Little Italy Development LLC v. Chicago Title Insurance Co. et al
Filing
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Memorandum Opinion and Order: This matter is before the Court upon Plaintiff Little Italy Development LLCs Motion to Compel Production of Documents (Doc. 36 ). LID's motion is GRANTED in PART and DENIED in PART. Chicago Title must produce the documents identified in this Order for an in camera review on or before October 26, 2011. Judge Patricia A. Gaughan on 10/17/11. (LC,S)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION
Little Italy Development, LLC,
Plaintiff,
Vs.
Chicago Title Insurance Co., et al.,
Defendants.
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CASE NO. 1: 11 CV 112
JUDGE PATRICIA A. GAUGHAN
Memorandum of Opinion and Order
INTRODUCTION
This matter is before the Court upon Plaintiff Little Italy Development LLC’s Motion to
Compel Production of Documents (Doc. 36). This is an insurance coverage dispute. For the
reasons that follow, the motion is GRANTED in PART and DENIED in PART.
FACTS
Only those facts necessary for a resolution of the instant motion are set forth herein.
Plaintiff, Little Italy Development LLC (“LID”), brings this lawsuit against defendants,
Chicago Title Insurance Company and Fidelity National Title Group, Inc. (collectively,
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“Chicago Title”)1. LID purchased a title insurance policy from Chicago Title.
On July 9, 2009, Little Italy Preservation Partners sued LID regarding the use of an
easement over LID’s property. It appears that the complaint in that matter contained seven
claims. LID tendered the defense of the litigation to Chicago Title pursuant to the policy.
Chicago Title agreed under a reservation of rights to defend only count six, which alleged a
public prescriptive easement.
On November 17, 2010, Chicago Title informed LID that, under Ohio law, it had no duty
to provide a complete defense
LID issued discovery requests to Chicago Title. Chicago Title asserted the attorneyclient privilege and work-product doctrines in response to certain requests. LID now moves the
Court to compel responses to the requests and Chicago Title opposes the motion.
ANALYSIS
1.
Attorney-client privilege
LID argues that the Ohio Supreme Court’s holding in Boone v. Vanliner Ins. Co., 744
N.E.2d 154 (Ohio 2001), creates an exception to the attorney-client privilege. According to LID,
the Ohio Supreme Court concluded that “claims file materials that show an insurer’s lack of
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Chicago Title Ins. Co. argues that this motion cannot be granted as
to Fidelity National Title Group, Inc. (“Fidelity”) as LID never
sent a deficiency letter to Fidelity. This Court rejects the
argument, as defendants’ response to the deficiency letter provides,
“[t]his acknowledges receipt of your letter dated July 1, 2001, in
which you claim that discovery responses of Chicago Title
Insurance Company and Fidelity National Title Group, Inc.
(collectively “Chicago Title”) are deficient.” This demonstrates
that the parties intended to treat the alleged deficiencies in the
discovery requests as related to both parties. Accordingly,
Fidelity’s argument is rejected.
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good faith in denying coverage are unworthy” of attorney-client privilege protection. In
response, Chicago Title argues that the Ohio legislature’s amendment to O.R.C. § 2317.02
overrules the holding in Boone and requires LID to make a prima facie showing of bad faith
before the exception to the attorney-client privilege may be invoked.
Ohio law applies in analyzing the parties’ dispute as to the application of the attorneyclient privilege. Under Ohio law, the attorney-client privilege is “governed by both common law
and statute.” In re Professionals Direct Ins. Co., 578 F.3d 432, 440 (6th Cir. 2009). In Boone,
the Ohio Supreme Court opined as follows:
...[W]e hold that in an action alleging bad faith denial of insurance coverage, the insured
is entitled to discover claims file materials containing attorney-client communications
related to the issue of coverage that were created prior to the denial of coverage. At that
stage of the claims handling, the claims file materials will not contain work product, i.e.,
things prepared in anticipation of litigation, because at that point it has not yet been
determined whether coverage exists.
Boone, 744 N.E.2d at 158.
After the issuance of Boone, the Ohio legislature amended O.R.C. § 2317.02(A), to
include subpart (2). The statute reads, in relevant part:
The following persons shall not testify in certain respects:
(A)(1) An attorney, concerning a communication made to the attorney by a client in that
relation or the attorney's advice to a client, except that the attorney may testify by express
consent of the client or, if the client is deceased, by the express consent of the surviving
spouse or the executor or administrator of the estate of the deceased client. However, if
the client voluntarily testifies or is deemed by section 2151.421 of the Revised Code to
have waived any testimonial privilege under this division, the attorney may be compelled
to testify on the same subject.
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(2) An attorney, concerning a communication made to the attorney by a client in that
relationship or the attorney's advice to a client, except that if the client is an insurance
company, the attorney may be compelled to testify, subject to an in camera inspection by
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a court, about communications made by the client to the attorney or by the attorney to the
client that are related to the attorney's aiding or furthering an ongoing or future
commission of bad faith by the client, if the party seeking disclosure of the
communications has made a prima facie showing of bad faith, fraud, or criminal
misconduct by the client.
It is well-settled that subsection (A)(1) does not apply to the production of documents. In
re Professionals, 578 F.3d at 440-41. (citing Grace v. Mastruserio, 2007 WL 2216080 at *3 (“A
plain reading of the statute clearly limits the statute’s application to cases in which a party is
seeking to compel testimony of an attorney...–as opposed to cases where a party is seeking to
compel production of documents.”)). Rather, the provision creates a testimonial privilege
preventing attorneys from testifying in certain respects. See, State ex rel Leslie v. Ohio Hous.
Fin. Agency, 824 N.E.2d 990, 996 (“R.C. 2317.02(A), by its very terms, is a mere testimonial
privilege precluding an attorney from testifying about confidential communications.”).
The Court finds that a plain reading of the language in subsection (A)(2) compels the
same result. Like the language in subpart (A)(1), the language contained in subpart (A)(2) is
directed at persons “testifying.” Moreover, the exception to the statute, which requires the party
seeking disclosure of the communication to make a prima facie showing of bad faith, applies in
determining when an “attorney may be compelled to testify.” Thus, on its face, the statutory
provision creates a testimonial privilege.
Chicago Title points out that the explanatory notes to the amendment provide that “the
common law established in Boone..., is modified accordingly to provide for judicial review of
the privilege.” According to Chicago Title, the explanatory notes clarify that Boone is no longer
good law and that prior to obtaining privileged documents, LID must make a prima facie
showing of bad faith. This Court disagrees. As an initial matter, the Court finds that the
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statutory language is clear on its face. Therefore, resort to the explanatory notes is not proper.
Moreover, the Court finds that the explanatory notes can be read in conjunction with Boone.
Boone created an “exception” to the attorney-client privilege. The amendment to O.R.C. §
2317.02(A) provides that the Boone exception cannot be applied to the testimonial privilege.
Thus, while the exception may apply to the production of documents, it cannot be applied to the
testimonial privilege absent a prima facie showing of bad faith. Accordingly, the Court finds
that the amendment to O.R.C. § 2317.02(A) did not overrule Boone. Because LID seeks the
production of documents, as opposed to attorney testimony, O.R.C. § 2317.02(A)(2) does not
apply.2
Chicago Title also purports to rely on In re Professionals. According to Chicago Title,
by implication, the Sixth Circuit concluded that O.R.C. § 2317.02(A)(2) must apply to
documents. In In re Professionals, the Sixth Circuit expressly concluded that O.R.C. §
2317.02(A) applies only to attorney testimony. The court went on to address whether the
amendment to that statute, i.e., O.R.C. § 2317.02(A)(2) applied to the facts of the case. The
court concluded that the events giving rise to the lawsuit occurred before the amendment and
that the amendment could not be applied retroactively. Accordingly, the court did not reach
whether O.R.C. § 2317.02(A)(2) applies to documents. From this, Chicago Title argues that the
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Chicago Title also relies on Galion Community Hospital v.
Hartford Life and Accident Ins. Co., 2010 WL 359126 (N.D. Ohio
Jan. 29, 2010). In Galion, the district court ruled that a movant
must make a prima facie showing of bad faith before obtaining
documents otherwise subject to the attorney-client privilege.
Other than citing to the explanatory note, the opinion contains no
analysis. For example, there is no discussion of the statutory
language and the court does not address the difference between a
testimonial privilege and the production of documents.
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“implication...is that, if the amended statute did apply retroactively, it would apply to both
confidential attorney-client communications presented in testimony or...documents. Otherwise,
the Sixth Circuit would not have had to analyze whether the statute applied retroactively.” This
Court disagrees with Chicago Title’s argument. Before interpreting the scope of the statute, the
Sixth Circuit first determined whether the statute even applied to the claims at issue. To address
the issue in the reverse order, i.e., interpreting the scope of the statute before determining
whether the statute is applicable, would often result in an advisory opinion. This is precisely
what would have happened in In re Professionals, as the Sixth Circuit determined that the
amended statute did not apply to the case. Thus, the Court rejects Chicago Title’s argument that
the Sixth Circuit implied that the amendment overrules Boone. The Sixth Circuit simply did not
reach the issue as the amendment had no bearing on the case.
Having concluded that Boone applies, LID need not make a prima facie showing that it is
entitled to discover privileged communications. The Court now addresses the cutoff date for
determining which documents must be produced. LID asks the Court to impose a cutoff date of
September 2, 2011, the date on which Chicago Title responded to interrogatories denying that
Count 6 in the underlying litigation is a covered claim. In the alternative, LID argues that the
Boone cutoff date should be November 17, 2010, the date on which Chicago Title notified LID
of its position that insurers are not obligated to provide a “complete defense.” On the other
hand, Chicago Title claims that the cutoff date should be August 24, 2009, the date on which
Chicago Title sent its initial denial letter regarding all claims other than Count 6.
Upon review, the Court finds that the cutoff date for purposes of Boone discovery is
August 24, 2009. On that date, Chicago Title sent LID a denial letter, which provides in part as
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follows:
I am in receipt of the Plaintiff’s Complaint. After a careful review of the pleadings, I find
the following:
Counts I through IV and VII of Plaintiff’s Complaint specifically concern issues
surrounding the 1951 Easement or prescriptive easements appurtenant to Plaintiff....
[Paragraphs 12 and 15 contained in the Exceptions to Schedule B] exclude from coverage
any loss resulting from a judgment rendered against the Insured under Counts I through
IV and VII of Plaintiff’s Complaint. Exception no. 15 excludes from coverage rights of
private parties to use East 119 th Street, which would apply to Plaintiff, since it is a
private adjoining landowner. Count V concerns a judicial determination post-policy that
vacated East 119 th Street has become “public” by common law dedication. This
determination, as noted above, would be post-policy and excluded pursuant to Exclusions
from Coverage paragraph 3(d) for defects, liens, encumbrances, adverse claims, or other
matters attaching or created subsequent to Date of Policy. For these reasons, Chicago
[Title] denies Insured’s tender of defense on Counts I through V and VII.
Chicago [Title] accepts tender of defense for Count VI (“Covered Count”) pursuant to the
Terms and Conditions fo the Policy, pursuant to a reservation of rights more fully set
forth below.
Chicago [Title] reserves the right to deny coverage or indemnity for any loss related to a
judgment rendered in Plaintiff’s favor for Count VI of the Complaint....
The Court finds that this letter constitutes the “denial of coverage” for purposes of
Boone. In Boone, the court reasoned that:
[T]he lack of good faith in determining coverage involves conduct that occurs when
assessment of coverage is being considered. Therefore, the only attorney-client privilege
and work-product documents that would contain information related to the bad faith
claim, and, thus, be unworthy of protection, would have been created prior to the denial
of coverage.
Boone, 744 N.E.2d at 158.
LID argues that Boone has been applied to cases in which the “insured’s claim for bad
faith goes beyond the traditional bad faith denial of coverage claim.” LID relies on Scotts
Company v. Liberty Mut. Ins. Co., 2007 WL 1500899 (S.D. Ohio May 18, 2007). In Scotts, the
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insured contacted its insurer regarding environmental coverage purportedly covered by insurance
policies issued in the mid-1950s to the mid-1960s. The insurers denied that such policies existed
and eventually entered into a “complete policy buyout,” pursuant to which the insured obtained
far less compared to what coverage would have afforded. Later, the insured alleged that it
discovered evidence of insurance coverage during the relevant time and that the insurers
intentionally deceived the insureds regarding the existence of such coverage. The court held that
Boone should be applied based on the “unique facts of the each case.” Given that the case before
the court in Scotts was an “atypical” bad faith claim, which reached far beyond “the decision to
deny coverage,” the court allowed discovery of material up until the date of the policy buyout
agreement.
LID also relies on Unklesbay v. Fenwick, 855 N.E.2d 516 (Oh. Ct. App. 2006). In
Unklesbay, the insured contacted his insurer and made a claim for uninsured/underinsured
motorist’s coverage. The insurer never responded to the request and the insured sued and
ultimately asserted a claim for bad faith. The insurer argued that it never denied coverage and,
as such, by definition no Boone materials could exist. The court rejected this theory and
concluded that the basis for the bad faith claim was not the insurer’s decision to deny coverage.
Rather, the bad faith claim stemmed from the insurer’s complete failure to process, evaluate, or
investigate the claim in the first place. The court reasoned that Boone could be extended to
cover bad faith claims based, not on the decision to deny coverage, but on the failure to address a
claim at all.
Upon review, the Court finds that Scotts and Unklesbay do not support LID’s position as
the facts of those cases are simply not present. Unlike here, Scotts involved the allegation that
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the insurer deceived its insured about the very existence of coverage. Unklesbay involved a
complete failure on the part of the insurer to address its insured’s claim. In this case, Chicago
Title expressly addressed LID’s claims in the denial letter dated August 24, 2009. Chicago Title
denied coverage for all counts other than Count 6. With regard to Count 6, Chicago Title
indicated that it would provide a defense subject to a reservation of rights. The parties do not
dispute that such a defense was, in fact, provided by Chicago Title. Although LID complains
that Chicago Title improperly handled the matter after denying coverage, Boone creates an
exception to the attorney-client privilege for “conduct that occurs when assessment of coverage
is being considered.” Ohio courts have broadened this exception for situations falling outside
the scope of this provision where coverage is atypically considered. In this case, LID asks the
Court to extend this exception even further–to cover conduct occurring after the denial of
coverage in a run of the mill insurance coverage case. On the facts of this case, the Court
declines to do so. Here, LID presented its claim for defense coverage to Chicago Title. Chicago
Title responded to LID’s request by denying coverage. Although LID continued with its efforts
to convince Chicago Title that coverage should be afforded, the Court finds that expanding the
exception to the attorney-client privilege would exceed the mandate in Boone. To accept LID’s
position would essentially negate the existence of the attorney-client privilege in all bad faith
cases, as most insurers stand by their initial denial of coverage.
The Court thus rejects LID’s claim that the Boone cutoff date should be September 2,
2011. That date, which is the date on which Chicago Title responded to LID’s second set of
discovery requests in this litigation, is just days before the filing of this motion to compel.
According to LID, this is the first time Chicago Title converted its reservation of rights letter into
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a denial of coverage with respect to Count 6. LID’s suggested date ignores the fact that the
thrust of this litigation is Chicago Title’s alleged failure to provide a complete defense for all of
the claims, regardless of whether underlying coverage exists. The vast majority of the coverage
issues were addressed in the August 24, 2009, denial of coverage letter.
The Court further rejects LID’s alternative date, i.e., November 17, 2010, the date on
which Chicago Title notified LID of its position that insurers are not obligated to provide a
“complete defense.” On August 24, 2009, Chicago Title informed LID that it would provide a
defense to only one of the claims asserted against LID. Thus, it was apparent that Chicago Title
did not believe it was obligated to provide a “complete defense.” While the November 17, 2010
letter may have clarified Chicago Title’s position, it is undisputed that coverage was denied on
August 24, 2009. Accordingly, the Court finds that, for purposes of Boone, LID is entitled to all
claims file documents created on or before August 24, 2009, the date on which Chicago Title
denied coverage.
Upon review of the revised privilege log (ECF 36-7), it appears that none of the claims
file documents prepared prior to August 24, 2009, were withheld based on the attorney-client
privilege. As Chicago Title need not produce any document created after August 24, 2009 and
withheld based on the attorney-client privilege, there are no documents to produce based on
Boone.
2. Work-product doctrine
Unlike the attorney-client privilege, the work-product doctrine is governed by federal
law. See, In re Professionals Direct, 578 F.3d 432, 438 (6th Cir. 2009)(noting that the workproduct doctrine is a procedural rule and, as such, federal law will govern in a diversity case).
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Federal Rule of Civil Procedure 26(b)(3) protects from disclosure “documents and tangible
things that are prepared in anticipation of litigation...by or for another party or its
representative.”
To determine whether a document has been prepared ‘in anticipation of litigation,’ and is
thus protected work product, we ask two questions: (1) whether that document was
prepared ‘because of’ a party’s subjective anticipation of litigation, as contrasted with
ordinary business purpose; and (2) whether that subjective anticipation was objectively
reasonable.
In re Professionals, 578 F.3d at 439. The burden is on Chicago Title to show that “anticipated
litigation was the driving force behind the preparation of each requested document.” Id. (Internal
citations and quotations omitted).
LID argues that the privilege log provides an insufficient basis to determine whether the
work-product doctrine protects documents from disclosure. Specifically, LID claims that it is
not possible to tell whether a particular document was prepared “in anticipation of litigation.”
As such, LID asks the Court to conduct an in camera review of the documents for which
Chicago Title claims work-product protection. In response, Chicago Title cites a case from the
Southern District of Indiana in which the court opined that documents created after the denial of
coverage are “presumed protected” by the work-product doctrine.
Upon review, the Court finds that an in camera review of the documents is necessary.
See, In re Professionals Direct, 578 F.3d at 439 (noting that “whether the documents at
issue...were in fact prepared in anticipation of litigation can only be determined from an
examination of the documents themselves and the context in which they were prepared”). Even
if the Court “presumed” that the documents were protected, the Court finds that the more prudent
course is to analyze the documents and independently determine whether the work-product
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doctrine applies. As such, Chicago Title must produce all documents on the privilege log for
which only the work-product doctrine is invoked. To the extent Chicago Title asserted both the
attorney-client privilege and work-product doctrine for documents created after August 24, 2009,
these documents need not be produced. As set forth above, no exception to the attorney-client
privilege exists with respect to these documents and thus they are protected from disclosure on
that basis.3 The Court need not determine whether they are also protected from disclosure under
the work-product doctrine. Accordingly, Chicago Title must produce to the Court the following
documents from the privilege log: Docs. 2, 7, 13, 16, 29, 38, 43, 46-52, 54, 58, 59, 125-128, and
131. The documents must be produced on or before October 26, 2011.
3. Other deficiencies
a. Request No. 17
LID asks this Court to order Chicago Title to respond “more fully” to Request for
Production No. 17. The request and the response are as follows:
REQUEST NO. 17: All documents referring or related to any practice or policy of
Chicago Title to decline to defend all claims in a lawsuit against your insured when at
least one of the claims in the suit is a covered claim.
RESPONSE: ....To the extent this request seeks non-privileged documents created and
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Although LID generally asks that the Court “review in camera all
documents Chicago Title is currently withholding that may cast
light on its bad faith [claim],” LID does not point to any particular
document set forth in the privilege log for which it claims the
attorney-client privilege was wrongly invoked. Rather, LID rests
with its argument that the attorney-client privilege is not
applicable. Accordingly, the Court finds that it need not conduct
an in camera review to determine whether Chicago Title
improperly relied on the attorney-client privilege as the privilege
log sets forth sufficient detail and LID fails to offer any argument
to the contrary.
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maintained in the context of Chicago Title’s normal role as title insurer and not in
anticipation of litigation, Chicago Title has no such documents aside from the title policy
itself, which Chicago Title will produce. It is possible that individual employees of
Chicago Title have published articles concerning this subject. Chicago Title, however,
has no knowledge whether such material exists, and even if it does exist, Chicago Title
does not collect or maintain such material. Further, if such material exists, it would be
equally available to LID as it would be Chicago Title.
LID argues that the parties corresponded concerning the meaning of the phrase “practice
or policy,” and that Chicago Title’s response to this request is too narrow. As such, Chicago
Title asks the Court to order LID to supplement its response to state affirmatively that it has
looked for documents relating to a policy, practice, guideline, or operating procedure regarding
the complete defense issue. Chicago Title argues that its response is complete on its face and
that the Court should not grant the relief LID requests.
Upon review, the Court agrees with Chicago Title. The response is complete on its face
and LID offers nothing to suggest that Chicago Title narrowly interpreted the definition of
“practice or policy.” To the contrary, the response not only identifies the title policy, but also
discusses the fact that employees may have written articles on the subject. There is nothing on
the face of the response suggesting that it is incomplete. Moreover, the Court has reviewed the
correspondence cited by LID and finds nothing suggesting that the response should be
supplemented. Accordingly, LID’s request is denied.
b. Request No. 21
In Request No. 21, LID seeks “all documents related to Chicago Title’s approval or
denial of claims made by similarly situated insureds.” Chicago Title objected on the grounds
that the request is unduly burdensome and seeks irrelevant information. During the meet-andconfer, LID offered to narrow the scope of the Request to similarly situated insureds in Ohio.
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According to Chicago Title, the request, even if limited to Ohio insureds, is unduly burdensome.
Chicago Title argues that it would be required to search through all of its files in order to
determine whether an insured made a claim under Ohio law. Chicago Title claims that, to the
extent the documents are even relevant, the burden outweighs any usefulness of the discovery as
the “great majority of [the documents] have no relationship to the subject matter.”
Upon review, the Court finds that Chicago Title need not respond to this Request as the
burden outweighs the benefits of the discovery. Although “similarly situated insured” is defined
as any insured having the same policy language who demanded a complete defense where at
least one but fewer than all claims were covered under the insured’s policy, the request is not
limited to the “complete defense” issue. Rather, the request seeks all documents related to all
claims of similarly situated insured. Thus, the request seeks coverage determinations other than
the coverage claims at issue in this case or “complete defense” claims, so long as the insured
meets the definition of “similarly situated insured.” LID generally argues that the documents are
relevant to its bad faith claim. These documents, however, would have no bearing on the issues
in this lawsuit, including LID’s bad faith claim. Moreover, Chicago Title would have to search
through every single claim file in order to determine whether a particular insured even meets the
definition of “similarly situated insured.” This would involve not only comparing the policy
language at issue, but also researching the particulars of every single claim. As Chicago Title
points out, limiting the request to Ohio insureds would require it to conduct an initial sweep in
any event. In all, the Court finds that the burden on Chicago Title to search all of its claim files
outweighs any potential relevancy of the documents. Accordingly, LID’s request is denied.
c.
Request No. 22
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In Request No. 22 LID, seeks “all documents related to the financial impact of Chicago
Title’s delays in handling and/or responding to claims.” Chicago Title objected to this request.
LID later clarified that it is seeking “information relating to the financial benefit Chicago Title
gains from its practice of repeatedly transferring claims files and failing to respond to claims and
status inquiries made by its insureds.” Chicago Title argues that LID’s “clarification”
demonstrates that the objection is valid as the “clarification” is vague, overly broad,
argumentative, based on a false predicate, and not proffered to discover relevant information.” It
appears that Chicago Title indicated that it did not understand the request and, alternatively, it
possesses no responsive documents. In its briefing, Chicago Title indicates that it “stands by its
initial objection.”
Upon review, the Court finds that LID’s request must be denied. The Court agrees with
Chicago Title that the request is not clear and imposes an obligation to provide discovery based
on what Chicago Title finds to be a “false predicate.” Since Chicago Title claims that it does not
“engage in a practice of unwarrantedly transferring files of delaying its response to claimants,” it
would follow that no documents regarding any financial impact would exist. Even so, Chicago
Title indicated in its response letter that “to the extent LID is asking whether there are
documents reflecting an intentional decision to delay claims for a financial benefit, none exist.”
The Court finds that Chicago Title’s response is sufficient. Accordingly, LID’s request is
denied.
CONCLUSION
For the foregoing reasons, LID’s motion is GRANTED in PART and DENIED in PART.
Chicago Title must produce the documents identified in this Order for an in camera review on or
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before October 26, 2011.
IT IS SO ORDERED.
/s/ Patricia A. Gaughan
PATRICIA A. GAUGHAN
United States District Judge
Dated: 10/17/11
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