Louisiana Generating LLC et al v. Illinois Union Insurance Company

Filing 80

RULING on 63 Motion to Compel Discovery. Accordingly, the Plaintiffs Motion to Compel Discovery of Reinsurance, Reserves, Similarly Situated Policyholder and Premium Information is denied. Pursuant to Rule 37(a)(5)(B, the plaintiffs shall pay to the defendant, within 14 days, reasonable expenses in the amount of $2,000.00.. Signed by Magistrate Judge Stephen C. Riedlinger on 8/8/2011. (LSM)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA

LOUISIANA GENERATING, L.L.C. AND
NRG ENERGY, INC.

CIVIL ACTION

VERSUS

NUMBER 10-516-RET-SCR

ILLINOIS UNION INSURANCE COMPANY
RULING ON MOTION TO COMPEL DISCOVERY
Before the court is the Plaintiffs’ Motion to Compel Discovery
of Reinsurance, Reserves, Similarly Situated Policyholder and
Premium Information.

Record document number 63.

The motion is

opposed.1
Plaintiffs

Louisiana

Generating,

L.L.C.

and

its

parent

corporation NRG Energy, Inc. filed this declaratory judgment action
seeking

a

determination

of

coverage

under

a

Custom

Premises

Pollution Liability Insurance Policy issued by Illinois Union
Insurance Company.

Plaintiffs requested defense and coverage for

damages resulting from a separate action, in which the U.S.
government sought injunctive relief and civil penalties against
Louisiana Generating for certain alleged violations of the Clean
Air Act.

The insurer denied coverage under the policy and refused

to defend the plaintiffs.
On November 18, 2010, a scheduling order was issued as to

1

Record document number 65.
Plaintiffs
memorandum. Record document number 75.

filed

a

reply

discovery and dispositive motions relevant of the defendant’s duty
to defend, but “it does not prohibit the parties from conducting
such

other

discovery

as

they

may

agree

on.”2

Plaintiffs

subsequently propounded its first set of discovery requests on the
defendant on December 1, 2010.

Defendant served its responses on

January 18, 2011. This motion addresses the defendant’s failure to
respond to certain requests which sought information concerning the
following subjects: (1) communications between the defendant and
its reinsures about the government action; (2) reserves set by the
defendant for the government action; (3) prior insurance coverage
provided by the defendant to similarly situated policy holders
facing lawsuits involving Clean Air Act violations; and, (4)
documents used to calculate the premiums for the plaintiffs’
pollution policy.
Plaintiffs sought production of the defendant’s reinsurance
agreements applicable to the plaintiffs’ claim pursuant to Rule
26(a)(1)(iv), Fed.R.Civ.P., which provides that “any insurance
agreement under which an insurance business may be liable to
satisfy all or part of a possible judgment in the action or to
indemnify or reimburse for payments made to satisfy the judgment.”
Plaintiff has not shown how production of any reinsurance
agreement is relevant to the defendant’s duty to defend.

Under

Louisiana law, an insurer has a duty to defend its insured unless

2

Record document number 32.
2

the allegations in the petition unambiguously exclude coverage.3
The allegations of the petition must be liberally interpreted in
determining whether the claim falls within the scope of the
insurer’s duty to defend, and ambiguous provisions in insurance
policies are strictly construed against the insurer in favor of
coverage.4

The issue of whether or not an insurer has a duty to

defend is determined by the application of the eight corners rule,
where the insurer must compare the allegations in the complaint
against the terms of the policy.5
Interrogatory Number 10 and Document Request No. 19 sought
information

concerning

communications

with

the

defendant’s

reinsurers regarding the plaintiffs’ entitlement to coverage for
the

government

action.

Plaintiffs

argued

that

communications

between the defendant and its reinsurers are relevant because they
may contain statements regarding the existence and application of
key policy terms and the potential for coverage under the policy.
Plaintiffs noted that these communications may also include a loss
assessment report.

3

United Fire and Casualty Co. v. Hixon Brothers, Inc., 453
F.3d 283, 286 (5th Cir. 2006); Hardy v. Hartford Ins. Co., 236 F.3d
287, 290 (5th Cir. 2001).
4

Hardy, 236 F.3d at 290, citing, Yount v. Maisano, 627 So.2d
148, 153 (La. 1993) and Louisiana Ins. Guar. Ass'n v. Interstate
Fire & Cas. Co., 630 So.2d 759, 764 (La. 1994).
5

Martco Ltd. Partnership v. Wellons, Inc., 588 F.3d 864, 87277 (5th Cir. 2009); Lamar Advertising Co. v. Continental Casualty
Co., 396 F.3d 654, 660 (5th Cir. 2005).
3

In Interrogatory No. 11 and Document Request No. 20, the
plaintiffs requested information concerning the insurance reserves
set by the defendant for the plaintiffs’ claim.

Plaintiffs argued

that this information is directly relevant to whether the defendant
believes a potential for coverage exists under the pollution
policy.
Plaintiffs

also

argued

that

documents

used

to

calculate

premiums as requested in Document Request Nos. 1 and 9 must be
produced because they will demonstrate the scope of coverage that
was

intended

under

the

pollution

policy.

Specifically,

the

plaintiffs noted that the documents used to calculate the premiums
may be relevant to the question of whether coverage for Clean Air
Act violations was part of the consideration in setting the price
for the pollution policy and whether the defendant intended to
provide coverage for actions involving such violations.

Plaintiff

argued that these documents may provide information concerning how
the defendant applies terms under the policy, particularly the
terms “pollution condition” and “claim”.
Plaintiffs have failed to demonstrate how the information
requested in Interrogatory Nos. 10 and 11 and Document Request Nos.
1, 9, 19, and 20 are relevant at this stage of discovery.
While the possibility of liability under the policy triggers
the insurer’s duty to defend, the defendant’s subjective beliefs or
statements regarding the potential for coverage or indemnity does

4

not influence this objective determination of whether coverage is
unambiguously

excluded

by

the

allegations

of

the

petition.

Plaintiff failed to cite any controlling case law that demonstrates
the relevance of the aforementioned discovery requests to the issue
of an insurer’s duty to defend.

Most of the cited cases involved

the relevance of discovery to actual coverage, claim valuation, and
bad faith claims.

These discovery requests require no further

response from the defendant at this time.
Plaintiffs also sought substantive responses to Interrogatory
Number 9 and Document Request No. 13, which requested information
and

documents

regarding

claims

made

by

similarly

situated

policyholders and lawsuits alleging violations of the Clean Air
Act.

Plaintiffs asserted that this information may show how the

defendant

has

circumstances.

interpreted

its

Interrogatory

policy

No.

9

terms

in

specifically

similar
requested

identification of other lawsuits involving the defendant in which
coverage was sought for a claim arising out of or relating to the
Clean Air Act.

Plaintiffs later identified about 400 companies

which they contended were “facing or hav[e] faced potential Clean
Air Act liability” and demanded that the defendant essentially
state whether it provided coverage for these entities and produce
the requested documents if it did.6

6

Defendant argued that not only

Record document number 63-15, Declaration of Shavon J.
Smith, Exhibit 11.
5

was the request overbroad, but it was also irrelevant because the
policy at issue was a custom policy specific to the plaintiffs and
thus could not assist in policy language interpretation. Defendant
provided evidence to demonstrate that a search through the relevant
database of policyholders would be tedious and would not generate
all the information needed to adequately respond to the plaintiffs’
request.7
database

Defendant asserted that the claims narrowed down by its
search

would

then

need

to

be

manually

reviewed

to

determine whether the matter involved a Clean Air Act violation
and/or whether there was any litigation.

Defendant additionally

asserted that, due to privacy concerns, additional time would be
required to get the policyholders to consent to the use of the
information from their claims.
Although the plaintiffs’ policy may have been customized to
fit their needs, the defendant did not contend that it never issued
another custom policy with the same coverage terms and conditions.
In general, the interpretation of the same policy language by
another court may be helpful in determining whether the defendant
has a duty to defend. But these discovery requests are not limited
to policies with the same coverage terms and conditions. Moreover,
the plaintiffs did not just seek identification of claims and
lawsuits where a court has interpreted the same policy language,

7

Record document
Christopher R. Stella.

number

65,
6

Exhibit

A,

Affidavit

of

they sought production of the files too.

As such, these discovery

requests

the

are

overbroad.

Given

that

duty

to

defend

is

determined by the court applying the eight corners rule, it does
not appear that the marginal benefit to the parties and the court
from production of the defendant’s files for Clean Air Act claims
under policies with the same coverage terms and conditions would
outweigh the defendant’s burden to search for and produce them.
Permitting the extensive discovery sought by the plaintiffs would
defeat the purpose of limiting discovery to the duty to defend
issue.

Therefore, the defendant is not required to supplement its

response to Interrogatory No. 9 or Document Request No. 13.
Under Rule 37(a)(5)(B), if a motion to compel discovery is
denied, the court must require the moving party or its attorney or
both to pay the party who opposed the motion its reasonable
expenses incurred in opposing the motion unless the motion was
substantially justified or other circumstances make an award of
expenses unjust.
Plaintiff’s motion was not substantially justified.
discovery

requests

at

issue

sought

information

and

The

documents

primarily, if not exclusively, relevant to coverage rather than the
defendant’s duty to defend.

And there is no agreement to conduct

discovery relevant to coverage.
Defendant did not submit anything to establish a specific
amount of expenses incurred in opposing motion.

7

A review of the

motion

papers

supports

finding

that

an

award

of

$2,000

is

reasonable.
Accordingly, the Plaintiffs’ Motion to Compel Discovery of
Reinsurance, Reserves, Similarly Situated Policyholder and Premium
Information is denied. Pursuant to Rule 37(a)(5)(B, the plaintiffs
shall pay to the defendant, within 14 days, reasonable expenses in
the amount of $2,000.00.
Baton Rouge, Louisiana, August 8, 2011.

STEPHEN C. RIEDLINGER
UNITED STATES MAGISTRATE JUDGE

8