ELI LILLY AND COMPANY et al v. ARCH INSURANCE COMPANY et al

Filing 533

ORDER ON CERTAIN DEFENDANTS' MOTION TO COMPEL - Defendants', Arch Insurance Company and Arch Specialty Insurance Company, #468 Motion to Compel is GRANTED in part and DENIED in part. (See Order.) Signed by Judge Larry J. McKinney on 9/27/2016. (GSO)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION

ELI LILLY AND COMPANY,
et al.
Plaintiffs,
vs.
ARCH INSURANCE COMPANY,
et al.
Defendants.

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No. 1:13-cv-01770-LJM-TAB

ORDER ON CERTAIN DEFENDANTS’ MOTION TO COMPEL
Defendants Arch Insurance Company and Arch Specialty Insurance Company
(collectively, “Arch”) have moved for an Order that compels Plaintiffs Eli Lilly and
Company (“Lilly”) and Eli Lilly do Brasil LTDA (“Lilly do Brasil”) (collectively, “Plaintiffs”) to
produce all documents responsive to Arch’s third set of document requests; to produce
all communications with and between Plaintiffs’ insurance brokers, including documents
in JLT London’s and JLT Brazil’s possession; and to produce complete copies of all
insurance policies requested by Arch. Dkt. No. 468. Plaintiffs contend that Arch’s request
for hundreds of policies not at issue in this case is overly burdensome and that the benefit
of production is far outweighed by the burden of locating all of them. Dkt. No. 511.
Further, Plaintiffs asserts that Arch should seek Jardine Lloyd Thompson Group (“JLT”)
documents from that entity because Plaintiffs have no legal control over JLT, its
employees or its documents. Id. Plaintiffs also argue that it has already produced more
than 55,000 pages of documents from JLT and the 59 documents that Plaintiffs withheld
are either irrelevant or subject to the attorney-client and work-product privileges via a

common interest privilege. Id. at 2. 1 Finally, Plaintiffs assert that Arch is not entitled to
further discovery related to payment of insurance premiums and premium tax information
(“premium information”) because Lilly has provided information and witness testimony
that Lilly Brasil did not pay any portion of the Arch premium, which is all the information
that is required.

Further information regarding this topic would be too expensive,

disruptive and intrusive to produce. Id. at 3.
I. BACKGROUND
On December 9, 2015, Arch filed a Motion to Stay Discovery. Dkt. No. 318.
On December 21, 2015, Arch served on their third request for production of
documents, which consisted of an additional 57 requests for production, bringing the total
to 572. Dkt. No 470-1. The relevant requests include: (1) those directed to Plaintiffs’
accounting practices related to allocation of insurance premiums amongst various
corporate entities and information regarding the payment of premium taxes in the United
States, Brazil and other countries, Dkt. No. 470-1, RFP Nos. 260-64 & Nos. 255-58; (2)
documents reflecting communications between Plaintiffs and their insurance brokers,
including JLT London and JLT Brazil, Dkt. No. 470-1, RFP No. 277 2; (3) a complete set
of insurance policies, as requested in September 2015, RFP Nos. 233, 235, 247 and 288,
and as shown in Docket No. 469 at 8-10, including policies for any Lilly subsidiary from
1977 through 2014.

1

All page numbers in this Order refer to the ECF page number in the upper-right hand
corner of the document in the electronic file.
2 The Court notes that this Requests for Production was identified by the Court as
reasonably seeking the information at issue in Arch’s Motion. To the extent the Court is
wrong and there are other requests at issue, Arch must shoulder the error because it has
the burden of proof on the Motion.
2

On January 28, 2016, the Court granted in part and denied in part Arch’s motion
to stay discovery (“Jan. 28 Order”). Dkt. No. 342. Specifically, the Court stated, “[T]he
discovery between Lilly and Arch shall be limited to the foreign law defense and
arguments raised by Arch in its Motion for Judgment on the Pleadings.” Dkt. No. 342 at
4. Arch continued to fight the scope of the Jan. 28 Order; and the Court heard arguments
and tried to clarify the issues on February 2, 2016 (“Feb. 2 Order”). Dkt. Nos. 346; 348.
On February 8, 2016, Plaintiffs served responses and objections to Arch’s Second
Set of Requests for Production, which included the requests related to insurance policies
for each Lilly entity from 1977 through 2014. Dkt. No. 511-3. Lilly objected to the requests
on the grounds that policies not at issue in this lawsuit are irrelevant and that the burden
and expense of production outweighs its likely benefit, but promised to produce some
responsive documents. Id. at 13 & 15. Lilly objected to RFP No. 247 because it was
duplicative of RFP No. 233. Id. at 25.
According to Arch, Lilly has produced the following policies, but many of them are
incomplete. Dkt. No. 469 at 8-10.
Insurer

Policy Number (if known) Bates Reference

State of Pennsylvania
ACE American/ACE Group

99-0263237

ARCH00000943
ARCH00001487
ARCH00001557
ARCH00003120

ACE American/ACE Group

CSZ G27174346-001

ARCH00003496
ARCH00007347

Winterthur
Swiss Re

#901/LK0105810

LILLY_00110705
LILLY_00160224

North American
Specialty
Gerling

LILLY_00160224

GE Frankona

LILLY_00160224

LILLY_00160224

3

Insurer
XL

Policy Number (if known) Bates Reference
LILLY_00160224

Allied World Assurance

LILLY_00160224

Zurich

LILLY_00160224

Scor

LILLY_00160224

American Re

LILLY_00160224

XL

LILLY_00160226

Illinois Union

LILLY_00160226

XL
Illinois Union

US00007658LI05A

LILLY_00160228
LILLY_00160228

Illinois Union

LILLY_00160228

ELCO/ELGO

LILLY_00160228

Illinois Union

LILLY_00160228

Zurich

LILLY_00160228

ELCO/ELGO

LILLY_00160230

Illinois Union

LILLY_00160230

Illinois Union

LILLY_00160230

ELCO/ELGO

LILLY_00160230

ACE InternationalOther
Auto
AISL- Contractor's
Pollution
Allied World (AWAC)

LILLY_00160381LILLY_00160383
LILLY_00160381LILLY_00160383
LILLY_00160381LILLY_00160383
LILLY_00160381LILLY_00160383
LILLY_00160381LILLY_00160383
LILLY_00160381LILLY_00160383
LILLY_00160381LILLY_00160383

CNA
Chubb
FM Global
Glacier Reinsurance

4

Insurer
HDI GlobalLlyods
Montpeilier Re
Munich Re
National Union Fire Co.
QBE InternationalRLI
SCOR
Star Tech
Gemini
Lexington
American Specialty

Policy Number (if known) Bates Reference
LILLY_00160381LILLY_00160383
LILLY_00160381LILLY_00160383
LILLY_00160381LILLY_00160383
LILLY_00160381LILLY_00160383
LILLY_00160381LILLY_00160383
LILLY_00160381LILLY_00160383
LILLY_00160381LILLY_00160383
LILLY_00160381LILLY_00160383
LILLY_00160381LILLY_00160383
CEX09600116-00
LILLY_00217321
#23543096
LILLY_00217321
ELD10003843800
LILLY_00217321

Dkt. No. 469 at 8-10. Arch seeks the complete policies referenced above. In addition,
Arch contends that Plaintiffs should be compelled to produce all claims-made foreign
general liability policies that they have asserted were requested from their brokers. Id. at
10 (citing Dkt. No. 470-13). None of the “other” policies referenced by Plaintiffs in meet
and confer emails were disclosed. Moreover, Arch seeks all policies issued to Lilly Brasil
by an admitted insurer in Brazil, which is relevant to the issues of coverage in this case.
On February 22, 2016, Plaintiffs asked Arch to identify which of the requests in its
Third Set of Request for Production Arch believed related to its MJOP. Dkt. No. 470-2 at
5. Arch declined; instead it proposed that the parties stay Arch’s discovery until after
Plaintiffs filed their response to Arch’s Motion for Judgment on the Pleadings, or, if
Plaintiffs raised factual issues in their response to the Motion for Judgment on the
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Pleadings, Plaintiffs’ RFP responses would be due no less than 14 days prior to Arch’s
deadline to file a reply. Id. at 4. Plaintiffs declined. Id. at 2. Instead, Plaintiffs served
their responses on April 1, 2016. Dkt. No. 470-3. With respect to the relevant requests,
Plaintiffs stated that, notwithstanding the overbreadth of the requests (as pertaining to
jurisdictions not at issue in the case) and the expense, it would “produce non-privileged
responsive documents for the policies at issue in this case to the extent they have not
already been produced, including but not limited to invoices, receipts, and check stubs
evidencing payment of insurance premiums.” See, e.g., id. at 8.
On April 15, 2016, Arch inquired about the promised premium information. Dkt.
No. 470-5 at 1. Plaintiffs responded that it was working to identify responsive documents.
Id.
On June 2, 2016, the other issues that are the subject of this Motion to Compel,
Arch took issue with Plaintiffs’ production of communications with insurance brokers, JLT
in particular. Dkt. No. 470-7 at 3. Arch stated that Plaintiffs made the information relevant
by attaching JLT affidavits to their Complaint. Id.
On June 20, 2016, Plaintiffs responded by reminding Arch of the partial stay of
discovery as well as their well-founded objections to the discovery requested. Dkt. No.
471-1 at 1. Further, Plaintiffs informed Arch of the documents that it intended to produce
with respect to each of the disputed topics. As to the premium payments, Plaintiffs
claimed that they would provide “documentation evincing that (1) Lilly do Brasil did not
pay any of the premiums for the policies at issue; (2) no premiums were ever allocated to
Lilly do Brasil; and (3) Lilly do Brasil did not pay any premium taxes.” Id. at 3. Further,
the response explained the difficulty in producing the relevant documents, but explained

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how the premiums are paid and how they are allocated. Id. Plaintiffs further asserted
that the burden to gather all of the requested information was high and the benefit to Arch
minimal; therefore, under the new proportionality in the Rule 26, the information was more
properly sought through an interrogatory. Id. at 3-4. But, Plaintiffs proposed to provide
more recent premium-allocation documentation that is less burdensome to collect as well
as provide an affidavit regarding the facts of the premium allocation system described in
the letter as well as answer an interrogatory. Id. at 4.
As to the JLT documents, Plaintiffs asserted that they had provided such
documents in their 4th, 5th and 8th productions. Id. They further offered to help locate the
specific information in JLT affidavits that Arch could not find. Id. Plaintiffs also asserted
a common interest privilege in certain documents and promised to provide a privilege log.
Id.
On July 12, 2016, Arch served Plaintiffs with ten interrogatories and eight requests
for admission. Dkt. No. 470-9.
On July 15, 2016, Plaintiffs provided Arch with an affidavit explaining how Lilly
handles premium payments, allocations, etc. Dkt. No. 460-6.
On July 20, 2016, the Court lifted the stay on discovery between Plaintiffs and Arch
and converted Arch’s Motion for Judgment on the Pleadings to a Motion for Summary
Judgment. Dkt. No. 465.
On August 15, 2016, Plaintiffs responded to the interrogatories and requests for
admission propounded on July 12, 2016; Plaintiffs also produced a privilege log on this
date. Dkt. Nos. 511-1 at ¶¶ 8 & 19; Dkt. No. 511-2.

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On August 19, 2016, the date Plaintiffs responded to this Motion to Compel, they
served documents related to premiums. Dkt. Nos. 511-4, 511-5, 511-6, 511-1 at ¶ 19.
Also on August 19, 2016, Plaintiffs served additional insurance-related documents
including some historical excess liability policies, and certain auto policies. Dkt. No. 5101 at ¶ 17. Plaintiffs also confirmed that it provided 11 policies identified in Arch’s list
above; and produced additional information related to “some” of the remainder despite
Plaintiffs’ continuing objection as to relevance. Dkt. No. 510-1 at ¶ 18.
Plaintiffs offered further compromises regarding the scope of Arch’s requests
regarding policy information; Arch refused. Dkt. No. 511 at ¶ 16; Dkt. No. 510-9.
II. DISCUSSION
The Court has broad discretion in discovery matters, including ruling on motions
to compel. See James v. Hyatt Regency Chi., 707 f.3d 775, 784 (7th Cir. 2013); Packman
v. Chi. Tribune Co., 267 F.3d 628, 646 (7th Cir. 2001). Pursuant to Rule 26(b)(1) of the
Federal Rules of Civil Procedure (“Rule 26(b)(1)”), parties are entitled to discover
any nonprivileged matter that is relevant to any party’s claim or defense and
proportional to the needs of the case, considering the importance of the
issues at stake in the action, the amount in controversy, the parties’ relative
access to relevant information, the parties’ resources, the importance of the
discovery in resolving the issues, and whether the burden and expense of
the proposed discovery outweighs its likely benefit.
Information within
this scope of discovery need not be admissible in evidence to be
discoverable.
Fed. R. Civ. P. 26(b)(1). With respect to requests for production of documents, pursuant
to Rule 34(a)(1), a party may request production of “items in the responding party’s
possession, custody or control . . . .” Fed. R. Civ. P. 34(a)(1).
Rule 37(a) permits the Court to order disclosure of information when the original
answer or production is “evasive or incomplete.” Fed. R. Civ. P. 37(a)(4). If the Court
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believes that a party’s failure to disclose information is substantially justified or is
harmless, the Court may deny a motion to compel. Fed. R. Civ. P. 37(c)(1). Moreover,
Rule 26(b)(2)(C) allows the Court to limit discovery if the information “sought is
unreasonably cumulative or duplicative, or can be obtained from some other source that
is more convenient, less burdensome, or less expensive” or “ the proposed discovery is
outside the scope permitted by Rule 26(b)(1).” Fed. Rs. Civ. P. 26(b)(2)(C)(i) & (iii).
A. PREMIUM ALLOCATION AND PREMIUM TAXES
Arch asserts that despite being told by Plaintiffs that insurance premium allocation
and premium tax payment information would be forthcoming since April 2016, Plaintiffs’
claim now that such production is too burdensome and proffers of a comprise rings false.
Further, Arch argues that the production that has been made falls short because it fails
to address the premium allocation and premium taxes for the relevant years and, if there
are no responsive documents, as Plaintiffs’ compromise proffer suggests, Plaintiffs
should amend their answers to the requests for production and so state. Dkt. No. 523 at
2. Lilly asserts that the Affidavit of Martin Clemens, which details Lilly’s intercompany
payment and allocation process, documents from the years 2011 through 2014 that
evidence that Lilly do Brasil paid no premiums for the policies at issue, and Lilly’s proffer
of a Rule 30(b)(6) witness to testify on this subject should be sufficient to answer Arch’s
questions.

Dkt. No. 511 at 22-24.

Plaintiffs contend that Arch’s requests are

disproportionate to Arch’s need for information about premium allocations and payments.
Id.
The question here is an important one for the parties because the Second
Amended Complaint asks the Court to reform the contracts of the parties such that Lilly

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do Brasil is an insured. The entities that paid for, or were allocated, a portion of the
premiums on the relevant policies is highly probative of this inquiry; this would include
other Lilly-affiliates that Lilly claims should have been covered by the policies and/or
“Entrepreneurial Affiliates.” The Court understands Plaintiffs to be saying that they have
provided all the information they are comfortable providing; but that is not the standard.
Further, without explanation, Plaintiffs have provided the requested information for a
truncated number of years, leaving eight relevant years of information to be answered for
in a deposition. Without more information about why retrieval of document for the entire
relevant time period is too complicated or too burdensome, the Court agrees with Arch
that Plaintiffs should be compelled to produce additional information, or, to the extent no
documents are available, Plaintiffs should answer the interrogatories and requests for
production accordingly. However, to the extent that Arch seeks such information that predates the term of the purported coverage or the purported underlying claims, the requests
are too broad.

Therefore, Arch’s motion with respect to premium allocation and/or

premium tax payment information is GRANTED, but limited to the policy years referenced
by Arch in its Reply brief at page 2.
B. JLT / OTHER BROKER DOCUMENTS
Arch contends that the Court should compel Plaintiffs to produce documents from
its insurance brokers, JLT London and JLT Brazil in particular, because those entities
were agents or otherwise within Lilly’s control with respect to the underlying claims and
the insurance policies at issue. Dkt. No. 469 at 6-8; Dkt. No. 523 at 6-8. Further, Arch
argues that Plaintiffs have not established any valid privilege to any documents it has

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produced from JLT entities and the common interest doctrine does not apply. Dkt. No.
523 at 8-12.
Plaintiffs assert that they have produced approximately 55,500 pages of
documents from JLT, minus 59 documents; 30 of which Lilly claims are irrelevant and 29
of which Lilly asserts a common interest privilege. Dkt. No. 511 at 9. Plaintiffs state that
they were not required to provide any JLT documents, because they lack legal control
over JLT. Id. at 12-16. Further, Plaintiffs aver that it properly withheld the 59 documents,
particularly the common interest privilege documents, which Plaintiffs claim “is widely
used in federal court.” Id. at 16-18. Plaintiffs argue, too, that Arch may obtain the JLT
documents through other means; therefore, Plaintiffs should not have to produce them.
Id. at 19-22.
The Court finds Plaintiffs’ inconsistent positions on its relationship with the JLT
entities troubling. In written communications to Arch, Plaintiffs assert that as insurance
brokers, the JLT entities are agents of Arch and other insurance companies they
represent. Dkt. No. 471-1 at 4. Under Indiana law, that is generally true. See Am. Nat’l
Fire Ins. v. Rose Acre Farms Inc., 911 F. Supp 366, 371 (S.D. Ind. 1995) (stating “in
Indiana ‘when a broker makes application for insurance and the insurance policy is
issued, the broker is the agent of the insurer . . . .’” quoting, Plumlee v. Monroe Guar. Ins.
Co., 655 N.E.2d 350, 357 (Ind. Ct. App. 1995), further citations omitted). Therefore, as
Arch points out, if the JLT entities were parties to this litigation, as brokers of the relevant
insurance they would be defendants aligned with Arch. But, both in communication to
Arch and in its brief in opposition to this Motion, Plaintiffs claim that the JLT entities have
a common interest with them, have asserted a common interest privilege as to certain

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documents and have hinted that Lilly’s relationship with JLT is a close one. Dkt. No. 511
at 16-20; Dkt. No. 523-3 (“It is no secret that Lilly is a long-standing client of JLT’s. It
seems reasonable to me that a client’s kind request for information and assistance might
be treated much differently than a discovery demand from a hostile third-party.”). The
fact that the JLT entities readily produced documents to Plaintiffs and provided affidavits
in support of Plaintiffs’ Second Amended Complaint suggests that the JLT entities have
ignored Indiana law and their duty to Arch. The Court will not allow the JLT entities or
Plaintiffs to hide behind an alleged attorney/client or common interest privilege in these
circumstances. It seems to this Court that as an “agent” of Arch, JLT should produce its
documents to Arch with little or no fuss. In addition, having produced them to the common
client, it bends the law too far to now let Plaintiffs withhold them from Arch.
Furthermore, the common interest privilege extends to documents that advance a
shared legal interest and seek an attorney’s advice to advance that interest. See United
States v. BDO Seidman, LLP, 492 F.3d 806, 815-16 (7th Cir. 2007). Here, the JLT entities
are not parties to this litigation; therefore, there is no common legal interest for which they
must seek an attorney’s advice to advance that interest and, agreements or not, it is this
Court’s view that the privilege does not apply to shield documents produced to Plaintiffs
by the JLT entities.
The Court is not, however, completely convinced that Arch could not and should
not have sought this discovery itself directly from the JLT entities. As such, although the
Court will grant Arch’s Motion to Compel production of these documents from Plaintiffs, it
will not assess attorneys’ fees related to and/or caused by this portion of the Motion.
Arch’s Motion with respect to the JLT entity documents is GRANTED.

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C. INSURANCE POLICIES
Arch asserts that Plaintiffs should produce all claims-made foreign general liability
policies, including the ones in the list above, as well as others, if known to Plaintiffs to
provide such coverage. Plaintiffs claim that Arch’s requests for insurance policies that
cover a 37-year period is overbroad both in time and in scope and the burden of
production outweighs the likely benefit from the production. Dkt. No. 511 at 9. Plaintiffs
urge that non-liability policies have no bearing at all and that some forms of liability
policies raise “different scope and need issues;” therefore, “Lilly has produced the
relevant policies that do matter.” Id. at 10. Specifically, Plaintiffs “produced in excess of
one hundred policies related primarily to its general liability and excess liability insurance
program between the 1997 and 2014 time period,” and “excess liability policies from the
1977 through 2003 time period, along with additional auto policies.” Id. But, Arch claims
that Plaintiffs implied that they have not provided all policies that “may have covered the
alleged underlying events, including policies that have since been settled or paid out . . .
.” Dkt. No. 523 at 13. Further, Arch argues that Plaintiffs should not be allowed to
unilaterally decide what types of policies should be provided, particularly because they
have indicated that pollution policies have been withheld, which directly relate to the
underlying matters in this action. Id. In addition, Arch states, other policies are relevant
to Plaintiffs’ reformation claim to evidence how the named insureds were identified
therein. Id. at 14.
Similarly to the premium allocation and premium tax payments information, the
issue with respect to insurance policies, generally, is proportionality and who should make
that determination. It is the Court’s view that neither Plaintiffs nor Arch can make that

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determination unilaterally. The Court certainly hopes that Plaintiffs cannot argue that any
policy that they contend provides for or that they have recovered under with respect to
the underlying claims is irrelevant and undiscoverable. Further, if the policy or a portion
of a policy is listed in the chart above, which the Court copied directly from Arch’s opening
brief, that policy should be disclosed in full, if it has been otherwise withheld. Moreover,
it is clear that any policy written by or obtained by the broker(s) Plaintiffs used to obtain
those it obtained from Arch, whether underwritten or written by Arch or other insurance
companies, are discoverable because they may bear on the question of the
understanding of the parties as to the named insureds.

In addition, claims-related

policies that cover environmental contamination and/or pollution in any country or territory
within at least the period extending five years prior to the underlying claims at issue in this
case to the present are also relevant to evidence Lilly’s global insurance practices. To
the extent that Arch seeks additional global coverage policies, Plaintiffs shall provide Arch
a list of the types of claims-related policies it has maintained within the period extending
five years prior to the underlying claims at issue in this case to the present. The parties
shall then meet and confer to narrow the list to those policies that are close in kind to
those Plaintiffs obtained from Arch. If the parties cannot agree, they shall jointly move for
a teleconference with the Court to resolve the matter. Arch’s motion with respect to
insurance policies, generally, is GRANTED in part and DENIED in part.
D. ATTORNEYS’ FEES
Pursuant to Rule 37(a)(5), the Court must require Plaintiffs to pay Arch’s
reasonable expenses, unless Plaintiffs’ nondisclosure or response was substantially
justified or “other circumstances make an award of expenses unjust.” Fed. R. Civ. P.

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37(a)(5). Plaintiffs assert that they were justified in withholding all of the documents it has
withheld, particularly the JLT entities’ documents. Dkt. No. 511 at 24-27. The Court
disagrees that Plaintiffs were substantially justified as to all of the disputed documents as
discussed above. However, it agrees with Plaintiffs that as to the JLT entities’ documents,
an award of expenses would be unjust because Arch could have and should have sought
to discovery them itself. For these reasons, Arch may recover its expenses only for the
portions of its Motion related to premium allocation and premium taxes documents and,
in part, insurance policies, generally. Because the parties have shown themselves unable
to reach agreement on nearly any issue, Arch shall submit its brief in support of
reasonable expenses, including an itemized schedule of expenses, on or before October
11, 2016; Plaintiffs shall file their objections on or before October 18, 2016; Arch shall file
any reply in support of its expenses on or before October 21, 2016.
III. CONCLUSION
For the reasons stated herein, Defendants’, Arch Insurance Company and Arch
Specialty Insurance Company, Motion to Compel, Dkt. No. 468, is GRANTED in part and
DENIED in part.
IT IS SO ORDERED this 27th day of September, 2016.

________________________________
LARRY J. McKINNEY, JUDGE
United States District Court
Southern District of Indiana

Electronically distributed to all registered attorneys of record via ECF.

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