PROGRESSIVE GARDEN STATE INSURANCE COMPANY v. METIUS et al

Filing 28

OPINION. Signed by Magistrate Judge Mark Falk on 4/3/2019. (sm)

NOT FOR PUBLICATION

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

PROGRESSIVE GARDEN STATE
INSURANCE COMPANY,
Plaintiff,
Civil Action No. 18-2893 (WJM)
v.
ERWIN METIUS,
OPINION
Defendant.

FALK, U.S.M.J.
Before the Court are: (1) Defendant Erwin Metius’s motion to compel discovery;
and (2) Plaintiff Progressive Garden State Insurance Company’s motion to sever and stay
one of Defendant’s counterclaims [ECF No. 23]. For the reasons stated below,
Defendant’s motion is GRANTED, subject to the parameters expressed herein.
Plaintiff’s motion is DENIED.
BACKGROUND
This case involves a dispute over insurance coverage. On August 22, 2017,
Defendant Metius applied for and was issued a “Boat and Personal Watercraft” policy by
Progressive. On December 28, 2017, Metius’s yacht caught fire and was destroyed in a
marina in Jersey City, New Jersey. Metius made a claim to Progressive, which denied it
and rescinded coverage, contending that he was using the boat as his “primary residence”

in violation of the policy.
On February 28, 2018, Progressive filed suit, contending (1) Metius’s loss is
excluded under the policy because he was using it as his “primary residence”; (2) the
policy is void because Metius made material misrepresentations in connection with his
application for insurance; and (3) the policy is void ab initio.
On April 6, 2018, Metius filed an Answer, stating that he did not consider the
yacht his primary residence, and that the term “primary residence” is ambiguous. In
addition, Metius’s pleading contains counterclaims against Progressive for (1) declaratory
judgment relating to coverage; (2) breach of contract; and (3) breach of the implied
covenant of good faith and fair dealing.
DISPUTES
The parties have two pending disputes. The first dispute is a document discovery
issue. In this coverage action, Metius’s defense is premised in part on alleged ambiguity
in Progressive’s application and policy - in particular, with respect to the meaning of
“primary residence.” The term “primary residence” was apparently not defined in the
application or policy. Indeed, Metius makes it clear that this a -- if not the -- central issue
in the case: “the coverage dispute turns on the meaning and intent of the term ‘primary
residence’ in the policy and application . . . .” (ECF No. 26 at 10.) To that end, he seeks
documents relating to how certain terms in the application and policy -- chiefly “primary
residence” -- have been interpreted and defined by Progressive on other occasions -- in
marine policies, underwriting materials, and other insurance products.
Progressive opposes any discovery of the type, claiming the policy is not
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ambiguous at all; that Metius was aware of the scope of coverage; and that he is fishing
for “anything” upon which he could premise a “credible claim” for coverage.
In informal submissions to the Court, the parties argue over 13 document
demands, although they agree that the discovery sought can be grouped into three basic
categories: (1) “drafting histories of insurance documents”; (2) “underwriting
manuals/claims handling guidelines and calculations”; and (3) “other insurance policies
underwritten by Progressive that define the relevant terms.”
The second dispute is a motion to sever and stay. In short, Progressive has filed a
motion seeking to stay Metius’s counterclaim alleging breach of the implied covenant of
good faith and fair dealing, claiming it is a “bad faith” claim and that such claims are
routinely stayed in coverage cases. In response, Metius states that he has not pleaded a
bad faith claim in the case, and that for the claims that are pleaded, the proofs overlap and
a severance and stay would be prejudicial, counterproductive, and inefficient.
DISCOVERY STANDARD
Federal Rule of Civil Procedure 26(b)(1) provides that a party may obtain
discovery regarding “any nonprivileged material 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 or expense of the proposed discovery outweighs its
likely benefit.” Id. It is “well recognized that the federal rules allow broad and liberal
discovery.” Pacini v. Macy’s, 193 F.3d 766, 777-78 (3d Cir. 1999). Relevance is a
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broader inquiry at the discovery stage than at the trial stage, see Nestle Food Corp. v.
Aetna Cos. & Surety Co., 135 F.R.D. 101, 103 (D.N.J.1990), and “relevant information
need not be admissible at trial if the discovery appears reasonably calculated to lead to
the discovery of admissible evidence.” Pearson v. Miller, 211 F.3d 57, 65 (3d Cir. 2000).
While relevant information need not be admissible, the burden remains on the party
seeking discovery to “show that the information sought is relevant to the subject matter of
the action and may lead to admissible evidence.” Caver v. City of Trenton, 192 F.R.D.
154, 159 (D.N.J. 2000). A party resisting discovery on the grounds of burden or expense
“bears the burden of showing specifically how the request is burdensome.” Carnegie
Mellon Univ. v. Marvell Tech. Grp., Ltd., 2010 WL 4922701, at *3 (W.D. Pa. Nov. 29,
2010).
DECISION
A.

Document Dispute
When establishing the parameters of discovery relevance, it is the positions of the

parties, in the Complaint and other pleadings, which set the guardrails for discoverable
information. The question is what is pleaded and how is it being defended? Anything
generally within those guardrails and not unreasonable or disproportional is fair game for
discovery. Here, Progressive does not materially argue that there would be prohibitive
cost or expense associated with discovery; thus, the question is relevance. As set forth
below, the basic inquiry is proper discovery.
Metius claims the policy, application, and terms within both are ambiguous. This
is a claim or defense that is squarely in this case, no matter how strongly Progressive
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believes otherwise. Therefore, Metius is entitled to discovery to support his position.
Metius has plainly established that the three categories of information that he seeks
through his document demands are generally “relevant” for discovery purposes.
First, “drafting histories of insurance documents” may be relevant to a dispute like
this. The Court agrees that a party could reasonably want to review changes to policy
applications – both prior to and following the issuance date of the policy at issue. Such
changes could provide a window into the question of whether terms in the application
were ambiguous, and if so, how Progressive itself interpreted them. Likewise, any
proposed revisions – whether implemented or not – would at least be discoverable to
determine whether any changes were considered, recommended, or suggested, and how
or why they were not implemented. Therefore, Plaintiff is directed to provide insurance
documents that address or reference the meaning of “primary residence.” Wholesale
production of drafting history documents is not required.
Second, “underwriting manuals/claims handling guidelines and calculations” is a
type of discovery commonly sought and allowed in insurance cases. Here, Metius
explains that such information is relevant to uncover how Progressive evaluated and
underwrote risk, knowing that his vessel had onboard sleeping accommodations. With
respect to the aspect of the document demand that seek information relating to vessels
other than his own, again, it seems reasonable to want to know how other similarly
situated vessels were treated for insurance purposes and how and in what way the
underwriting guidelines are constructed and applied.
Progressive contends this is highly sensitive information that should be kept
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confidential. However, confidentiality is not a basis to withhold discovery. Cf. Fed.
Open Mrkt. v. Merrill, 443 U.S. 340, 362 (1979). Moreover, a Discovery Confidentiality
Order was entered in this case on June 1, 2018. See CM/ECF No. 17. If information
produced in discovery – such as this – is alleged to be sensitive and confidential, it can be
designated as such. Confidentiality and business interests, however, are not a legitimate
objection to discovery. Once again, any documents referencing or relating to
underwriting of “primary residence” issues should be produced. Other underwriting
documents need not be produced.
Third, “other insurance policies underwritten by Progressive that define the
relevant terms” is the final category of discovery sought – and again, it should be
produced. While Progressive objects to how information in a homeowners’ policy, for
example, could be relevant to a marine policy, that goes to the weight, admissibility, and
persuasiveness of the information, not to the question of discoverability. Progressive
chose not to define “primary residence” in the Metius policy. If Progressive has defined
the relevant terms – specifically, “primary residence” – in other policies and applications,
it should be produced, especially when no compelling burdensome argument has been
made. 1
B.

Motion to Sever & Stay
As discussed in footnote 2, supra, Progressive filed a motion to sever and stay

In addition to the document disputes, the papers refer to a seemingly tertiary dispute
about the scope of a Rule 30(b)(6) deposition notice. It seems that the deposition
subjects largely track the disputed document categories, and for the same reasons already
articulated, are permissible. If a dispute arises during the deposition, the parties are
directed to immediately contact the Undersigned.
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Metius’s counterclaim alleging breach of the covenant of good faith and fair dealing. In
its moving brief, Progressive casts Metius’s claim as one for “bad faith” and cites case
law that suggests bad faith claims may be severed and stayed until the question of
coverage is resolved. Metius, however, has made clear that he is not alleging bad faith in
this case: “Mr. Metius has not filed a bad faith claim against Progressive.” (Metius’s
Opp’n Br. 2 (emphasis in original).) Thus, there is no “bad faith” claim to sever, and the
motion fails on that basis. To the extent Progressive later tries to reformulate and save its
argument by claiming there is no real difference between “bad faith” and “breach of the
covenant of good faith and fair dealing,” it still fails to establish a basis for a severance
and stay.
Courts consider the following factors when considering requests for a severance:
(1) whether the issues sought to be tried separately require the testimony of different
witnesses and documentary proof; (2) whether the separable issues are significantly
different from one another; (3) whether the party opposing severance will be prejudiced if
it is granted; (4) whether the party requesting severance will be prejudiced if it is not
granted. Sclafani-Tarantola v. District Council 711, 2016 WL 5867819, at *1 (D.N.J.
Oct. 7, 2016).
The factors here do not support severance at this stage under any formulation.
First, Progressive does not explain how the alleged proofs on the breach of fiduciary duty
claim differ significantly from the other counterclaims, and Metius claims otherwise.
Since these are his affirmative claims, it makes sense to credit his assertion regarding
what discovery he intends to use to support his claims. Factor one does not support
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severance.
Second, courts have noted that the implied covenant of good faith and fair dealing
is inherent in every contract, and thus, often “intertwined” with breach of contract claims.
E.g., Linger6 LLC v. Antonio, 2016 WL 4257762, at *8-9 (D.N.J. Aug. 10, 2016). Thus,
the issues in the three counts of the counterclaim are not “significantly different from one
another.” Therefore, factor two does not support severance.
Third and Fourth, Metius has credibly argued that he could be prejudiced by a
severance, while Progressive has not. Metius claims that the coverage dispute “will turn
on the meaning and intent of the term ‘primary residence’ in the policy and application.”
(Def.’s Br. 10.) Thus, if severance were to be granted and discovery deferred, he would
be forced to litigate the coverage case without, he argues, full information necessary to
support his defenses. This could lead to additional problems – e.g., it could result in
Metius opposing a summary judgment motion with a Rule 56(d) application, which are
liberally granted. See, e.g., Culwell v. City of Fort Worth, 468 F.3d 868, 871 (5th Cir.
2006) (Rule 56(d) motions “are broadly favored and should be liberally granted”). All
this does is delay the case and waste party and court resources. This factor weighs
against severance. 2

After Defendant raised the discovery dispute with the Court, Progressive requested
permission to “promptly” file a motion for summary judgment. By email sent to the
Court the same day, Metius’s counsel objected to summary judgment motions being filed
“at this juncture” (see e-mail from Jeffrey M. Pollock, Esq., dated February 4, 2019), and
then submitted an additional letter on February 21, 2019, stating summary judgment
motion practice is “premature” because “discovery is ongoing [] and Progressive refuses
to produce information or provide testimony on several relevant topics.”
The Court generally contemplates summary judgment motions at the close of
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Finally, if this case proceeds to trial, Plaintiff can seek severance or bifurcation of
some part of the case, although it is difficult to imagine the basis. However, at this stage,
there is absolutely no basis for severance or stay, which would be unfair and grossly
inefficient.
CONCLUSION
For the reasons stated herein, the discovery sought is relevant within the meaning
and contemplation of Rule 26. Moreover, no basis for a severance or stay has been
shown. Therefore, Metius’s request to compel is GRANTED, and Plaintiff Progressive’s
Motion to Sever and Stay [ECF No. 23] is DENIED. An appropriate Order will be
entered.

s/Mark Falk________________
MARK FALK
United States Magistrate Judge
Dated: April 3, 2019

discovery. Given Defendant’s representation to the Court that any summary judgment
motion now would be met with a Rule 56(d) application (which, as stated previously are
liberally construed) - and given the Court’s decision that the discovery should be
provided - summary judgment motions will not be filed presently. Plaintiff may renew
its request to file for summary judgment at the close of discovery.
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