Chubb Custom Insurance Company v. Grange Mutual Casualty Company et al

Filing 141

ORDER granting in part and denying in part 137 Motion for Discovery. Plaintiff shall submit documents for in camera inspection. Signed by Magistrate Judge Norah McCann King on 4/17/2012. (nmk0)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
CHUBB CUSTOM INSURANCE
COMPANY,
Plaintiff,
vs.

Civil Action 2:07-CV-1285
Judge Smith
Magistrate Judge King

GRANGE MUTUAL CASUALTY
COMPANY, et al.,
Defendants.
OPINION AND ORDER
This matter is before the Court on Defendants’ Motion Pursuant to
Rule 56(d) to Conduct Additional Discovery to Discover Facts in
Opposition to Plaintiff’s Renewed Motion for Summary Judgment, Doc.
No. 137.

For the reasons that follow, the motion of defendants

(collectively, “Grange”) is DENIED in part and GRANTED in part.
I.

PROCEDURAL BACKGROUND

Several times the Court has set forth at length the factual
background of this action.

See, e.g., Opinion and Order, Doc. No.

134; Opinion and Order, Doc. No. 125.

Procedurally, on December 20,

2007, plaintiff Chubb Custom Insurance Company (“Chubb”) filed the
instant action against Grange seeking declaratory judgment related to
the Insurance Company Professional Liability Policy, Policy Number
7022-9033 (“the Policy”) that Chubb, the insurer, issued to Grange,
the insured. See Doc. No. 125, pp. 1-3. Grange responded by filing an
answer and counterclaim. Id.
On February 15, 2011, Chubb moved for summary judgment on all
claims (Doc. No. 68), and Grange moved for partial summary judgment
(Doc. No. 69).

On September 29, 2011, the Court denied in part

Chubb’s motion for summary judgment and granted Grange’s motion for
partial summary judgment. See Opinion and Order, Doc. No. 125.

The

Court deferred ruling, however, on Chubb’s motion for summary judgment
as it relates to Grange’s bad faith counterclaim, instead instructing
the parties to provide supplemental briefing on this issue.
24.

Id. at

The Court also requested “briefing on the issue of whether Grange

is entitled to an additional reimbursement of approximately $200,000
for defense costs.”

Id.

Nearly two months later, shortly before the supplemental briefing
deadline, Grange filed a motion pursuant to Fed. R. Civ. P. 60(a) to
modify the Opinion and Order (Doc. No. 125).

Grange sought to extend

the briefing schedule so that it could first conduct additional
discovery on the bad faith claim.

See Doc. No. 126.

Chubb opposed

Grange’s motion. See Doc. No. 128. On December 20, 2011, the Court
denied Grange’s motion (Doc. No. 126) but modified the parties’
supplemental briefing.

See Doc. No. 134.

Specifically, the Court

ordered Chubb to file a renewed motion for summary judgment as to
Grange’s bad faith counterclaim.

Id. at 5.

Further, the Court

ordered Grange to file a motion complying with Fed. R. Civ. P. 56(d)
if Grange concluded that additional discovery was necessary to respond
to Chubb’s renewed motion for summary judgment. Id.
On December 30, 2011, Chubb filed its renewed motion for summary
judgment as to the bad faith claim. See Doc. No. 135. In response, on
January 10, 2012, Grange filed the instant motion pursuant to Fed. R.
Civ. P. 56(d) seeking leave to conduct additional discovery relating
to its opposition to Chubb’s renewed motion for summary judgment. See
Doc. No. 137.
By this motion, Grange seeks to discover: (1) communications
2

between Chubb and its outside counsel from June 29, 2007 through
December 20, 2007 (the filing of this lawsuit); and (2) deposition
testimony of Chubb’s counsel, Stanley J. Lehman and Karen Y. Bonvalot,
regarding their communications with Chubb as to the insurance coverage
dispute from June 29, 2007 through December 20, 2007. Id. Grange
asserts that this discovery is necessary to enable Grange to oppose
Chubb’s motion as to the “reasonable justification” element of the bad
faith claim. Id. Grange explains that they were unable to earlier
pursue such privileged communications because the Court had previously
stayed discovery of privileged information in connection with the bad
faith claim. Id.; see also Doc. Nos. 22, 60.

Grange attached the

declaration of Natalie T. Furniss (“Furniss Declaration”) to its
memorandum in support of its motion. See Doc. No. 138.
Chubb opposes Grange’s motion, contending that (1) the
declaration is insufficient to support a 56(d) motion and (2) the
requested discovery is irrelevant to the Court’s bad faith analysis
and, therefore, unnecessary for Grange’s opposition to Chubb’s renewed
summary judgment motion. See Doc. No. 139.
II.

STANDARD FOR RULE 56(d) MOTIONS

Rule 56(d), formerly Rule 56(f), establishes the proper procedure
to be followed when a party concludes that additional discovery is
necessary to respond to a motion for summary judgment:
When Facts Are Unavailable to the Nonmovant. If a nonmovant
shows by affidavit or declaration that, for specified
reasons, it cannot present facts essential to justify its
opposition, the court may:
(1) defer considering the motion or deny it;
(2) allow time to obtain affidavits or declarations or to
take discovery; or
(3) issue any other appropriate order.
Fed. R. Civ. P. 56(d). Rule 56(d) is intended to provide a mechanism
for the parties and the court “to give effect to the well-established
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principle that ‘the plaintiff must receive a “a full opportunity to
conduct discovery” to be able to successfully defeat a motion for
summary judgment.’” Cardinal v. Metrish, 564 F.3d 794, 797 (6th Cir.
2009)(quoting Short v. Oaks Corr. Facility, 129 F. App’x 278, 281 (6th
Cir. 2005).

See also Plott v. Gen. Motors Corp., 71 F.3d 1190, 1195

(6th Cir. 1995) (“Before ruling on summary judgment motions, a
district judge must afford the parties adequate time for discovery, in
light of the circumstances of the case.”).
The affidavit (or declaration) required by Rule 56(d) must
“indicate to the district court [the party’s] need for discovery, what
material facts it hopes to uncover, and why it has not previously
discovered the information.” Cacevic v. City of Hazel Park, 226 F.3d
483, 488 (6th Cir. 2000) (citing Radich v. Goode, 866 F.2d 1391,
1393–94 (3d Cir. 1989)).

Whether to grant a Rule 56(d) motion falls

within the district court’s discretion. Ball v. Union Carbide Corp.,
385 F.3d 713, 720 (6th Cir. 2004).

A motion under Rule 56(d) may be

properly denied where the requesting party “makes only general and
conclusory statements [] regarding the need for more discovery,” Id.
(quoting Ironside v. Simi Valley Hosp., 188 F.3d 350, 354 (6th Cir.
1999)), or where the affidavit (or declaration) “lacks ‘any details’
or ‘specificity.’” Id. (quoting Emmons v. McLaughlin, 874 F.2d 351,
357 (6th Cir. 1989)).
III.

DISCUSSION

As an initial matter, the Court must address the fact that
Grange’s briefing has been somewhat confusing.

Grange has made the

bases for its bad faith claim anything but “consistent and clear,” as
it claims. See Reply Memorandum of Grange Mutual Casualty Company in
Support of its Motion Pursuant to Rule 56(d), Doc. No. 140, p. 1. In
its initial representation to the Court, Grange asserted that the bad
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faith claim was “not based upon Chubb’s position of no coverage,” but
instead upon Chubb’s alleged “foot-dragging” in the claims-handling
process, especially as it related to Chubb’s communication of its
coverage position to Grange.

See Reply Memorandum of Grange Mutual

Casualty Company in Support of Its Motion for Procedural Modification,
Doc. No. 129, p. 4. Now, in its Rule 56(d) memorandum in support,
Grange asserts that it needs additional discovery to show that the
coverage determination was not reasonably justified. See Doc. No. 138.
Finally, in its reply, Grange premises its need for additional
discovery on Chubb’s alleged concealment of its coverage determination
and Chubb’s alleged failure to conduct an adequate investigation of
the claim before making its determination. See Doc. No. 140.
The Court also recognizes that its earlier stay of discovery on
the bad faith claim was based in significant measure on the fact that
“the parties agree[d] that discovery relating to privileged
information [would] be necessary to the resolution of the defendants’
bad faith counterclaim.” See Order, Doc. No. 60. Therefore, the Court
finds it appropriate to proceed with its analysis of the motion before
it.
A.

Rule 56(d)
Chubb claims that Grange’s Rule 56(d) motion should fail for two

reasons. First, Chubb asserts that the Furniss Declaration is too
general and conclusory to satisfy the specificity requirements of Rule
56(d). The Court disagrees. Grange does not merely indicate that it
“needs more discovery.” See, e.g., Tillman v. Mausser, No. 2:09-cv904, 2011 WL 1659387, at *4 (S.D. Ohio May 2, 2011)(finding as
insufficient an affidavit that simply asserted need for “evidentiary
documentation”).

Grange specifies the precise, limited, discovery

that it needs, i.e., attorney-client communications identified on
5

Chubb’s privilege log and attorney depositions, and the reason that
such discovery has not been previously obtained. 1 See Memorandum in
Support of 56(d) Motion and Furniss Declaration, Doc. No. 138. Grange
also suggests that, by such discovery, it will uncover material facts
that can be used to combat the “reasonable justification” element
(albeit, articulated in various forms) of the bad faith claim
addressed in Chubb’s renewed motion for summary judgment. Id.
Ultimately, although the Furniss Declaration could perhaps have been
more detailed, Grange’s corollary briefing fills in the gaps.

Thus,

any arguable deficiency in the declaration is immaterial and will be
construed by this Court as satisfying Rule 56(d).
Chubb also argues that Grange’s Rule 56(d) motion should be
denied because the requested discovery is irrelevant to the Court’s
bad faith analysis and, therefore, not “essential” to Grange’s
opposition to Chubb’s renewed summary judgment motion. See Chubb’s
Opposition to Rule 56(d) Motion, Doc. No. 139. In this regard, the
parties delve into the merits of the bad faith claim, debating what
standard applies for determining “reasonable justification.” Id.;
Grange’s Reply Memorandum in Support of Rule 56(d) Motion, Doc. No.
140. The undersigned believes that this debate is unnecessary to the
Court’s analysis herein and is more properly left to the District
Judge’s consideration on summary judgment.
Even if the undersigned were to apply the objective standard

1

To the extent that Grange requests the production of “other
documents,” the Court finds such request too general and thus insufficient to
satisfy the standards of Rule 56(d). Moreover, the parties have already
conducted significant discovery in this action on the coverage dispute, and
there is no reason to believe that Chubb has not already identified on its
privilege log all communications regarding the coverage issue that were
withheld as protected by the attorney-client privilege.

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proposed by Chubb – i.e., that the insurer must have had a reasonable
basis for its decision and taken reasonable steps in adjusting the
claim, regardless of subjective intent – it is conceivable that the
requested discovery could provide facts material to this inquiry and
Grange’s opposition. Moreover, the Court must remind Chubb that, when
the Court agreed to stay discovery of privileged information, Chubb
specifically represented that discovery of such information “will be
necessary” to the Court’s resolution of the bad faith claim.

See

Opinion and Order, Doc. No. 60. It simply is not equitable for this
Court to allow Chubb to foreclose such discovery as “unnecessary” to
the resolution of the bad faith claim when it previously argued for a
stay of such discovery until it later became “necessary” to address
the bad faith claim.

Therefore, the Court will now consider whether,

and to what extent, Grange is entitled to the additional discovery
requested in the Furniss Declaration.
B.

Attorney-Client Privilege
Grange has requested discovery of attorney-client communications.

Whether Grange is entitled to this otherwise privileged material is
governed in Ohio by both common law and statute.
1.

Boone Exception

In Boone v. Vanliner, 91 Ohio St. 3d 209 (2001), the Ohio Supreme
Court established a common law exception to Ohio’s attorney-client
privilege in specific cases, like the one at hand, involving
allegations that an insurer denied an insured’s claim in bad faith. In
re: Prof’ls Direct Ins. Co., 578 F.3d 432, 441 (6th Cir. 2009). Boone
held that, in such bad faith cases, “the insured is entitled to
discover claims file materials containing attorney-client
communications related to the issue of coverage that were created
7

prior to the denial of coverage.” Boone, 91 Ohio St. 3d at 209,
syllabus. The critical issue is whether the documents “‘may cast
light’ on whether the insurer acted in bad faith.” In re: Prof’ls
Direct Ins. Co., 578 F.3d at 442 (quoting Garg v. State Auto. Mut.
Ins. Co., 155 Ohio App. 3d 258 (Ohio Ct. App. 2003)).
In the case sub judice, there was no formal, written denial of
claim, so the Court must first determine the appropriate date upon
which the Boone exception arose. See, e.g., Scotts Co. v. Liberty Mut.
Ins. Co., No. 2:06-cv-899, 2007 WL 1500899, at *4 (S.D. Ohio May 18,
2007)(finding that the actual scope of the Boone exception is
dependant upon the unique facts of each case).

“An outright denial of

a claim is not required in order to obtain discovery under Boone.” In
re: Prof’ls Direct Ins. Co., 578 F.3d at 442 n.8; see also Unklesbay
v. Fenwick, 167 Ohio App. 3d 408, 415, 855 N.E.2d 516 (2006). The
United States Court of Appeals for the Sixth Circuit has recognized
that, in situations where the insurer elects to defend the insured
under a reservation of rights instead of simply deny coverage, there
may be no actual coverage denial date. In re: Prof’ls Direct Ins. Co.,
578 F.3d at 442. Thus, it is reasonable for a court to construct a
date of denial for purposes of determining the scope of the Boone
exception. Id.
Here, it is undisputed that Chubb provided Grange a defense to
the underlying litigation subject to a reservation of rights. See
Order, Doc. No. 22. On May 31, 2005, Chubb issued an initial
reservation of rights letter to Grange at the outset of the underlying
litigation. See id.; Doc. No. 71-33. On August 10, 2007, Chubb issued
a supplemental reservation of rights letter to Grange after Grange
announced its shift in defense strategy from one of litigation to
settlement. See Order, Doc. No. 22; Doc. No. 71-35. In the latter
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letter, Chubb specifically noted that it believed that there were
“serious issues with respect to coverage under the Policy for any
potential settlement” that might ensue. See Doc. No. 71-35. In neither
letter, however, did Chubb deny coverage outright; rather, Chubb
stated that its articulated position with respect to coverage was
based on the facts and information known to date, making the analysis
subject to change if additional facts became known to it. See Doc.
Nos. 71-33, 71-35.
On December 12, 2007, once terms of settlement had been reached
in the underlying litigation, Grange demanded that Chubb reverse its
position and provide indemnification coverage for the settlement. See
Doc. No. 71-41. On December 20, 2007, Chubb responded to Grange’s
demand by filing the instant declaratory action.
Based on these events, it appears that the only reasonable date
to use as a constructive denial date is December 20, 2007, i.e., the
date that Chubb actually filed this action. See, e.g., In re: Prof’ls
Direct Ins. Co., 578 F.3d at 442 (approving the Magistrate Judge’s use
of the date by which the insurer made its coverage decision and
informed the insured that it would seek a declaratory judgment).
Furthermore, Chubb itself views the filing of this lawsuit as its
formal denial of indemnity coverage. See Chubb’s Renewed Motion for
Summary Judgment, Doc. No. 136, p. 17.
Therefore, any document that Chubb identified on its privilege
log as including communications with coverage litigation counsel for
the time frame June 29, 2007 through December 20, 2007, and which was
previously withheld or redacted as protected by the attorney-client
privilege, may be discoverable under Boone. See Chubb Custom’s
Privilege Log Prepared in Supplemental Response to Certain of
Defendants’ First Set of Requests for Production of Documents, Doc.
9

No. 48-2. Ohio courts prefer an in camera review of these documents
before providing them to the opposing party. See generally Scotts Co.,
2007 WL 1500899, at *5 (citing examples). Accordingly, Chubb must
produce for in camera review the following documents, in unredacted
form:2
Date
6/29/07
7/2/07
7/2/07
7/13/07
8/12/07
8/14/07
8/27/073
9/13/07
9/24/07
10/17/07
11/6/07
12/5/07

Bates Range
F00073-F00074
F00071
F00067-F00068
F00055
F00045
F00045
F00041-F00044
F00032-F00033
F00031-F00032
F00025-F00026
F00023
F00021
See Doc. No. 48-2, pp. 4-8.
2.

Ohio Revised Code § 2317.02(A)

After Boone, the Ohio General Assembly amended its privileged
communications statute, Ohio Revised Code § 2317.02(A), to create a
testimonial exception to the attorney-client privilege under limited
circumstances:
The following persons shall not testify in certain respects:
* * *
(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 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
2

Chubb may retain redactions in these documents only to the extent
that they relate to confidential and proprietary computer information, which
is not at issue here. All other redactions must be removed for the Court’s
review.
3

The date listed on the log for this document is 8/27/2008. Due to
the location of this document on Chubb’s chart, however, the Court assumes
this was a typographical error and should have read 8/27/2007. If this
document is indeed dated 8/27/2008, it need not be produced.

10

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.
Ohio Rev. Code Ann. § 2317.02(A)(2) (West 2011). Because Grange seeks
to depose Chubb’s attorneys regarding the insurance coverage dispute,
such testimony can be compelled only if the provisions of § 2317.02(A)
are met. The initial inquiry is whether Grange has made a prima facie
showing of bad faith in this case.

The Court concludes that Grange

has not.
When the Court deferred ruling on Grange’s bad faith counterclaim
to allow additional briefing, it observed that, based on the evidence
before it, “the nature of this insurance coverage dispute demonstrates
an absence of bad faith by Chubb.” Opinion and Order, Doc. No. 125, p.
24.

Indeed, the very genesis of this Rule 56(d) motion is the belief

that Grange requires more evidence to oppose Chubb’s renewed motion
for summary judgment on the bad faith counterclaim. Furthermore,
Grange admits that it “does not know” if the privileged communications
sought by Grange will reveal evidence to undermine Chubb’s position in
its motion for summary judgment; Grange speculates only that such
communications “may” do so. See Memorandum in Support of Rule 56(d)
Motion, Doc. No. 138; see also Reply Memorandum in Support of Grange’s
Motion for Modification, Doc. No. 129, p. 3 (“The fact is Grange has
no idea whether discovery [of attorney-client communications] will
reveal egregious admissions . . . or whether it will reveal anything
of any significance.”). Although Grange’s speculation regarding what
it may find related to the claim of bad faith is enough to warrant
this Court’s review of the previously redacted documents, such
speculation is insufficient to override the evidentiary privilege that
ordinarily insulates the the testimony of attorneys from the discovery
process.
11

C.

Work Product Doctrine
Grange also seeks documents that Chubb withheld from production

for reasons of “attorney-client privilege or work product.” See Chubb
Custom’s Privilege Log, Doc. No. 48-2. Thus, even if Grange is
entitled to discover certain attorney-client communications contained
in documents that fall within the Boone exception, Grange may
nevertheless not be entitled to the documents to the extent that those
documents also qualify as protected work product.
Unlike the attorney-client privilege, the work-product doctrine
is governed by federal law. See In re: Prof’ls Direct Ins. Co., 578
F.3d at 438 (noting that the work-product doctrine outright

is a

procedural rule and, as such, Fed. R. Civ. Pro. 26(b)(3) governs in a
diversity case). “The work-product doctrine protects an attorney’s
trial preparation materials from discovery to preserve the integrity
of the adversarial process.” Id. Specifically, Rule 26(b)(3) protects
from disclosure all: (1) “documents and tangible things;” (2)
“prepared in anticipation of litigation or for trial;” (3) “by or for
another party or its representative.” Id.
In the case presently before the Court, the sole issue in this
analysis is whether the requested documents were prepared in
anticipation of litigation. Id. To determine whether a document has
been prepared "in anticipation of litigation," and is thus protected
work product, the Court asks two questions: (1) whether that document
was prepared "because of" a party's subjective anticipation of
litigation, as contrasted with an ordinary business purpose; and (2)
whether that subjective anticipation was objectively reasonable. Id.
at 439 (citing United States v. Roxworthy, 457 F.3d 590, 594 (6th Cir.
2006)). If a document is prepared in anticipation of litigation, the

12

fact that it also serves an ordinary business purpose does not deprive
it of protection, although the burden is on the party claiming
protection to show that anticipated litigation was the "driving force
behind the preparation of each requested document." Id. at 439 (citing
Roxworthy, 457 F.3d at 595, 598-99) (internal citations omitted).
Due to the very nature of insurance disputes, an insurer’s
attorneys often serve two functions: providing advice on the business
decision of whether to deny coverage and providing legal guidance in
anticipation of litigation.

Thus, whether the documents at issue here

are in fact protected work product can be determined only from an
examination of the documents themselves and the context in which they
were prepared. Id. The Court will have to make such an evaluation
through an in camera review of the documents.
In sum, the Court concludes that the Boone exception applies to
allow discovery of the requested documents (not testimony) otherwise
insulated from discovery by the attorney-client privilege if those
documents are relevant to whether Chubb acted in bad faith.

These

documents, however, must be examined to verify that they satisfy the
Boone exception to the attorney-client privilege and are not otherwise
protected as work product.
WHEREUPON, Defendants’ Motion Pursuant to Rule 56(d) to Conduct
Additional Discovery to Discover Facts in Opposition to Plaintiff’s
Renewed Motion for Summary Judgment, Doc. No. 137, is DENIED in part
and GRANTED in part.

Specifically, the Court denies Grange’s motion

as it relates to the depositions of Chubb’s counsel.

The Court grants

Grange’s motion as it relates to certain documents identified on
Chubb’s privilege log, subject to the Court’s review.

Within 10 days,

Plaintiff is ORDERED to submit for in camera review the 12 documents

13

listed above, dated June 29, 2007 to December 5, 2007, which were
previously withheld or redacted as protected by the attorney-client
privilege and/or work product doctrine. The Court will then determine
which, if any, of the submitted documents must be produced to Grange.

April 17, 2012

s/Norah McCann King
Norah McCann King
United States Magistrate Judge

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