Wausau Underwriters Insurance Company v. Reliable Transportation Specialists, Inc. et al
ORDER granting 82 Objections, filed by Wausau Underwriters Insurance Company to Magistrate Judge's Order Compelling discovery and modifying Order in part 80 Signed by District Judge George Caram Steeh. (MBea)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
CASE NO. 15-12954
HON. GEORGE CARAM STEEH
SPECIALISTS, INC., AMARILD
USHE and BURT HOLT,
ORDER GRANTING PLAINTIFF WAUSAU=S OBJECTIONS
TO MAGISTRATE JUDGE=S ORDER COMPELLING
DISCOVERY AND MODIFYING ORDER IN PART [DOC. 82]
This case stems from an underlying lawsuit (the AHolt Litigation@) filed
by Burt Holt against Reliable Transportation, Amarild Ushe and a coco-defendant who is not a party to this action, related to injuries sustained
by Holt when he was struck by a tractor trailer operated by Ushe. The
present litigation arises out of plaintiff Wausau Underwriters Insurance
Company=s (AWausau@) declaratory judgment complaint seeking a
declaration from this court that it is responsible for no more than the policy
limit under the commercial insurance policy issued to Reliable. Reliable
Transportation and Ushe filed a counterclaim alleging that Wausau acted in
bad faith against its insured by refusing to negotiate a settlement within the
policy limits in the Holt Litigation.
The matter is presently before the court on Wausau’s objections to
the Magistrate Judge’s March 17, 2017 Order Granting in Part and Denying
in Part Defendants’ Motion to Compel Discovery Responses (“Order”). The
only portion of the Order that Wausau objects to relates to the requirement
that Wausau “must produce the docket information for cases from within
the past 3 years in which bad faith failure to settle was alleged against
Liberty Mutual and/or its subsidiaries.” Doc. 80, p. 2. For the reasons set
forth below, Wausau’s objection is granted and the Magistrate Judge’s
order is modified accordingly.
In the motion to compel, Reliable and Ushe sought responses from
Wausau for documents relating to other litigated cases:
15. Copies of all documents regarding other litigation
regarding the same or similar issues as in the above styled
case or in bad faith cases in same, or in other jurisdictions, both
trial and appellate courts, from the last three (3) years.
16. Copies of all documents regarding any and all
judgments awarded against Wausau in other litigation
regarding the same or similar issues as in the above styled
case or in bad faith cases in the same or in other jurisdictions,
both trial and appellate courts, from the last three (3) years.
17. Copies of all documents regarding any awards of
punitive damages against Wausau within the last seven (7)
years, including the jurisdiction in which the punitive damages
were awarded and the style of the case.
Wausau filed a response in opposition to the motion to compel, arguing
that the requests for information relating to other litigation are overly broad
and seek irrelevant information.
On March 1, 2017, the parties met to discuss the outstanding
discovery issues as required by the Magistrate Judge. At this meeting,
Reliable’s counsel stated that Reliable was seeking information from any
Liberty Mutual company, not just Wausau. On March 3, 2017, Reliable and
Ushe filed a report with the Magistrate Judge stating that it would limit its
requests to “bad faith failure to settle” cases, as opposed to any bad faith
case. Reliable also offered to limit the request to certain jurisdictions,
subject to further detail from Wausau. Reliable further stated it
contemplated withdrawing Request 17 “[a]s punitive damages do not
appear to be allowable . . . .” The report did not state that Reliable was
expanding the request to include all Liberty Mutual companies.
On March 8, 2017, Wausau filed its response to Reliable and Ushe’s
report. Wausau objected on the basis of relevance and explained the
practical difficulties in complying with the requests. Wausau did not
address its objections to including all Liberty Mutual companies because it
was not discussed by Reliable.
Magistrate Judge Stafford heard oral argument on the motion to
compel on March 16, 2017. She granted the motion in part and denied it in
part. With respect to the request for information pertaining to other
litigation the order states:
Wausau must produce the docket information for cases from
within the past 3 years in which bad faith failure to settle was
alleged against Liberty Mutual and/or its subsidiaries. To the
extent that defendants have requested documentation
regarding any such litigation that is publicly available, these
requests are otherwise DENIED.
Doc. 80 at pp. 2-3.
Wausau filed the present motion requesting that the Order be
modified pursuant to Fed. R. Civ. P. 72(a) on the issue of other litigation
matters because it argues that that portion of the decision is contrary to
B. Standard of Law
Fed. R. Civ. P. 26(b)(1) allows the discovery of information “that is
relevant to any party’s claim or defense and proportional to the needs of
the case.” Fed. R. Civ. P. 72(a) provides that “[t]he district judge in the
case must consider timely objections and modify or set aside any part of
the [Magistrate’s] order that is clearly erroneous or is contrary to law.” A
magistrate judge’s nondispositive order is reviewed for clear error. 28
U.S.C. § 636(b)(1)(A). “A judge of the court may reconsider any
[nondispositive] pretrial matter . . . where it has been shown that the
magistrate judge’s order is clearly erroneous or contrary to law.” Id.; see
also Vogel v. U.S. Office Prods. Co., 258 F.3d 509, 515 (6th Cir. 2001).
The clearly erroneous standard applies to a magistrate’s factual findings,
whereas legal conclusions are reviewed under the “contrary to law”
standard. Sedgwick Ins. v. F.A.B.E. Custom Downstream Sys., Inc., 47 F.
Supp. 3d 536, 538 (E.D. Mich. 2014).
Reliable and Ushe contend that docket information from the past
three years in which bad faith failure to settle was alleged against Liberty
Mutual and/or its subsidiaries “is relevant in establishing whether a pattern
of bad faith failure to settle can be identified within Liberty Mutual and/or its
subsidiaries as well as any specific personnel involved in the identified
litigation that relates to the claims alleged in Reliable Transportation and
Ushe’s Counterclaim . . . .” Doc. 83 p. 6.
The dispute in this case is whether Wausau acted in bad faith in not
settling the underlying liability lawsuit filed by defendant Holt against
Reliable and Ushe. There are no allegations in the pleadings pertaining to
Wausau’s patterns, practices or course of conduct with respect to other
claims. The Counterclaims assert:
Wausau breached the insurance contract and its duty of good
faith and fair dealing to Reliable Transportation and Ushe by
wrongfully refusing, despite multiple opportunities to settle the
Holt Lawsuit at or within the available policy limits and, as a
result, subjected Reliable Transportation and Ushe’s assets to
an excess judgment in the amount of $7,735,142.35.
Doc. 10, ¶ 30; Doc. 12, ¶33.
In support of its contention that evidence of a practice and pattern of
bad faith failure to settle is proper, Reliable and Ushe rely on Commercial
Union Ins. Co. v. Liberty Mut. Ins. Co., 426 Mich. 127 (1986). In the
context of bad faith failure to settle by an insurance company, Commercial
Union articulated the definition of “bad faith” for purposes of jury
instructions as “arbitrary, reckless, indifferent, or intentional disregard of the
interests of the person owed a duty.” Id. at 136. The court also provided
“supplemental factors” which may be considered in determining whether
liability exists for bad faith, noting that the facts of each individual case will
determine which of the factors are relevant. Id. at 137.
1) failure to keep the insured fully informed of all developments
in the claim or suit that could reasonably affect the interests of
2) failure to inform the insured of all settlement offers that do
not fall within the policy limits,
3) failure to solicit a settlement offer or initiate settlement
negotiations when warranted under the circumstances,
4) failure to accept a reasonable compromise offer of
settlement when the facts of the case or claim indicate obvious
liability and serious injury,
5) rejection of a reasonable offer of settlement within the policy
6) undue delay in accepting a reasonable offer to settle a
potentially dangerous case within the policy limits where the
verdict potential is high,
7) an attempt by the insurer to coerce or obtain an involuntary
contribution from the insured in order to settle within the policy
8) failure to make a proper investigation of the claim prior to
refusing an offer of settlement within the policy limits,
9) disregarding the advice or recommendations of an adjuster
10) serious and recurrent negligence by the insurer,
11) refusal to settle a case within the policy limits following an
excessive verdict when the chances of reversal on appeal are
slight or doubtful, and
12) failure to take an appeal following a verdict in excess of the
policy limits where there are reasonable grounds for such an
appeal, especially where trial counsel so recommended.
Id. at 138–39 (citations omitted).
None of the twelve factors relate to the insurer’s conduct involving
other claims or lawsuits, nor do they relate to litigation filed against the
insurer’s affiliated companies. Wausau is the named party in this case, and
Wausau is the insuring entity that issued the policy to Reliable. The court
understands Reliable and Ushe’s contention that Liberty Mutual was
involved in handling, defending and adjusting claims for all of their
subsidiaries. However, there are apparently 60 companies that fall within
the definition of “Liberty Mutual and its subsidiaries,” a fact that Magistrate
Judge Stafford was not made aware of before making her decision.
Declaration of J. Townsend, ¶ 4. Information regarding allegations of bad
faith failure to settle in any jurisdiction against any Liberty Mutual company
has no bearing on whether Wausau acted in bad faith with regard to
settlement of the Holt litigation.
The court finds that the portion of the Order requiring production of
docket information for cases in which bad faith failure to settle was alleged
against Liberty Mutual and/or its subsidiaries is contrary to law because the
requested information is not relevant to any party’s claims or defenses in
this case. For this reason, the court modifies the Order by striking that
portion of the Order.
It is so ordered.
Dated: April 28, 2017
s/George Caram Steeh
GEORGE CARAM STEEH
UNITED STATES DISTRICT JUDGE
CERTIFICATE OF SERVICE
Copies of this Order were served upon attorneys of record on
April 28, 2017, by electronic and/or ordinary mail.
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