Sedillo Electric et al v. Colorado Casualty Insurance Company et al

Filing 220

ORDER by Magistrate Judge William P. Lynch granting in part and denying in part 105 Motion for Protective Order; granting in part and denying in part 128 Motion to Compel. (mej)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW MEXICO
SEDILLO ELECTRIC and
TELESFOR SEDILLO,
Plaintiffs,
v.

CV 15-1172 RB/WPL

COLORADO CASUALTY INSURANCE COMPANY,
LIBERTY MUTUAL INSURANCE COMPANY,
PEERLESS INSURANCE COMPANY, and
BAKER INSURANCE SERVICES, L.L.C.,
Defendants.

ORDER GRANTING IN PART AND DENYING IN PART
DEFENDANTS’ MOTION FOR PROTECTIVE ORDER
AND PLAINTIFFS’ MOTION TO COMPEL
The Defendants (collectively “Liberty Mutual”) filed a motion for a protective order.
(Doc. 105.) Plaintiffs filed a cross motion to compel. (Doc. 128.) Each motion is opposed and the
parties scarcely agree on anything, other than that they have an ongoing dispute. The motions are
now fully briefed.1 To the extent that the parties resolved their disputes prior to this point—
specifically with regard to the motion for a protective order as it relates to Request for
Production (“RFP”) Nos. 1 and 2 and the corresponding aspects of the subpoena duces tecum—
the motion for a protective order is denied as moot. (See Doc. 155 at 2 (After the motion for
protective order was filed, Plaintiffs’ voluntarily dismissed the vandalism claim, as such,
“Liberty Mutual submits that RFP Nos. 1 and 2 are no longer at issue, and that only RFP No. 3 is
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In response to the motion for a protective order, Plaintiffs’ counsel asserts that I ordered that the
response be filed by noon on November 21, 2016. (Doc. 134 at 2.) Counsel misunderstood my Order of
November 21, 2016, directing the Defendants to file a response to Plaintiffs’ opposed motion to extend
time in which to respond to the motion for protective order. (Doc. 132.) Had counsel read the Order more
closely, he would have seen that the expedited briefing was for Liberty Mutual to file a response to his
own motion.

at issue herein.”).) Having reviewed the briefing, and the record, and being otherwise advised on
these matters, I grant in part and deny in part Liberty Mutual’s motion for a protective order and
Plaintiffs’ cross motion to compel, as explained herein.
MOTION FOR PROTECTIVE ORDER
Liberty Mutual moved for a protective order as it relates to RFP No. 3 and the
corresponding aspects of the subpoena duces tecum. Because the RFP and the requests contained
in the subpoena duces tecum are nearly identical, I refer to them collectively with reference to
the RFP, unless otherwise noted.
Federal Rule of Civil Procedure 26(c) allows courts, for “good cause,” to issue a
protective order regarding discovery “to protect a party or person from annoyance,
embarrassment, oppression, or undue burden or expense.” The “good cause” standard is “highly
flexible, having been designed to accommodate all relevant interests as they arise.” Rohrbough v.
Harris, 549 F.3d 1313, 1321 (10th Cir. 2008) (quoting United States v. Microsoft Corp., 165
F.3d 952, 959 (D.C. Cir. 1999)).
“It is the party seeking the protective order who has the burden to show good cause for a
protective order.” Dorato v. Smith, 163 F. Supp. 3d 837, 869 (D.N.M. 2015) (quoting Velasquez
v. Frontier Med. Inc., 229 F.R.D. 197, 200 (D.N.M. 2005)). The party seeking the protective
order must provide the court “a particular and specific demonstration of fact, as distinguished
from stereotyped and conclusory statements.” Gulf Oil Co. v. Bernard, 452 U.S. 89, 102 n.16
(1981) (quotation omitted).
RFP No. 3 reads:
Rachel Berg’s testimony established what incentive evidence exists that is
relevant to incentive payments made to Steve Harkness, another Liberty Mutual
adjuster. At pp. 194:23 to 195:16; 207:18 to 210:25 of her deposition, Rachel
Berg testified the employee handbook probably explains how Liberty Mutual’s
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Incentive Program worked. Berg Deposition, pp. 194:23 to 195:7. From January
1, 2013 to date, produce a copy of the relevant employee handbook and all
documents relevant to Liberty Mutual’s Variable Incentive Program (“VIP”), and
any other relevant documents that show and explain how the incentive program
worked for a.) Rachel Berg, b.) Steve Harkness, and c.) whoever has been
adjusting the Sedillo claim from the date of Rachel Berg’s March 22, 2013 denial
letter to date (who also must be identified). This request includes but is not
limited to actual incentives paid, the basis for the computation of the amount paid,
the criteria applied for the payment, performance evaluations, performance
reviews and combined ratio computations, the “QCR”, Objective Settings and
Performance Evaluation Forms, Financial Objectives, relevant 401k’s, quarterly
reports, the relevant business unit’s earnings and growth targets, outcomes of
reviews by quality team or manager of the files at issue, guidelines, customer
service scores, teamwork and claim cultural objectives.
(Doc. 105 Ex. 3 at 4-5.)
Liberty Mutual contends that RFP No. 3 is duplicative of an RFP served and answered in
state court, and thus violates the agreement to not re-serve discovery; that the RFP is vague,
ambiguous, confusing, overly broad, and unduly burdensome and expensive; that the documents
requested are irrelevant; that some of the documents requested are confidential and proprietary;
and that the last sentence is a fishing expedition for unrelated material. To the extent that a
litigation adjuster has worked on the claim since suit was filed, Liberty Mutual contends that
those documents are protected by the work product doctrine and the attorney/client privilege.
Additionally, Liberty Mutual asserts that it has no duty to continue investigating a claim after the
claim has been denied and litigation has commenced.
Plaintiffs address only two aspects of this argument: first, Plaintiffs dispute whether an
insurer bears an ongoing duty to investigate after a claim has been denied and suit has been filed;
and second, Plaintiffs argue that any claim of privilege has been waived. Further, Plaintiffs
contend that RFP No. 3 “requested the entire personnel file of Rachel [B]erg and other relevant
adjusters.” (Doc. 134 at 9.) Plaintiffs agree that they are “satisfied with the production made as to
Liberty training and adjusting program,” but maintain all other aspects of the RFP. (Id. at 9-10.)
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As an initial matter, I note that Plaintiffs’ failure to respond to Liberty Mutual’s
arguments in the motion for protective order can be considered a concession of that position. See
Pueblo of Pojoaque v. New Mexico, --- F. Supp. 3d ---, 2016 WL 6405927, *62 n.17 (D.N.M.
Sept. 30, 2016). However, under the circumstances presented by this case, I will address the
merits and the arguments.
When this case was pending in state court, Plaintiffs propounded state case RFP No. 28,
which reads:
At pp. 194:23 to 195:16; 207:18 to 210:25 of her deposition, Rachel Berg testified
the employee handbook probably explains how Liberty Mutual’s Incentive
Program worked. Berg Deposition, pp. 194:23 to 195:7. From January 1, 2013 to
date, produce a copy of the relevant employee handbook and all documents
relevant to Liberty Mutual’s Variable Incentive Program (“VIP”), and any other
relevant documents that show an explain how the incentive program worked for
a.) Rachel Berg, b.) Michael Westby, c.) Steve Harkness, d.) whomever was the
person(s) who managed and/or evaluated Steve Harkness from June 30, 2012 to
his denial letter of August 6, 2015 (who must also be identified), and e.)
whomever has been adjusting the Sedillo claim from the date of Rachel Berg’s
March 22, 2013 denial letter to date (who also must be identified). This request
includes but is not limited to actual incentives paid, the basis for the computation
of the amount paid, the criteria applied for the payment, performance evaluations,
performance reviews and combined ratio computations, the “QCR”, Objective
Settings and Performance Evaluation Forms, Financial Objectives, relevant
401k’s, quarterly reports, the relevant business unit’s earnings and growth
targets,, outcomes of reviews by quality team or manger [sic] of the files at issue,
guidelines, customer service scores, teamwork and claim cultural objectives.
(Doc. 105 Ex. 4 at 3-4.) Liberty Mutual responded to that RFP in substantially similar fashion as
it responded to RFP No. 3 in this case. I agree that the RFPs are nearly identical. Further, the
parties “agreed not to reissue any discovery requests which were answered while the case was
pending in state court.” (Doc. 77 (Clerk’s Minutes for the Initial Scheduling Conference on July
12, 2016).) Plaintiffs essentially reissued this RFP, in violation of the parties’ agreement.
Beyond these obvious deficiencies, it is unclear what documents Liberty Mutual
produced in response to the state RFP or RFP No. 3.
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This case arises out of alleged hail damage to a roof that, according to Plaintiffs, would
cost $27,973.44 to repair. (Doc. 128 at 7.) Plaintiffs also assert a claim for punitive damages
resulting from the allegedly bad faith handling of the hail claim.
While I agree that the claims file is relevant and appears reasonably calculated to lead to
the discovery of admissible evidence, many of Plaintiffs’ requests as stated are overly broad,
unduly burdensome, disproportionate, and request information subject to attorney-client
privilege and work product doctrine. Therefore, I will limit Plaintiffs’ requests and grant in part
Liberty Mutual’s motion for protective order.
There are two general categories of information sought in this RFP: financial information
and information about the file/adjusters after litigation commenced.
Liberty Mutual essentially argues that Plaintiffs are not entitled to documents or
information about how the claim was handled created after the filing of the lawsuit as they
contain information protected by attorney client and work product privileges. Both parties cite to
Barela v. Safeco Insurance Company of America, 2014 WL 11497826 (D.N.M. Aug. 22, 2014)
(unpublished), for guidance on this point.
While it is generally understood that privilege does not attach to an insurer’s
investigatory file on an insured’s claim before a final decision is made, id., that is not the case
here. Neither side asserts that Liberty Mutual failed to produce the claims file through the date of
denial. Lindley v. Life Investors Insurance Company of America is instructive on this point:
Fed. R. Civ. P. 26(b)(3) requires that a document or thing produced or used by an
insurer to evaluate an insured’s claim in order to arrive at a claims decision in the
ordinary and regular course of business is not work product regardless of the fact
that it was produce after litigation was reasonably anticipated. It is presumed that
a document or thing prepared before a final decision was reached on an insured’s
claim, and which constitutes part of the factual inquiry into or evaluation of that
claim, was prepared in the ordinary and routine course of the insurer’s business of
claim determination and is not work product. Likewise, anticipation of litigation
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is presumed unreasonable under the Rule before a final decision is reached on the
claim. The converse, of course, is presumed for documents produced after claims
denial. To overcome these presumptions, the insurer must demonstrate, by
specific evidence proof of objective facts, that a reasonable anticipation of
litigation existed when the document was produced, and that the document was
prepared and used solely to prepare for that litigation and not to arrive at a (or
buttress a tentative) claim decision.
267 F.R.D. 382, 399 (N.D. Okla. 2010). In Barela, Judge Yarbrough noted that “‘courts have
adopted a nuanced approach to the anticipation-of-litigation prong of work-product analysis’ and
focus on ‘whether specific materials were prepared in the ordinary course of business, or were
principally prompted by the prospect of litigation.’” 2014 WL 11497826, at *4 (quoting 8
Charles A. Wright, Arthur R. Miller & Richard L. Marcus, Federal Practice & Procedure § 2024
(3d ed.)).
It seems that the real question is whether Liberty Mutual had an affirmative duty to
continue investigating the claim after denial and the commencement of litigation. If Liberty
Mutual had such a duty, then all documents related to the file after suit was filed would still be
produced in the ordinary course of business. If, however, Liberty Mutual had no such duty, then
any documents related to handling the claim during suit would be covered by the work-product
doctrine and attorney client privilege.
Plaintiffs cite to Sinclair v. Zurich American Insurance Company, 129 F. Supp. 3d 1252
(D.N.M. 2015); the combination of Jessen v. National Excess Insurance Company, 776 P.2d
1244 (N.M. 1989), and American National Property and Casualty Company v. Cleveland, 293
P.3d 954 (N.M. Ct. App. 2013); and Barela for the collective proposition that insurers have a
duty to continue investigation of claims once the claim has been denied and suit initiated. (Doc.
134 at 3-9.)

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In Sinclair, I held that an insurer has a duty to act in good faith even when suit has been
filed and that the insurer carries a continuing obligation to “reassess its initial decision to deny
coverage based upon information received subsequent to the initial decision, even if that
information is received after suit is filed.” 129 F. Supp. 3d at 1257. Plaintiffs twist this holding
and attempt to contort the case to fit their narrative, arguing that “[e]xisting New Mexico law
recognizes that insurance companies have a continuing duty to investigate and pay claims after
litigation commences.” (Doc. 134 at 4.)
The insurer’s continuing obligation to act in good faith and its obligation to reassess its
initial decision based on subsequently received information is not tantamount to an obligation to
affirmatively investigate a claim. Indeed, the insurer’s obligation to reassess is couched in the
passive terms of “based upon information received”—that is, the insurer does not have to go find
additional information to bolster or undercut its initial determination.
Jessen stands for the proposition that an insurer’s obligation to investigate and render a
determination on a claim does not terminate when suit begins: the insurer must still investigate
and render an initial decision even if litigation has commenced. In Jessen, the insurer relied on a
third-party’s investigation as the reason for delaying its determination. 776 P.2d at 1248. In
Cleveland, the New Mexico Court of Appeals reaffirmed that an insurer must conduct an
investigation of the claim that is “adequate to determine whether its position is tenable,” even
though the investigation does not need to be perfect. 293 P.3d at 958.
Plaintiffs construe these cases, together, as standing for the proposition that an insurer has
a continuing obligation to investigate the claim after the claim has been denied. Neither case
speaks to an insurer’s conduct after the claim has been denied. Even under the broadest reading,
Jessen and Cleveland do not create such a duty.

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Finally, in Barela, Judge Yarbrough cited Lindley for the proposition that a claims file
does not become privileged merely because the case has entered litigation. 2014 WL 11497826,
at *4-5. In Barela, as in the other cases, the underlying claim had not been resolved when the bad
faith case was brought. That is not the case here: Liberty Mutual resolved and denied the hail
claim in March 2013, months before this case was filed.
Plaintiffs’ argument that Barela stands for the proposition that post-litigation claims files
are never covered by work-product is unavailing and deceptive. The factual circumstances of
Barela differ in the only material way from those of this case: the claim in this case was resolved
and denied, such that anything in the claims file after litigation could only have been prepared in
the course of litigation and not in the regular course of business.
Pursuant to Lindley, and taking note of the Privilege Logs produced on March 7, 2014
and July 6, 2016 (Doc. 105 Ex. 3 at 10-14), I agree with Liberty Mutual that they had no
continuing obligation to affirmatively investigate the hail claim after the claim had been denied
and litigation commenced. As such, any claims adjustment after the claim was denied was not
conducted in the ordinary course of business and is protected by attorney-client privilege and the
work product doctrine. Liberty Mutual’s motion for protective order is granted as to the identity
of the litigation adjuster, if any, on the hail claim and any request for incentive information
related to the time period after the denial.
The other broad category of information sought is financial information. Both parties cite
extensively to Judge Yarbrough’s well-reasoned opinion in Barela for guidance on this matter. I
agree that Barela is instructive.
In Barela, the Court limited disclosure of claims manuals, training manuals, and written
procedural materials relevant to the handling of uninsured and underinsured motorist claims to

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those documents provided to adjusters handling these claims in New Mexico for the year of the
accident at issue and the two succeeding years. 2014 WL 11497826, at *6. The Court also
limited the production of personnel information for each of the claims adjusters handling the file
to “documents that pertain to their educational and professional background, qualifications,
training, job performance as it relates to handling uninsured/underinsured claims, and
compensation structure only if it is tied to losses on uninsured/underinsured motorist claims, and
licensing.” Id. at *10. Judge Yarbrough further ordered the parties to enter a confidentiality
agreement to protect this information. Id.
Liberty Mutual contends that it should not be required to produce financial information,
but that any such information should be limited to information made public in New Mexico in
2013 and 2014.
Plaintiffs, on the other hand, cite to Sherrill v. Farmers Insurance Exchange, 374 P.3d
723 (N.M. Ct. App. 2016), for the proposition that incentive evidence and other financial
information is relevant and not subject to confidentiality or privilege. Plaintiffs fail to disclose
that Sherrill is a wrongful termination/retaliatory discharge case in which Sherrill, a Farmers
adjuster, refused to comply with Farmers’ policy of early settlement in automobile cases. While
incentive information was certainly relevant to Sherrill’s claims against Farmers, Sherrill is
inapposite.
This case is more like Barela than Sherrill. Plaintiffs indicated that they are satisfied with
Liberty Mutual’s disclosure of training materials, so the motion for protective order is denied as
moot on that point. As to earnings information, Liberty Mutual’s motion for protective order is
granted in part and denied in part: Liberty Mutual will disclose all financial information made
publicly available in New Mexico in 2013, 2014, and 2015. As it relates to the compensation and

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incentive structure for Rachel Berg, Liberty Mutual’s motion for protective order is granted in
part and denied in part: Liberty Mutual will disclose documents that pertain to compensation
structure for Berg only if it is tied to losses on property claims.
The remaining arguments as to over breadth, relevance, ambiguity, confusion,
burdensomeness, and proportionality are overruled.
MOTION TO COMPEL
Plaintiffs moved for an order compelling production of “hail storm evidence defendants
refused to produce in response to”:
a.) The identities and location of the present adjuster and “litigation
adjuster” on the hail claim and relevant incentive evidence as to
Rachel Berg and those adjusters relevant only to the hail claim
requested in RFP No. 3 . . . ;
b.) The production of all the claims adjusting evidence on the hail claim
from the date the claim was reported in January 2013 to date that
should have been produced pursuant to RFP No. 2 in the State case, . .
. , and in the initial production with an appropriate privilege log.
c.) An order that Liberty cannot refuse to produce requested evidence on
the basis of the inadequate privilege log provided . . . that was attached
to Defendants’ Initial Disclosure produced to Plaintiffs on July 6,
2016.
d.) A judicial declaration rejecting defendants’ false justification for
refusing to disclose relevant evidence because it has no “continuing
duty to investigate after a claim is denied.” . . .
e.) A clear declaration of Plaintiff’s [sic] rightful scope of discovery so
that Plaintiffs can pose the questions and require the production of
evidence described in the Exemplar Duces Tecum to appropriate Rule
30B6 witnesses and the “litigation adjuster” . . . to avoid facing a time
consuming and unnecessary motion for protective order.
(Doc. 128 at 2-3 (footnotes omitted).)
Pursuant to Federal Rule of Civil Procedure 34, a party must either produce documents
responsive to an RFP or “state with specificity the grounds for objecting to the request, including
the reasons” and “state whether any responsive materials are being withheld on the basis of that
objection.” FED. R. CIV. P. 34(b)(2). “[A]n evasive or incomplete disclosure, answer, or response
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is to be treated as a failure to disclose, answer, or respond.” FED. R. CIV. P. 37(a)(3). General
objections to a request for production are insufficient and will be overruled. See Convertino v.
U.S. Dep’t of Justice, 565 F. Supp. 2d 10, 12-13 (D.D.C. 2008).
Federal Rule of Civil Procedure 26(b)(1) allows discovery of any nonprivileged matter
that is “relevant” to any party’s claim or defense, provided such discovery “is relevant to any
party’s claim or defense and proportional to the needs of the case.” At the motion to compel
stage, the proponent of the motion bears the initial burden of showing that the information sought
is relevant. Metzger v. Am. Fid. Assurance Co., No. CIV-05-1387-M, 2007 WL 3274934, at *1
(W.D. Okla. Oct. 23, 2007) (unpublished) (citations omitted).
Request a.) is addressed completely above in the section on the motion for protective
order. Liberty Mutual is not required to disclose the identity of the “litigation adjuster,” if any,
and is only required to disclose compensation information for Rachel Berg and other relevant
adjusters as it relates to losses on property claims. The motion to compel is therefore granted in
part and denied in part.
Request b.) is also fully addressed in the above section on the motion for protective order.
Liberty Mutual is not required to produce the claims file for the period after the claim was denied
and suit was filed. To the extent that Liberty Mutual has not produced the claims file from the
period up through March 22, 2013, the date of denial, Liberty Mutual is ordered to do so. The
motion to compel is thus granted in part and denied in part.
Request d.) is likewise fully addressed above—there is no affirmative obligation for an
insurer to continue investigation a claim after the claim has been denied and suit commenced.
The insurer is still required to reassess its position in light of newly produced evidence. The
motion to compel is denied on this point.

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As to Request c.), Plaintiffs are essentially challenging the objections—that is, the
privilege log—served by Liberty Mutual. Pursuant to Local Rule 26.6, when a party is served
with objection to interrogatories, requests for production or inspection, or requests for admission,
the party must proceed with a motion to compel within twenty-one days of service of the
objection. In this case, Plaintiffs filed their motion to compel on November 18, 2016, and are
challenging the privilege log—essentially objections to State case RFP No. 13, originally
produced on March 11, 2015—that was produced in the federal case on July 6, 2016. (Doc. 128
Ex. 4.) Plaintiffs argue that a new privilege log was required in the federal case pursuant to Local
Rule 26.3. This seems disingenuous in light of the parties’ agreement not to re-serve discovery
that had already been conducted. Nonetheless, the time to object to the privilege log has long
since lapsed and any objection has been waived. Accordingly, the motion to compel is denied on
this point.
Finally, as to Request e.), Plaintiffs seek a judicial declaration as to the scope of
discovery for purposes of a Rule 30(b)(6) deposition. I have already determined that insurer’s do
not have a continuing, affirmative obligation to investigate a claim after the claim has been
denied and suit has been filed. To the extent that Plaintiffs’ seek to depose a litigation adjuster or
other Rule 30(b)(6) designee about Liberty Mutual’s handling of the claim after the claim was
denied and suit was filed, about compensation structure not related to losses on property claims,
or about the vandalism claim, the motion to compel is denied. Further, to the extent that the
subpoena duces tecum seeks to abrogate any previously asserted privilege, the motion to compel
is denied.
In their Reply brief, Plaintiffs introduce a new argument and contend that Liberty Mutual
is defying the Scheduling Order, which expressly allows for a four hour deposition of Rachel

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Berg’s supervisor and at least one Rule 30(b)(6) deposition. (Doc. 163 at 7-8.) New arguments
advanced in reply briefs cannot be relied upon unless the nonmovant is offered an opportunity
for surreply. See, e.g., Beaird v. Seagate Tech. Inc., 145 F.3d 1159, 1164-65 (10th Cir. 1998). No
surreply has been requested or will be allowed in this instance, and thus no arguments, advanced
for the first time in the Reply, will be considered.
Plaintiffs may notice and take the depositions specified in the Scheduling Order, subject
to the above limitations, and may specifically request information from the Rule 30(b)(6)
designee about Liberty Mutual’s consideration of the expert reports and what, if any,
reassessment of the claim occurred when new evidence was submitted to Liberty Mutual. Again,
Liberty Mutual did not and does not have a continuing, affirmative obligation to investigate the
claim after the claim was denied and suit was filed. Rather, Liberty Mutual has an obligation to,
in good faith, reassess the determination when presented with new evidence.
CONCLUSION
As discussed above, Liberty Mutual’s motion for protective order is granted in part and
denied in part. Liberty Mutual did not and does not have an affirmative obligation to continue
investigating the claim after the final claims decision has been issued, but does have an
obligation to, in good faith, reassess the claims decision when presented with new evidence.
Plaintiffs’ motion to compel is granted in part and denied in part. Plaintiffs may take any
depositions specifically allowed for in the Scheduling Order, provided that Plaintiffs operate
within the parameters described herein. Any depositions must occur within fourteen days from
the date of entry of this Order.

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IT IS SO ORDERED.
___________________________________
William P. Lynch
United States Magistrate Judge

A true copy of this order was served
on the date of entry--via mail or electronic
means--to counsel of record and any pro se
party as they are shown on the Court’s docket.

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