American Precision Industries, Inc. v. Federal Insurance Company et al

Filing 43

ORDER granting in part and denying in part 24 Motion to Compel. Signed by Hon. H. Kenneth Schroeder Jr. on 2/26/2018. (HKG)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK

AMERICAN PRECISION INDUSTRIES,
INC.,
Plaintiff,
v.

14-CV-1050-RJA-HKS

FEDERAL INSURANCE COMPANY,
FIREMAN’S FUND INSURANCE
COMPANY, and NORTH RIVER
INSURANCE COMPANY,

Defendants.

DECISION AND ORDER
This case was referred to the undersigned by the Hon. Richard J. Arcara,
in accordance with 28 U.S.C. § 636(b)(1)(A), for all pretrial matters. Dkt. No. 8.

American Precision Industries, Inc. (“API”) commenced this action on
December 16, 2014, seeking a declaration that the defendant Insurers, Federal
Insurance Company (“Federal”), Fireman’s Fund Insurance (“Fireman’s), and North
River Insurance Company (“North River”), must defend and indemnify API “in
connection with asbestos-related claims asserted against API,” and reimburse defense
fees and costs and settlement amounts. Dkt. No. 1. Among other policies, API seeks
coverage from North River under an alleged commercial general liability policy number
ML-208455, covering the period from December 31, 1974, through December 31, 1977,
which has annual limits of $300,000 per occurrence and in the aggregate (“the Policy”).
Dkt. No. 1, ¶ 7.

As of this writing, neither API nor North River has located a copy of the
Policy. Although API has produced secondary evidence of the Policy’s existence, such
as contemporaneous certificates of insurance, correspondence, and premium audits
referencing or describing the Policy, North River refuses to acknowledge that it issued
the Policy. Dkt. No. 24-1, p. 5.

On July 17, 2015, API served its first request for documents and first set of
interrogatories. Dkt. No. 24-1, p. 5. In its Request, API sought, among other things, a
complete copy or any known excerpts of the Policy; “all documents concerning the
Policy;” the known terms and provisions of the Policy, including the per occurrence and
aggregate limits, the period, and the premiums charged; the investigation into the
existence of the Policy, including the efforts to locate it; the identities of “each and every
person who participated in or possesses knowledge of North River’s effort to identify or
locate the Policy or portions thereof;” “the types of insurance policies for which North
River used the prefix ‘ML’ during the period from December 31, 1974, through
December 31, 1977;” “all liability forms and/or standard or form policy language North
River used in drafting general liability insurance policies sold during the same period as
the policy that included an ‘ML’ prefix,” “all documents concerning North River’s
document retention and/or document destruction policy potentially applicable to the
Policy,” and “each and every lawsuit to which North River is or has been a party
concerning a lost insurance policy with an “ML’ prefix.” Dkt. No. 24-2, pp. 8-10.

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In its response, North River objected to API’s requests as being “overly
broad, unduly burdensome, vague and ambiguous,” irrelevant, or “protected . . . by the
work product doctrine, the attorney-client privilege, or by any other applicable privilege,
immunity or rule.” Dkt. No. 24-2, pp. 5-6. According to North River, “it has never been
established that the alleged ‘policy’ was ever in fact issued by North River.” Dkt. No.
24-2, pp. 13-14. North River has asserted the affirmative defense that API bears the
burden to prove the terms of the missing Policy. Dkt. No. 7, p. 8.

On September 10, 2016, API served a deposition notice for a corporate
representative of North River. Dkt. No. 24-2, p. 29. North River objected to producing a
witness on numerous deposition topics including: its coverage positions; the existence
and terms of its policy; the sale of the policy; its search for the policy, underwriting files,
claims files, and other secondary evidence; the identities of brokers involved in issuing
the policy; North River’s document retention policy; policy forms applicable to the policy;
and North River’s affirmative defenses. Dkt. No. 24-2, pp. 34-41. North River did agree
to produce Sean C. Magee, a claims handler for North River, and Roger Quigley, former
underwriter for North River “and other affiliated entities” (Dkt. No. 24-2, p. 18), and
further agreed that if Mr. Quigley could not address “all of [API’s] topics,” API could seek
“a corporate designee.” Dkt. No. 30-1, p. 19.

API discovered that Mr. Quigley testified as North River’s Corporate
designee in an unrelated matter, Dexter v. Cosan Chemical Corp., No. 91-5436(DRB),
1999 U.S. Dist. LEXIS 23187 (D.N.J. Aug. 26, 1999), that North River used the prefix

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“ML” for “multi-peril policies, including comprehensive general liability coverage,” and
that it used “COMPAC” policy forms for policies with the “ML” prefix. Id. at *5.
At his deposition, Mr. Magee testified that North River maintains two records systems,
“PaperVision,” containing electronic forms, and “ARO,” containing paper forms. Dkt.
No. 24-2, p. 46. Mr. Magee further testified that the “PaperVision” system likely
contains “COMPAC” policy forms. Dkt. No. 24-2, p. 48.

On September 27, 2016, Counsel for North River sent an email to API’s
counsel stating:
North River does not maintain a comprehensive database of policy
forms. Some policy forms are stored in an electronic database, known as
the Papervision system. However, forms are stored in the system when
included as part of an existing policy and not as an exhaustive form
collection. North River has conducted searches of its system in an
attempt to locate the forms potentially associated with the alleged policy
named in this litigation or with an “ML” policy generally. Unfortunately, it is
impossible to identify the policy forms or coverages included without
additional information, including but not limited to a list enumerating the
specific forms used in the policy.
Dkt. No. 24-2, p. 52. API subsequently deposed Mr. Quigley, who confirmed that the
declarations page and the “COMPAC” and “MLB-202" forms shown to him at his
deposition would be part of the Policy. Dkt. No. 32, p. 3.

Currently before the Court is API’s motion to compel North River to:
produce “all versions of forms applicable to comprehensive general liability policies with
an ‘ML’ prefix, including the “COMPAC” form”; identify the precise time period(s) during
which it used the “COMPAC” form for policies with an “ML” prefix; produce

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Mr. Quigley’s testimony in cases identified by API1 and “from all other matters related
to a lost policy issued during the 1970s containing an ‘ML’ prefix or ‘COMPAC’ form;”
and designate a witness on each topic identified in API’s deposition notice. Dkt. No.
24-3,
pp. 1-3.

Fed. R. Civ. P. 26(b)(1) provides, in relevant part:
Parties may obtain discovery regarding any nonprivileged matter 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. Information within the scope of
discovery need not be admissible in evidence to be discoverable.
Motions to compel are “entrusted to the sound discretion of the district court.” In re
Fitch, Inc., 330 F.3d 104, 108 (2d Cir. 2003) (quoting United States v. Sanders, 211
F.3d 711, 720 (2d Cir. 2000)).

“It is well established under New York law that a policyholder bears the
burden of showing that the insurance contract covers the loss.” Morgan Stanley Group
Inc. v. New England Ins. Co., 225 F.3d 270, 276 (2d Cir. 2000); Consol. Edison Co. of
New York, Inc. v. Allstate Ins. Co., 98 N.Y.2d 208, 218 (N.Y. Ct. App. 2002). An

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Bondex International, Inc. v. Hartford Accident & Indem. Co. (N.D. Ohio); Friedland v.
United States Fire Ins. Co. (D. Col.); General Refractories Co. v. First State Ins. Co. ( E . D . P a . ) ;
Hinkle v. North River Insurance Co. (D. Ala.); Kelley Moore Paint v. Continental Cas.
C o . ( C a l . S u p . Ct.); NCH Corp. v. Hartford Accident & Indemnity Co. (N.J. Super. Ct.); Pacific
Employers Ins. Co. v. Admiral Ins. Co. (N.J. Super. Ct.); Plant Insulation Co. v. Fireman’s Fund Ins. Co.
(Cal. Sup. Ct.); SPX Corp. v. Ace Property & Cas. (N.C. Super. Ct.); and Warren Pumps LLC v. Century
Indemnity Co. (Del. Super. Ct.).

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insured seeking coverage under a lost or “missing” policy “may rely on secondary
evidence (i.e., evidence other than the policy itself) to prove the existence and terms of
an insurance policy,” provided the insured “demonstrates that it has made a diligent but
unsuccessful search and inquiry for the missing policy.” Burt Rigid Box, Inc. v.
Travelers Prop. Cas. Corp., 302 F.3d 83 (2d Cir. 2002) (internal quotation and citation
omitted); Bituminous Casualty Corp. v. Vacuum Tanks, Inc., 262 F.3d 455, 460-63 (5th
Cir. 2001).

District courts within the Second Circuit have relied on “specimen” or
standard policy forms as secondary evidence of a lost or destroyed policy’s terms.
Glew v. Cigna Grp. Ins., 590 F. Supp. 2d 395, 411 (E.D.N.Y. 2008) (citing Bituminous);
Burroughs Wellcome Co. v. Commercial Union Ins. Co., 632 F. Supp. 1213, 1216
(S.D.N.Y. 1986) (using standard policy forms issued by defendant insurer to determine
the scope of coverage). Witness testimony connecting vital components of coverage
can provide “reliable and competent secondary evidence” of a lost policy’s terms.
Glew, 590 F. Supp. 2d at 411.

Given that neither party has been able to locate the Policy, and North
River’s affirmative defense that API must prove the terms of the Policy’s coverage, the
policy forms sought by API are indisputably relevant to its case and must be produced.
In this regard, API’s motion to compel (Dkt. No. 24) is GRANTED. To the extent that
North River has not: produced “all versions of forms applicable to comprehensive
general liability policies with an ‘ML’ prefix, including the ‘COMPAC’ form;” identified the
precise time period(s) during which it used the “COMPAC” form for policies with an
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“ML” prefix; and designated a witness on each topic identified on API’s deposition
notice, it must do so within 30 days of this Decision and Order.

If North River cannot produce these forms, it must instead produce Mr.
Quigley’s deposition testimony in the cases specified in Dkt. No. 24-3 within 60 days of
this Decision and Order. This Court finds that it would be unduly burdensome to direct
North River to produce Mr. Quigley’s deposition testimony “from all other matters
related to a lost policy issued during the 1970s containing an ‘ML’ prefix or ‘COMPAC’
form,” and therefore, API’s request for an Order directing this is DENIED.

The parties’ joint request to extend the discovery deadline is GRANTED.
An amended scheduling order will be entered shortly.

SO ORDERED.

DATED:

Buffalo, New York
February 26, 2018

s/ H. Kenneth Schroeder, Jr.
H. KENNETH SCHROEDER, JR.
United States Magistrate Judge

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