Lantz v. State Farm Mutual Automobile Insurance Company

Filing 26

OPINION and ORDER Regarding Defendant's Discovery Objections. Signed by District Judge Linda V. Parker. (Loury, R)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
GEORGELYN LANTZ,
Plaintiff,
v.

Civil Case No. 14-12813
Honorable Linda V. Parker

STATE FARM MUTUAL AUTOMOBILE
INSURANCE COMPANY,
Defendant.
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OPINION AND ORDER REGARDING DEFENDANT’S
DISCOVERY OBJECTIONS
In this diversity action removed from state court, Plaintiff seeks personal
protection insurance benefits pursuant to a no-fault insurance policy issued by
Defendant. Plaintiff’s injuries arose from a motor vehicle accident on November
6, 2013. She claims that Defendant has unreasonably refused to pay or has
unreasonably delayed making payments in violation of Michigan’s “No-Fault Act”,
Michigan Compiled Laws Sections 500.3142 and 500.3148 The matter presently
is before the Court on Defendant’s objections to certain discovery requests by
Plaintiff. (ECF No. 19.) Plaintiff has responded to Defendant’s objections. (ECF
No. 23.)
Defendant objects to information and documentation sought by Plaintiff

“pertaining to training of its [Defendant’s] claims personnel, its Advancing Claims
Excellence (“ACE”) review (which was conducted in Michigan from November
1995 through 1997), its Auto Claim Manual, [and] its vendor, MES Solutions
(“MES”), which scheduled an independent medical examination (‘IME’) of
Plaintiff that was ultimately performed by Dr. David Carr.” (ECF No. 19 at Pg ID
109.) Specifically, Defendant is objecting to the following discovery requests:
Plaintiff’s First Interrogatories Numbers 6, 7, 9, and 10 (ECF No. 19-1); Plaintiff’s
Requests for Production of Documents Numbers 3-9, 11, and 13 (ECF No. 19-2);
Plaintiff’s subpoena duces tecum issued to Defendant’s representative, seeking
production of Items e, 6 and 7 (ECF No. 19-3); and Plaintiff’s subpoena and
addendum to MES (ECF No. 19-4).1 (Id.) Defendant argues that the material
sought is relevant only to whether Defendant acted in good or bad faith– which
Defendant contends has no bearing on Plaintiff’s “straightforward claim for the

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Defendant objects generally to information sought in the addendum to the
subpoena issued to MES. Thus the Court presumes that it is objecting to all of the
items sought. Items 2 and 12, however, do not seek information related to
Defendant. For that reason, it appears to the Court that Defendant lacks standing to
assert an objection to those requests. “A party generally lacks standing to
challenge a subpoena directed to a non-party unless it claims a privilege or
demonstrates a personal interest.” Blumberg v. Ambrose, No. 13-cv-15042, 2014
WL 4988380, at *3 (E.D. Mich. Oct. 7, 2014) (citing cases); see also Langford v.
Chrysler Motors Corp., 513 F.2d 1121, 1126 (2d Cir. 1975) (“In the absence of a
claim of privilege a party usually does not have standing to object to a subpoena
directed to a non-party witness.”).
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recovery of various no-fault benefits pursuant to [Michigan Compiled Laws
Section] 500.3107.” (Id. at Pg ID 111.)
Plaintiff argues in response that the discovery sought is relevant to
Plaintiff’s theory of the case, which is that Defendant “has handled this claim in an
unreasonable and unfair fashion.” (ECF No. 23 at Pg ID 238.) Plaintiff relies
primarily on the Michigan Court of Appeals’ decision finding such discovery
relevant in Morales v. State Farm Mutual Insurance Company, 761 N.W.2d 454
(2008).
The Court indicates, at the outset, that it has reviewed Morales, as well as
the other cases cited by Plaintiff and Defendant. The decisions reflect varying
conclusions by different judges regarding the discovery of much of the same
information, in similar cases. Notably, none of the decisions are binding on this
Court. Thus the fact that this Court reaches a different holding than the judge in a
case cited by one of the parties does not mean that the Court overlooked that case.
The parties should assume that the Court simply disagreed with the reasoning in
that case.
Applicable Standard
Federal Rule of Civil Procedure 26 sets forth the scope and limits of
discovery and states, in relevant part, that “[p]arties may obtain discovery
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regarding any nonprivileged matter that is relevant to any party’s claim or defense .
. ..” Fed. R. Civ. P. 26(b)(1). Under the rule, “[r]elevant information need not be
admissible at the trial if the discovery appears reasonably calculated to lead to the
discovery of admissible evidence.” Id. The rule allows the court to limit discovery
if inter alia “the burden or expense of the proposed discovery outweighs its likely
benefit, considering the needs of the case, the amount in controversy, the parties’
resources, the importance of the issues at stake in the action, and the importance of
the discovery in resolving the issues.” Fed. R. Civ. P. 26(b)(2)(C)(iii).
Based on the plain language of Rule 26, an assessment of whether the
discovery sought is relevant must start with the claims and defenses asserted.
Here, Plaintiff asserts a single cause of action for benefits under an insurance
contract pursuant to Michigan’s No-Fault Act. (See ECF No. 1-2.) To prove such
a claim, the insured must show that he or she “is entitled to benefits ‘for accidental
bodily injury arising out of the ownership, operation, maintenance or use of a
motor vehicle as a motor vehicle’ without regard to fault, and that the insurer is
obligated under an insurance contract to pay those benefits, but failed to do so
timely.” Cooper v. Auto Club Ins. Ass’n, 751 N.W.2d 443, 448 (Mich. 2008)
(quoting Mich. Comp. Laws § 500.3105). Once the insured establishes these
elements, benefits are payable for “[a]llowable expenses consisting of all
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reasonable charges incurred for reasonably necessary products, services and
accommodations for an injured person’s care, recovery, or rehabilitation,” three
years of work loss with a monthly cap, expenses reasonably incurred in obtaining
ordinary and necessary replacement services for a three-year period with a daily
cap, and a survivor’s loss. See Mich. Comp. Laws §§ 500.3107, .3108.
The No-Fault Act requires an insurer to provide personal protection
insurance benefits “within thirty (30) days after an insurer receives reasonable
proof of the fact and of the amount of loss sustained.” Mich. Comp. Laws
§ 500.2142(2). Payments made outside that time frame are subject to mandatory
statutory interest of twelve percent (12%) per annum. Id. § 500.3142(3). “
‘Penalty interest must be assessed against a no-fault insurer if the insurer refused to
pay benefits and is later determined to be liable, irrespective of the insurer’s good
faith in not promptly paying the benefits.’ ” Williams v. AAA Michigan, 646
N.W.2d 476, 483 (Mich. Ct. App. 2002) (quoting Davis v. Citizens Ins. Co. of
America, 489 N.W.2d 214, 216 (Mich. Ct. App. 1992)); see also Cruz v. State
Farm Mut. Auto. Ins. Co., 648 N.W.2d 591, 601 (Mich. 2002) (citing Davis and
stating that “[p]enalty interest begins to accrue when an insurer refuses to pay
benefits for which it is liable . . . It is assessed regardless of the insurer’s good faith
in withholding benefits.”). However, “an insurer’s good faith in withholding
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payment of benefits is relevant in awarding attorney fees under the act[.]” Davis,
489 N.W.2d at 217 (citations omitted); Mich. Comp. Laws § 500.3148(1) (“The
attorney’s fee shall be a charge against the insurer in addition to the benefits
recovered, if the court finds that the insurer unreasonably refused to pay the claim
or unreasonably delayed in making proper payment.”)
Analysis
Discovery Related to Dr. David Carr (Interrogatories Nos. 9 & 10 and
Addendum to MES Subpoena Items 3, 4, & 10)
Defendant referred Plaintiff for an IME with Dr. David Carr through
Defendant’s vendor, MES. Apparently, based on Dr. Carr’s opinion, Defendant
determined that certain incurred charges were not reasonable. Plaintiff now asks
Defendant to indicate how many times it has hired Dr. Carr to conduct evaluations,
write reports, and testify for Defendant in the past five years (ECF No. 19-1,
Interrog. No. 9), as well as the amount of money Defendant has paid Dr. Carr for
his services. (Id., Interrog. No. 10.) Plaintiff also has deposed a representative of
MES, prepared to testify regarding the number of medical evaluations Dr. Carr has
conducted through MES in the last five years, the number he has conducted at the
request of Defendant during that period, and the income Dr. Carr has been paid for
work through MES during that time period. (ECF No. 19-4, Addendum Items 3, 4,

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& 10.) Plaintiff argues that this evidence is relevant to show Dr. Carr’s bias and/or
prejudice. Defendant contends that the information sought would demonstrate
nothing regarding his bias.
To the extent the information sought relates to Dr. Carr’s work for
Defendant, specifically, this Court agrees with Plaintiff and rejects Defendant’s
objections to these discovery requests. “Certainly, a continuing relationship
between the witness and a party in which a witness receives payment for
generating an opinion that may be favorable to the interests of the party seeking the
opinion is a source of bias[]” and is discoverable. Great Lakes Anesthesia, PLLC v.
State Farm Mut. Auto. Ins. Co., Nos. 11-10658, 11-11003, 11-11855, 2011 WL
4507417, at *5 (E.D. Mich. Sept. 29, 2011) (finding similar evidence concerning
medical service provider admissible to show provider’s bias in favor of insurer).
Information concerning Dr. Carr’s overall relationship with and work for MES,
however, is not relevant here.
Thus the Court is sustaining Defendant’s objections to Items 3 and 10 of the
addendum to the MES subpoena, but is requiring Defendant to respond to
Plaintiff’s First Interrogatories Numbers 9 and 10 and allowing Plaintiff to seek a
response to Item 4 from the MES representative.

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Discovery Related to Defendant’s Vendors, Including MES (Interrogatories
Nos. 6 & 7, Document Requests Nos. 3-5, and Remaining Items in the
Addendum to the Subpoena Issued to MES)
In these requests, Plaintiff asks Defendant and/or MES to indicate how many
times Defendant has asked MES to schedule medical evaluations and/or record
reviews in the past five years and the amount of money Defendant has paid MES
during that period to facilitate medical evaluations, record reviews, and
deposition/trial testimony. (ECF No. 19-1, Interrog. Nos. 6 & 7; ECF No. 19-4,
Addendum Items 1, 5 & 6.) Plaintiff also seeks a copy of any contracts and
agreements between Defendant and MES and “any lists, memoranda, e-mails,
documents, or the like” provided by Defendant to MES “utilized to facilitate the
medical evaluation(s) in Plaintiff’s case, providing any criteria either limiting or
controlling the vendor in its selection of a doctor specifically for State Farm
insureds/claimants.” (ECF No. 19-2, Nos. 4-5; ECF No. 19-4, Addendum Items 7,
8 & 9.) Plaintiff also asks Defendant to “produce a copy of the ‘approved vendor
list’ used by the State Farms Claims Representative assigned to the Plaintiff[‘]
claim.” (ECF No. 19-2, Doc. Requests No. 3.) Similarly from MES, Plaintiff
seeks “[a]ll records of any nature whatsoever concerning the Plaintiff . . .” and
“[t]he record review of Plaintiff.” (ECF No. 19-4, Addendum Items 11 & 14.)
The only request seeking information relevant to Plaintiff’s claim are those that are
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specific to Plaintiff: Document Request Number 5 and Items Eleven and Fourteen
of the addendum attached to the MES subpoena. The remaining requests do not
seek matters relevant to Plaintiff’s claim.
What Defendant conveyed to MES concerning Plaintiff’s claim, specifically,
before MES referred the claim to Dr. Carr for an IME may prove relevant to
Plaintiff’s cross-examination of Dr. Carr. Similarly, MES documents related to
Plaintiff, specifically, may shed light on Dr. Carr’s evaluation of Plaintiff. The
remaining requests, however, do not relate to Plaintiff’s claim. It does not appear
that MES has provided an opinion to Defendant that impacted or was considered in
the latter’s decision to pay Plaintiff’s claim. Thus the number of times Defendant
utilized MES in the last five years and MES’ financial interest are not relevant to
this case.
Therefore, the Court sustains Defendant’s objections to Plaintiff’s
Interrogatories Numbers 6 and 7, Document Requests Numbers 3 and 4, and Items
1, 5-9, and 13 of the addendum to the subpoena issued to MES. The Court rejects
Defendant’s objection to Document Requests Number 5 and Items 11 and 14 of the
addendum.

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Discovery Related to Defendant’s Training of Claims Personnel, ACE Review,
and Auto Claim Manual (Document Requests Nos. 6-9, 11, 13 & Items e, 6 & 7
to the Subpoena Duces Tecum Issued to Defendant)
Plaintiff’s remaining discovery requests seek information to demonstrate
that Defendant handled Plaintiff’s claim in an unreasonable and unfair fashion, and
that this was consistent with Defendant’s practice and procedure of denying claims
without regard to the actual validity of the claim. Plaintiff believes that the
information sought will demonstrate, relatedly, that Defendant trains its claims
adjusters to follow this practice and procedure. The Court concludes that these
issues and thus the information sought are not relevant to Plaintiff’s claim.
The only issues relevant to Plaintiff’s claim for benefits are whether a
contract exists and whether the expenses sought are compensable under the
contract and Michigan’s No-Fault Act. To be compensable,
three requirements must be satisfied: (1) the expense
must have been incurred by the insured, (2) the expense
must have been for a product, service, or accommodation
reasonably necessary for the injured person’s care,
recovery, or rehabilitation, and (3) the amount of the
expense must have been reasonable.
Hamilton v. AAA Michigan, 639 N.W.2d 837, 842 (Mich. Ct. App. 2001); see also,
Nasser v. Auto Club Ins. Ass’n, 457 N.W.2d 637, 645 (Mich. 1990). These are
objective questions to which Defendant’s good or bad faith and handling of other

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claims has no bearing. The question of whether Plaintiff submitted reasonable
proof of loss also is governed by an objective standard. See ACME Roll Forming
Co. v. Home Ins. Co., 31 F. App’x 866, 872 (6th Cir. 2002) (construing Michigan
insurance statute). As the Sixth Circuit stated in ACME Roll Forming:
The standards and criteria used to determine whether a proof of loss is
“satisfactory” is a long-standing issue in insurance law. . . . The
default reading should be an objective standard, satisfactory to a
neutral arbiter, rather than satisfactory to one of the two interested
parties. Moreover, “satisfactory” is traditionally limited by the
objective standard, so that the insurance company is not permitted to
reject proof that would be satisfactory to a reasonable person.
Id. at 872 (internal quotation marks, brackets, and citations omitted).
Documents regarding the ACE program are not relevant for the additional
reason that they relate to claims files from November 1995 through 1997. As
described in another case in which they were sought, the documents “were
generated as part of a self-critical audit of various automobile claim files, handled
exclusively by State Farm’s Michigan Region.”2 Chauvin, 2011 WL 1810625, at

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As further described by the Honorable Mark Goldsmith in a different and

unrelated case involving Defendant:
ACE was a comprehensive program employed by State Farm in which
the company initially (in the mid 1990s) performed a study on closed
claims files and then, based at least in part on what it learned from
those files, put in place a comprehensive program, including
(continued...)

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*2 (internal quotation marks and citation omitted). Plaintiff’s accident occurred
and her claims were reviewed more than fifteen years after this audit. Evidence of
how Defendant handled claims fifteen years earlier is not relevant to how it
handled Plaintiff’s claim. While the ACE program may have led Defendant to
adopt a certain philosophy or approach for handling future claims such as
Plaintiff’s, the Court believes other, more direct, evidence is available from which
to glean that information which would be less burdensome to produce.
The Court acknowledges that evidence concerning Defendant’s bad faith
handling of insurance claims may be relevant if Plaintiff prevails and seeks
attorney fees under Section 500.3148. However, whether Plaintiff is entitled to
attorney fees would be decided by the Court in post-judgment proceedings if a jury
has decided that benefits are owing and overdue. Moore v. Secura Ins., 759

2

(...continued)

addressing claims handling practices, designed to make the company
more successful. . . . [T]he program concluded that State Farm could
“capture opportunities” for profit in the claims arm of the business by
settling fewer cases, delaying payment, etc. . . . According to State
Farm, the Michigan ACE study was a review of closed files only with
payments of less than $250,000 and was designed to improve State
Farm’s operations; its documents function as a continuing education
for adjusters.
Akins v. State Farm Mut. Auto. Ins. Co., No. 10-cv-12755, 2011 WL 3204839, at
*5 n.3 (E.D. Mich. July 28, 2011).
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N.W.2d 833, 838 (2008). Plaintiff can seek the requested discovery at that time, if
it still believes the information is needed.
The Court therefore sustains Defendant’s objections to Plaintiff’s Document
Requests Numbers 6-9, 11, and 13, and Items e, 6, and 7 of the subpoena duces
tecum issued to Defendant.
Summary
For the reasons stated, the Court rejects Defendant’s objections to Plaintiff’s
First Interrogatories Numbers 9 and 10, Requests for Production of Documents
Number 5, and Items 4, 11, and 14 of the addendum to the subpoena issued to
MES. Defendant shall respond to those discovery requests within twenty-one (21)
days of this Opinion and Order. Defendant’s remaining objections are sustained
and Plaintiff’s First Interrogatories Numbers 6 and 7, Requests for Production of
Documents Numbers 3, 4, 6-9, 11, and 13, Request for Items e, 6, and 7 in the
subpoena duces tecum issued to Defendant, and Request for Items 1, 3, 5-10, and
13 in the addendum to the subpoena issued to MES are stricken.
SO ORDERED.
S/ Linda V. Parker
LINDA V. PARKER
U.S. DISTRICT JUDGE
Dated: December 9, 2014
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I hereby certify that a copy of the foregoing document was mailed to counsel of
record and/or pro se parties on this date, December 9, 2014, by electronic and/or
U.S. First Class mail.
S/ Richard Loury
Case Manager

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