outside claim adjuster, that
the documents were not protected by the attorney-client or work
product privileges, and that the documents were discoverable because they were part of the claim file.
Because Fisher Kanaris
was acting as an outside claim adjuster, their documents had to
15
be part of the claim file.
In the January 6, 2011, Opinion and
Order, Judge Van Bokkelen stated that "It should have been clear
to Hartford long before January 6, 2011, that because Mr. Pugliese was, as the Court found in its order of November 18, 2008,
acting at least in part as an outside adjuster, the documents in
his file relating to the investigation of Illiana’s claim were
part of Hartford’s claim file, which Hartford had first been
ordered to produce on April 4, 2007."
Hartford’s motion attacks
the substance of the court’s previous orders and again falls
outside the court’s authority under Rule 60(a).
Finally, Hartford argues that it complied with every court
order and that the court must correct its statement concerning
"Hartford’s persistent refusal to provide the documents irrespective of how many times the court has ordered production."
Through this statement, the court was referencing Hartford’s
reluctance to turn over documents by its self determination that
some documents which were derived from and used in the investigation and adjustment of the claim, but were kept in separate
files, were distinct from the claim file.
It took several orders
for Hartford to turn over all documents related to the investigation and adjustment of the claim.
Hartford persistently refused
to provide the documents, which is what necessitated the numerous
directives by the court to turn over such information.
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Regard-
less, this statement did not bear on the outcome, and the court
later acknowledged that Hartford produced the documents after
sufficient prodding.
The facts accurately reflect the course of
events and Hartford’s refusal to provide the documents on more
than one occasion.
Moreover, the court’s statement that Hartford
persistently refused to provide the documents was in response to
whether any agreement could have been reached if the parties met
and conferred as required by Rule 37 and Local Rule 37.1 prior to
Hartford filing its motion.
The statement was in relation to the
documents that were subject to the motion and had not been produced.
_______________
Based on the foregoing, the Motion to Correct Errors [DE
243] filed by the defendant, Hartford Fire Insurance Company, on
May 8, 2012, is GRANTED IN PART and DENIED IN PART.
Because the
court has decided all the issues presented in Hartford’s motion
to correct errors, the Motion Requesting Oral Argument With
Respect to Its Motion to Correct Errors [DE 244] is DENIED.
ENTERED this 9th day of August, 2012
s/ ANDREW P. RODOVICH
United States Magistrate Judge
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