HBE Corporation v. Harleysville Group, Inc. et al

Filing 60

MEMORANDUM-DECISION AND ORDER denying 50 Motion in Limine: The Court hereby ORDERS that HBE's motion in limine is DENIED; and the Court furtherORDERS that the Clerk of the Court shall serve a copy of this Memorandum-Decision and Order on all parties in accordance with the Local Rules. Signed by U.S. District Judge Mae A. D'Agostino on 2/3/16. (ban)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
____________________________________________
HBE CORPORATION,
Plaintiff,
vs.

7:14-CV-145
(MAD/TWD)

HARLEYSVILLE GROUP, INC. and
HARLEYSVILLE INSURANCE COMPANY
OF NEW YORK,
Defendants.
____________________________________________
APPEARANCES:

OF COUNSEL:

WHITEMAN OSTERMAN & HANNA LLP
One Commerce Plaza
Albany, New York 12260
Attorneys for Plaintiff

WILLIAM S. NOLAN, ESQ.
EMILY P. QUINLAN, ESQ.

HURWITZ & FINE, P.C.
424 Main Street
1300 Liberty Building
Buffalo, New York 14202
Attorneys for Defendants

DAN D. KOHANE, ESQ.
CASSANDRA A. KAZUKENUS, ESQ.

Mae A. D'Agostino, U.S. District Judge:
MEMORANDUM-DECISION AND ORDER
I. INTRODUCTION
Plaintiff HBE Corporation ("HBE" or "Plaintiff") commenced this action in New York
State Supreme Court, St. Lawrence County, on January 3, 2014, alleging that Defendants
Harleysville Group, Inc. and Harleysville Insurance Company of New York (collectively,
"Harleysville" or "Defendant") wrongfully denied HBE insurance coverage under a policy
endorsement naming HBE as an additional insured under certain circumstances. See Dkt. No. 1-2
at 3-10. Harleysville removed the action to this Court on February 10, 2014. See Dkt. No. 1.

On September 30, 2015, the Court granted HBE's motion for partial summary judgment as
to Harleysville's causation defense and denied Harleysville's motion for summary judgment. See
Dkt. No. 39. Currently before the Court is HBE's motion in limine which seeks to preclude
Harleysville from offering any evidence not produced to HBE in discovery. See Dkt. No. 50.

II. BACKGROUND
For a complete recitation of the relevant factual background, the Court directs the parties
to the September 30, 2015 Memorandum-Decision and Order. See Dkt. No. 39.

III. DISCUSSION
In its motion in limine, HBE asks the Court to preclude Harleysville from introducing at
trial any documents it did not produce in discovery and from introducing the testimony of any
witnesses it did not previously disclose. See Dkt. No. 50-6 at 4. HBE claims that this "motion is
necessary because, more than a full year after the close of discovery in this action, Harleysville
stunningly disclosed a document that it claims is central to its position in this case." Id.
"Specifically, on Friday, January 22, 20[16] – one business day before the parties' pre-trial filings
were due – Harleysville produced a computer printout purporting to show that the insurance
policy at issue was printed and supposedly delivered to Demco's insurance agent prior to January
17, 2009, the effective date of New York Insurance Law § 3420(a)(5)." Id. This document is
significant because, according to Harleysville, it relieves it of having to prove that it suffered

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prejudice as a result of any late notice of the accident which gave rise to HBE's insurance claim,
as would otherwise be required by Insurance Law § 3420(a)(5).1
In response to HBE's motion, Harleysville contends that it should not be precluded from
introducing this evidence because it only became relevant when HBE raised the argument as to
the delivery date of the policy in its opposition to Harleysville's cross-motion for summary
judgment, which was after the close of discovery. See Dkt. No. 58 at 5. Specifically,
Harleysville contends that, in HBE's memorandum of law in opposition to Harleysville's crossmotion for summary judgment, HBE argued for the first time, without providing a basis for the
argument, that Harleysville was not entitled to summary judgment because it had not established
that the insurance policy in question was both issued and delivered prior to January 17, 2009. See
id. Moreover, Harleysville contends that none of the discovery demands or interrogatories
indicate in any way that the delivery date of the insurance policy would be relevant in any way.

Subsection 3420(a)(5) of the New York Insurance Law was added by the Legislature in
2008, and took effect on January 17, 2009. The new subsection provided as follows:
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(a) No policy or contract insuring against liability for injury to
person . . . or against liability for injury to, or destruction of[ ]
property shall be issued or delivered in this state, unless it contains
in substance the following provisions or provisions that are equally
or more favorable to the insured . . . :
(5) A provision that failure to give any notice required to be given
by such policy within the time prescribed therein shall not
invalidate any claim made by the insured, injured person or any
other claimant, unless the failure to provide timely notice has
prejudiced the insurer, except as provided in paragraph four of this
subsection.
N.Y. Ins. Law § 3420(a)(5). Significantly, this new provision applies only to insurance polices
that were "issued or delivered" on or after January 17, 2009. See B & A Demolition and Removal,
Inc. v. Markel Ins. Co., 818 F. Supp. 2d 592, 594 (E.D.N.Y. 2011) (citations omitted).

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See id. at 6. Further, Harleysville claims that it should not be precluded under Rule 26 from
introducing this evidence/testimony because, at the time it made its Rule 26 disclosures, "it was
unaware that HBE would seek to challenge the policy's delivery date, especially as there was
nothing on the face of the policy that would lend any credence to speculation that it was not
delivered to the insured promptly after issuance." Id. at 7.
The purpose of a motion in limine is to allow the trial court to rule in advance of trial on
the admissibility of certain forecasted evidence. See Luce v. United States, 469 U.S. 38, 40 n.2
(1984); see also Palmieri v. Defaria, 88 F.3d 136, 141 (2d Cir. 1996). A court should exclude
evidence on a motion in limine only when the evidence is clearly inadmissible on all potential
grounds. See Baxter Diagnostics, Inc. v. Novatek Med., Inc., No. 94–cv–5220, 1998 WL 665138,
*3 (S.D.N.Y. Sept. 25, 1998). Courts considering a motion in limine may reserve decision until
trial so that the motion is placed in the appropriate factual context. See Nat'l Union Fire Ins. Co.
v. L.E. Myers Co. Group, 937 F. Supp. 276, 287 (S.D.N.Y. 1996). Alternatively, the court is
"free, in the exercise of sound judicial discretion, to alter a previous in limine ruling" at trial as
"the case unfolds, particularly if the actual testimony differs from what was contained in the
[movant's] proffer." Luce, 469 U.S. at 41-42.
Federal Rule of Civil Procedure 37(c)(1) provides that
[a] party that without substantial justification fails to disclose
information required by Rule 26(a) or 26(e)(1), or to amend a
response to discovery as required by Rule 26(e)(2), is not, unless
such failure is harmless, permitted to use as evidence at trial, at a
hearing, or on a motion any witness or information not so disclosed.
Fed. R. Civ. P. 37(c)(1). The rule is designed "to avoid 'surprise' or 'trial by ambush.'" Am. Stock
Exch., LLC v. Mopex, Inc., 215 F.R.D. 87, 93 (S.D.N.Y. 2002) (quotation omitted).

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The sanction of preclusion under Rule 37(c)(1) is "automatic absent a determination of
either substantial justification or harmlessness." Id. (citations omitted). Substantial justification
means "justification to a degree that could satisfy a reasonable person that parties could differ as
to whether the party was required to comply with the disclosure request." Id. (quoting Henrietta
D. v. Giuliani, No. 95 Civ. 0641, 2001 WL 1602114, at *5 (E.D.N.Y. Dec. 11, 2001)). "The test
of substantial justification is satisfied 'if there exists a genuine dispute concerning compliance.'"
Id. (quoting Nguyen v. IBP, Inc., 162 F.R.D. 675, 680 (D. Kan. 1995)). The burden of proving
substantial justification rests with the party which has failed to disclose information. See id.
(citing Wright v. Aargo Sec. Servs., Inc., 99 Civ. 9115, 2001 WL 1035139, at *2 (S.D.N.Y. Sept.
7, 2001)).
Despite the "automatic" nature of Rule 37(c)(1), "the imposition of sanctions under the
rule is a matter within the trial court's discretion." Id. (quoting Jockey Int'l, Inc. v. M/V
"Leverkusen Express", 217 F. Supp. 2d 447, 452 (S.D.N.Y. 2002)). Further, "[p]reclusion of
evidence is generally a disfavored action." Id. The preclusion of evidence not disclosed in
discovery is "a drastic remedy and will apply only in situations where the failure to disclose
represents . . . flagrant bad faith and callous disregard of the rules." Johnson Elec. N. Am., Inc. v.
Mabuchi Motor Am. Corp., 77 F. Supp. 2d 446, 458 (S.D.N.Y. 1999) (citations omitted).
In the present matter, the Court finds that preclusion of the evidence at issue is not
warranted. In its memorandum of law in further support of its motion for partial summary
judgment and in opposition to Harleysville's cross-motion for summary judgment, which was
filed on February 20, 2015, HBE argued for the first time that "it is very possible that the policy
was delivered" sometime after January 17, 2009, given that the policy was issued in December

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2008. See Dkt. No. 34 at 16. HBE made this argument without citation to any evidence in the
record. See id.
In its April 17, 2014 discovery demands, HBE requested "true copies of any and all
documents which you will use to support any claims or defenses you have raised in this action at
trial, in motion practice, or otherwise;" "true copies of any and all documents that are related to or
reference Demco's insurance policy with" Harleysville; "true copies of any and all documents or
communications relating to insurance policy MPA 7G9336;" "true copies of any and all
documents or communications including without limitation, email exchanges, memoranda, and/or
handwritten or computerized notes or transcriptions relating to . . . insurance policy MPA
7G9336." Dkt. No. 50-6 at 4-5. Although HBE argues that these general discovery demands
clearly required Harleysville to disclose the computer printout at issue prior to the January 15,
2015 close of discovery, the Court disagrees. Had HBE made it clear prior to the close of
discovery that it intended to argue that the insurance policy was not delivered prior to the change
in the law, HBE's demands would undoubtedly cover the computer printout at issue. Harleysville,
however, had been provided no indication that such information would be relevant until HBE's
February 20, 2015 memorandum of law.
Counsel for HBE did not specifically request proof of delivery date until a January 22,
2016 email to Harleysville's counsel. See Dkt. No. 50-4 at 3. Within hours, Harleysville's
counsel provided HBE with the requested information. See id. Although the more prudent course
would have been for Harleysville to supplement its discovery response at some earlier time, the
Court finds that it substantially complied with its discovery obligations and preclusion is not
warranted. To reduce any prejudice, the Court will permit HBE to depose Harleysville's proposed
witness relative to the document at issue. If necessary, the parties may conduct this deposition by
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telephone. If the deposition cannot be scheduled prior to the start of trial, the Court will entertain
reasonable requests for adjournment so that the deposition may take place.
Based on the foregoing, HBE's motion in limine is denied.

IV. CONCLUSION
After carefully reviewing the entire record in this matter, the parties's submissions and the
applicable law, and for the above-stated reasons, the Court hereby
ORDERS that HBE's motion in limine is DENIED; and the Court further
ORDERS that the Clerk of the Court shall serve a copy of this Memorandum-Decision
and Order on all parties in accordance with the Local Rules.

IT IS SO ORDERED.
Dated: February 3, 2016
Albany, New York

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