Boardwalk Apartments, L.C. v. State Auto Property and Casualty Insurance Co.

Filing 111

MEMORANDUM AND ORDER granting 86 Plaintiff's Motion to Compel; granting 90 Defendant's Motion to Compel; granting 91 Defendant's Motion for Leave to File Under Seal. Defendant shall produce the requested information and/or a privilege log by 4/23/2013. Plaintiff shall provide complete responses to Interrogatory Nos. 2 and 3 and Production Request Nos. 1 and 2 by 4/23/2013. Counsel directed to file forthwith requested document(s) with an event from the SEALED DOCUMENTS category. The clerk shall grant access to sealed document(s) to counsel of record. Pro hac vice attorneys must obtain sealed document(s) from local counsel. Signed by Magistrate Judge Karen M. Humphreys on 4/8/2013. (sj)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS

BOARDWALK APARTMENTS, LLC,
Plaintiff,
v.
STATE AUTO PROPERTY AND
CASUALTY INSURANCE CO.,
Defendant,

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Case No. 11-2714-JAR

MEMORANDUM AND ORDER

This matter is before the court on plaintiff’s motion to compel (Doc. 86) and
defendant’s motion to compel (Doc. 90).1 For the reasons set forth below, both motions shall
be GRANTED.

Background
This is an action to collect on a commercial property insurance policy issued by
defendant for an apartment complex in Lawrence, Kansas. Plaintiff alleges that one building
in its apartment complex was totally destroyed by fire on October 7, 2005 and that defendant

1

Defendant’s motion for leave to file Exhibit 9 under seal (Doc. 91) is GRANTED
and the exhibit has been considered by the court.

breached the insurance contract by failing to pay Boardwalk’s lost business income and the
full replacement cost of the building. Plaintiff also alleges that defendant engaged in
misrepresentation and negligence while processing plaintiff’s insurance claim.
The parties’ current lawsuit is complicated by the protracted nature of their insurance
dispute and an earlier lawsuit filed in the Western District of Missouri. Highly summarized,
defendant apparently paid plaintiff $2,128,794 for the “actual cash value” of the building
and advanced $150,000 for business income losses within a few months of the fire. On
March 27, 2006, defendant filed a declaratory action against plaintiff in the Western District
of Missouri seeking a determination that it had fulfilled its obligations under the policy. The
Honorable Nanette K. Laughrey granted partial summary judgment to State Auto on an issue
concerning the “actual cash value” of the loss but also ruled that Boardwalk had the right to
replace the destroyed building and seek replacement costs within “a timely manner after the
resolution of this litigation.” State Auto Prop. and Cas. Ins. Co. v. Boardwalk Apartments,
Case No. 06-00252-CV-W-NKL, 2008 WL 474333 (W.D. Mo. Feb. 15, 2008), aff’d in part,
rev’d in part, 572 F.3d 511 (8th Cir. 2009).2 In order to expedite the appeal of the partial
judgment to the Eighth Circuit, the parties entered into a “stipulation of dismissal without
prejudice” and agreed that issues concerning State Auto’s obligation to pay “replacement
costs” and lost business income remained unresolved. In 2009 the Eighth Circuit reversed

2

The “actual cash value” issue involved a complex analysis of the policy language
and Kansas law. The details of the “actual cash value” ruling are not necessary to this
opinion and will not be repeated.
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Judge Laughrey’s decision concerning the “actual cash value” dispute and remanded the
matter for further consideration.

State Auto Prop. and Cas. Ins. Co. v. Boardwalk

Apartments, 572 F.3d 511, 519 (8th Cir. 2009). On remand, a final judgment was entered
concerning the “actual cash value” issue on September 8, 2009.
On January 26, 2010, plaintiff elected to rebuild the destroyed building and asserted
a claim for lost business income. State Auto requested, and plaintiff provided, additional
information concerning the lost business income claim. When the claim was not paid,
plaintiff initiated this lawsuit and, in addition to the lost business income, requested the
“replacement costs” associated with the rebuilt apartment building.3

Plaintiffs’ Motion to Compel (Doc. 86)
This motion concerns plaintiff’s request to compel discovery concerning two areas
of information: (1) defendant’s policies, practices, and manuals concerning the handling of
an insurance claim and (2) defendant’s “claims file.” The parties’ arguments concerning the
discovery requests are set forth in greater detail below.

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The circumstances surrounding the insurance issues are further complicated
because plaintiff did not simply replace the destroyed building. Rather, plaintiff razed all
the buildings in the complex and constructed multiple smaller apartment buildings.
Plaintiff claims to have rebuilt the same number of apartment units that were lost in the
fire.
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Defendant’s Policies, Practices, and Manuals
Interrogatory No. 12 asks whether defendant had any “practices, policies, manuals,
standards, or procedures related to property loss or business interruption claims” at any time
relevant to plaintiff’s claims. If so, plaintiff asked defendant to “identify them, when they
were implemented, and the dates they were in effect.” Production Request Nos. 11, 12, and
13 are closely related and seek production of documents related to defendant’s “policies and
practices” concerning its investigation, evaluation, and adjustment of property loss or
replacement cost claims. Defendant provided information concerning policies and practices
in 2005 and 2006 but refused to provide information concerning its policies and practices in
2010, 2011, and 2012. Plaintiff seeks to compel information responsive to its discovery
requests for the 2010 to 2012 period of time.
In response to the motion to compel, plaintiff asserts lengthy arguments explaining
why plaintiff “had no replacement cost claim in 2010" and that “the complaint fails to allege
facts suggesting negligence in the handling of Boardwalk’s replacement cost claim in 2011
or 2012.” In essence, defendant asserts arguments concerning the substantive merits of
plaintiff’s claims that are more properly the subject of a Rule 56 motion for summary
judgment or Rule 12(b) motion to dismiss for failure to state a claim upon which relief can
be granted. Defendant’s arguments concerning the merits of plaintiff’s claims are misguided
and inappropriate in the context of a motion to compel; accordingly, its “objections” are
rejected. Plaintiff’s discovery requests are relevant to the claims asserted in its complaint
and the request to compel information responsive to Interrogatory No. 12, and Production
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Request Nos. 11, 12, and 13 for 2010 to 2012 shall be GRANTED.

Claims File
Production Request No. 9 seeks production of defendant’s “claims file” concerning
plaintiff’s insurance claims. Again, defendant opposes production based on arguments
concerning the merits of plaintiff’s claims and the sufficiency of the allegations in the
complaint. For the reasons set forth above, these arguments are rejected.
Defendant also argues that the “claims file” documents are protected by the attorneyclient privilege or the work product doctrine because the parties “have been in near constant
litigation over various aspects of Boardwalk’s claim from March 7, 2006 onward.”
Defendant argues it would be “ridiculous” to require State Auto to produce a privilege log.
Defendant’s conclusory argument that essentially everything in State Auto’s claims
file is protected by the attorney client privilege or work product doctrine is not persuasive.
Accordingly, the motion to compel production of the claims file shall be granted and
defendant shall produce a privilege log setting forth those matters that are being withheld
based on the attorney client privilege and work product doctrine.

Defendant’s Motion to Compel (Doc. 90)
Defendant’s motion concerns the sufficiency of plaintiff’s responses to Interrogatory
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Nos. 2 and 3 and Production Request Nos. 1 and 2. These discovery requests seek
information concerning loans and investments that plaintiff made with the 2.1 million dollars
that State Auto paid to plaintiff in February 2006. Defendant contends that the information
is relevant to its defense that any income from the 2.1 million dollar payment should be offset
against plaintiff’s claim for lost business income. Plaintiff provided some information in
response to the four discovery requests but defendant seeks a more complete response.
Plaintiff does not dispute the relevance of the requested information but argues that
the motion to compel should be denied because defendant failed to comply with the duty to
confer required by D. Kan. Rule 37.2 after plaintiff supplemented its responses. Defendant
counters that it did confer with plaintiff but, for reasons unexplained, plaintiff did not
supplement its responses on February 1 and February 8 as promised but waited until after
5:00 p.m. on February 11 to provide its supplemental responses. Because of the 30-day
deadline for filing a motion to compel under D. Kan. rule 37.1, defendant argues that it acted
in good faith in conferring and filing its motion.
Under the circumstances, the court is satisfied that defendant made a “reasonable
effort to confer” as required by D. Kan. Rule 37.2. Moreover, the court has reviewed
plaintiff’s responses and supplemental responses and agrees that there are gaps and
inconsistencies in the information provided by plaintiff. Accordingly, the motion to compel
shall be GRANTED.

IT IS THEREFORE ORDERED that plaintiff’s motion to compel (Doc. 86) is
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GRANTED. Defendant shall produce the requested information and/or a privilege log by
April 23, 2013.
IT IS FURTHER ORDERED that defendant’s motion to compel (Doc. 90) is
GRANTED and plaintiff shall provide complete responses to Interrogatory Nos. 2 and 3 and
Production Request Nos. 1 and 2 by April 23, 2013. Defendant’s motion to file under seal
(Doc. 91) is GRANTED.
IT IS SO ORDERED.
Dated at Wichita, Kansas this 8th day of April 2013.

S/ Karen M. Humphreys
_______________________
KAREN M. HUMPHREYS
United States Magistrate Judge

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