UFP Eastern Division Inc v. Nationwide Mutual Fire Insurance Co et al
ORDER: The Court DENIES AS MOOT Plaintiff's motion in limine (Dkt. No. 82 ), GRANTS IN PART AND DENIES IN PART Defendant's motion in limine (Dkt. No. 83 ), and GRANTS IN PART AND DENIES IN PART Plaintiff's motion to strike (Dkt. No. 110 ). Signed by the Honorable Richard M. Gergel on 4/6/2017. (hcic, )
IN THE UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH CAROLINA
Civil Action No. 4:15-2801-RMG
UFP Eastern Division, Inc.,j/k1a Universal )
Forest Products Eastern Division, Inc.,
Selective Insurance Company of South
ORDER AND OPINION
This matter is before the Court on Plaintiff UFP Eastern Division, Inc.' s motion in limine
and motion to strike, and Defendant Selective Insurance Company of South Carolina's motion in
limine. For the reasons set forth below, the Court grants in part and denies in part Selective's
motion in limine, denies as moot UFP's motion in limine, and grants in part and denies in part
UFP's motion to strike.
UPF, a Michigan corporation, was a framing contractor to Beazer Homes for the
development of 59 single- and multi-story residential buildings in Horry County, South Carolina
(the "Park West" project). UFP used several subcontractors on Park West, including VF Builders,
which performed the framing scope of work on 13 of the 59 buildings and which was insured by
Defendant Selective and two other insurers, Nationwide Mutual and Frankenmuth Mutual. UFP
required VF Builders to include UFP as an additional insured on its commercial general liability
insurance policy. (Dkt. No. 34-2 § 3.5.)
After the completion of Park West, the Park West Horizontal Property Regime and Park
West Homeowners' Association of Myrtle Beach, Inc. (the "Owners") claimed that damaging
water intrusion into the buildings had occurred and that the framing scope of work contributed to
that water intrusion. The Owners filed suit against Beazer on January 31, 2013, Beazer in turn
filed a third-party complaint against its subcontractors, including UFP, and UFP in tum asserted
claims against its subcontractors, including VF Builders (the "Underlying Litigation").
On April 17, 2015, UFP filed the present action in state court against its three insurers.
(Dkt. No. 1-1 at 1.) UFP asserts two causes of action. The first cause of action seeks both a
declaratory judgment regarding Selective's duty of defense in the underlying litigation and
compensatory damages for Selective's alleged breach of that duty of defense. The second cause
of action alleges that Selective failed to process UFP'sclaims in good faith. On June 23,2015
after the complaint in this action was filed but before it was served-a settlement was reached in
the Underlying Litigation. VF Builder's three insurers paid $230,000 in settlement to UFP;
Selective contributed $120,000 ofthat amount. (Dkt. No. 72-1 at 4.) The settlement was allocated
as $41,089 for construction defects and $188,911 for attorney's fees. (ld. at 7.) UFP released
Frankenmuth from all possible claims, but specifically excluded from the settlement were UFP's
claims to insurance benefits, including both defense and indemnification, under commercial
general liability policies issued by Selective or Nationwide to VF Builders, and UFP's bad faith
claims against Selective or Nationwide. (ld. at 5-7.) Also excluded were the insurers' defenses
against those claims. Those excluded issues are the subject matter of the present litigation. The
settlement agreement, however, does provide UFP's insurers an offset of $188,911 in this
litigation. (ld. at 7.)
UFP's action originally named all three insurers-Selective, Nationwide, and
Frankenmuth-as Defendants. (Dkt. No.1-I). Frankenmuth was dismissed on June 29, 2015,
shortly after the settlement agreement and before this action was removed from state court. (Dkt.
Nos. 1-2 at 1; Dkt. No. 1-3 at 1 (removal on July 16, 2015).) Nationwide was dismissed on
February 20, 2016, leaving Selective as the sole Defendant. (Dkt. No. 28.) After the complaint
was amended to name the proper Selective legal entity, both parties filed renewed motions for
summary judgment, which were denied on February 13,2017. This case is scheduled for jury trial
beginning April 18,2017. Both parties have filed motions in limine, and UFP has filed a motion
to strike Robert Gagnon as a witness.
Although not specifically provided for in the Federal Rules of Evidence, motions in limine
"ha[ve] evolved under the federal courts' inherent authority to manage trials." United States v.
Verges, Crim. No.1 :13-222,2014 WL 559573, at *2 (E.D. Va. Feb. 12,2014). "The purpose of
a motion in limine is to allow a court to rule on evidentiary issues in advance of trial in order to
avoid delay, ensure an even-handed and expeditious trial, and focus the issues the jury will
consider." Id. "Questions of trial management are quintessentially the province of the district
courts." United States v. Smith, 452 F.3d 323, 332 (4th Cir. 2006); see also United States v.
McBride, 676 F.3d 385, 403 (4th Cir. 2012) ("[A]ssessing [whether evidence is] relevan[t] is at
the heart of the district court's trial management function. "). A district court therefore has "broad
discretion" in deciding a motion in limine. Kauffman v. Park Place Hosp. Grp., 468 F. App'x 220,
222 (4th Cir. 2012). Nonetheless, a motion in limine "should be granted only when the evidence
is clearly inadmissible on all potential grounds." Verges, 2014 WL 559573, at *3.
Defendant's motion in limine
Selective moves to bar expert opinion testimony from UFP witnesses Jason Gregorie and
Kelvin Causey, including any opinion testimony about the cause of damages observed in buildings
on which VF Builders worked or the repair costs for any consequential damages arising from VF
Builder's work. (Dkt. No. 83.) The bases of Selective's motion are 1) neither witness was
identified as an expert witness, and 2) Mr. Gregorie, a professional engineer who was an expert
witness in the Underlying Litigation but is a fact witness in this case, testified in his deposition
that he "ha[s] personal knowledge as to the [Park West] facility as a whole, but not as to the
individual buildings or specifics of individual buildings." (ld. at 3.)
Regarding Mr. Gregorie, UFP argues that he worked with the Owners and with Beazer
Homes to develop the scope of repair for Park West and that he has personal knowledge about the
property damage at Park West and the scope of repair costs. (Dkt No. 91 at 2.) In reply to that,
Selective argues that a lay witness is prohibited from relying on his own professional experience
or on the reports or analyses of other persons with specialized knowledge and information. (Dkt.
No. 95 at 2 (citing James River Ins. Co. v. Rapid Funding, LLC, 65 F.3d 1207, 1214 (lOth Cir.
Selective's argument is sound but overreaching.
Mr. Gregorie may testify from his
personal knowledge about Park West, including the damages he observed and the repairs that were
deemed necessary, to the extent his "inferences do not require any specialized knowledge and
could be reached by any ordinary person." James River Ins., 658 FJd at 1214. That he is identified
as lay witness and not an expert certainly limits the potential scope of his testimony, but the Court
does not find that specialized knowledge is required in order to make any personal observations of
damages in a building development. Nor does simply stating, from personal knowledge, what
repairs were in fact undertaken appear to require specialized knowledge.
Selective specifically seeks to exclude testimony on the cause of damages observed in
buildings on which VF Builders. Mr. Gregorie may not testify about defects in or damages to
specific buildings, because he has testified that he has no personal knowledge about individual
buildings. Any opinion about specific buildings, therefore, would be impermissible unnoticed
expert opinion testimony. To the extent testimony on causation of damages in Park West generally
is relevant, Mr. Gregorie may testify from his personal experience. Although Mr. Gregorie may
not offer expert opinions as a professional engineer, the Court again is not convinced that any
testimony about causation in this case must be expert testimony-that defective workmanship may
lead to water intrusion and that water intrusion may damage a house are not necessarily facts
"beyond the realm of common experience and which require the special skill and knowledge of an
expert witness." James River lns., 658 F.3d at 1214. If, at trial, Selective believes UFP is
attempting to elicit expert opinion testimony from Mr. Gregorie, the Court will take up Selective's
objection at that time.
The Court, however, notes that defective framing work caused water intrusion damage at
Park West does not appear to be seriously contested.
To the extent the point needs to be
established, the Court sees no reason why Mr. Gregorie should not be permitted to provide
evidence. But the real issue appears to be attribution of a portion of the damages at Park West to
work VF Builders performed. UFP must somehow show that VF Builders caused the damages it
seeks to attribute to VF Builders. The potential relevance ofMr. Gregorie's testimony to that issue
is unclear, given that VF Builders only worked on a few of the Park West buildings and given that
Mr. Gregorie has no knowledge about individual buildings. The Court previously found that "Mr.
Gregorie's testimony may be important to a material issue in this case-identification of damages
in the underlying litigation that are or are not attributable to work insured by Selective." (Dkt. No.
60 at 4-5.) Given Mr. Gregorie's deposition testimony, that possibility now appears remote.
Regarding Mr. Causey, UFP's general manager of operations, Selective's argument
appears only to be that he was not noticed as an expert. Certainly, he is a lay witness and thus may
not offer expert opinion testimony. But it appears highly likely that UFP's operations manager
has personal knowledge relevant to this matter, which arises from the operations of UFP and its
subcontractors, including first-hand knowledge about damages and repairs.
The Court therefore grants Selective's motion in limine to the extent that Mr. Gregorie and
Mr. Causey may not offer expert opinion testimony at trial, but denies Selective's motion to
exclude all testimony about the cause of damages or cost of repairs at Park West.
Plaintiff's motion in limine
UFP moves to exclude evidence regarding settlements between UFP and Nationwide
Mutual Fire Insurance, Frankenmuth Mutual Insurance, State Fann Insurance, Auto-Owners
Insurance, Upon the Rock Construction, Inc., Hardworkers Construction, AC Construction, and
SAL Construction. (Dkt. No. 82.) Selective agrees that under Rule 408 of the Federal Rules of
Evidence such evidence should not be submitted to the jury. (See Dkt. No. 90.) Selective argues
that settlement evidence should be admitted as exhibits that do not go to the jury to prove set-off
amounts, which Selective argues should be detennined by the Court as a matter of law. Selective
also argues UFP should be excluded from referring to settlements with other insurers to support
its bad faith claim. In reply, UFP agrees the Court should detennine set-off amounts as a matter
of law and UFP asserts it does not intend to use settlements with other insurers to support its bad
faith claim. (See Dkt. No. 94.)
Because the parties agree on the issues raised in UFP's motion in limine, the Court denies
the motion as moot.
Plaintiff's motion to strike
Plaintiff moves to strike Robert Gagnon, Selective's initial claims adjuster for Park West
claims, as a witness for Selective because he was not identified as a witness during discovery.
(Dkt. No. 110.) Selective first identified him as a witness on March 14,2017 (after jury selection).
Rule 37 of the Federal Rules of Civil Procedure provides that "[i]f a party fails to provide
information or identify a witness as required by Rule 26(a) or (e), the party is not allowed to use
that information or witness to supply evidence on a motion, at a hearing, or at a trial, unless the
failure was substantially justified or is harmless." Fed. R. Civ. P. 37(c)(l). "[T]he basic purpose
of Rule 37(c)(1) [is] preventing surprise and prejudice to the opposing party." S. States Rack &
Fixture, Inc. v. Sherwin-Williams Co., 318 F.3d 592,596 (4th Cir. 2003). Thus, the district court
has broad discretion to determine whether a nondisclosure of evidence is substantially justified or
harmless. ld. at 597. "[I]n exercising its broad discretion to determine whether a nondisclosure
ofevidence is substantially justified or harmless for purposes ofa Rule 3 7(c)(1) exclusion analysis,
a district court should be guided by the following factors: (1) the surprise to the party against whom
the evidence would be offered; (2) the ability of that party to cure the surprise; (3) the extent to
which allowing the evidence would disrupt the trial; (4) the importance of the evidence; and (5)
the nondisclosing party's explanation for its failure to disclose the evidence." Id.
As the initial claims adjuster, Mr. Gagnon may be an important witness. That factor advises
against UFP's motion to strike, and, indeed, this Court is highly reluctant to deny the jury
testimony from important witnesses on procedural grounds. But the other Southern States factors
strongly support striking him as a witness.
The late identification of Mr. Gagnon creates
considerable surprise for UFP.! Now that a jury has been empaneled, trial cannot be delayed to
reopen discovery so there is no ability to cure that surprise. Further, allowing an insurer to present
its claims adjuster as a surprise witness in an insurance coverage case would be disruptive.
! Selective argues there is no surprise because UFP had identified him as a potential witness. (Dkt.
No. 112 at 1.) The Court finds that argument to be without merit. UFP's interrogatory response
simply shows that UFP knew he was the initial claims adjuster and therefore someone likely to
have knowledge of material facts (and that UFP had not taken any statements from him and did
not even know his address), not that he would be a witness for Defendant.
The final factor is the non-disclosing party's explanation for its failure to timely identify
the witness. Selective does not explain its late identification and instead argues that its late
identification ofMr. Gagnon is equivalent to UFP's late identification of Ms. Lagrand, Ms. Herron,
and Mr. Gregorie. (See Okt. No. 112 at 2-3.) The Court finds that to be a false equivalence. UFP
untimely identified Ms. Lagrand, Ms. Herron, and Mr. Gregorie, on March 3, 2016, three days
after the close of discovery. Selective moved to exclude those witnesses as untimely identified.
(Okt. Nos. 33, 57.) UFP responded that it first learned of the need for Ms. Lagrand and Ms. Herron
on February 22, 2016--only ten days before they were disclosed as witnesses and, as it turns out,
379 days before the jury was empaneled in this case. (Okt. No. 37 at 2-3.) The Court therefore
found UFP had shown good cause for its late identification of Ms. Lagrand and Ms. Herron,
especially since that identification was late by only one month. (Okt. No. 60 at 4.) By contrast,
Selective does not even attempt to proffer an explanation for its late identification of Mr. Gagnon
other than to say his testimony was not necessary until UFP untimely identified Ms. Lagrand and
Ms. Herron as witnesses-which happened over one year ago.
UFP also untimely identified Mr. Gregorie. The Court found UFP failed to show good
cause for his late identification, but, applying the Southern States factors, found that any harm
from his late identification could be cured by amending the scheduling order to allow Selective to
depose Mr. Gregorie, as well as Ms. Lagrand and Ms. Herron, and to identifY additional witnesses
in response to their testimony, by September 19,2016. (Id. at 4-5.) That was a clear invitation
for Selective to identify Mr. Gagnon as a witness by September 19, 2016. Selective failed to
identify him until March 14,2017, a week after jury selection.
Because the jury is empaneled, the Court cannot amend the schedule to cure the prejudice
Selective's late identification of Mr. Gagnon creates.
Absent extraordinary circumstances,
important witnesses cannot be first identified after the jury is sworn. Selective fails to show any
extraordinary circumstances. The Court therefore strikes Robert Gagnon from Selective's trial
witness list. The Court, however, agrees with Selective's position that lay witnesses used solely
for impeachment need not be identified under Rule 26 of the Federal Rules of Civil Procedure.
See Fed. R. Civ. P. 26(a)(1)(A)(i) (requiring disclosure "unless the use would be solely for
impeachment"). Selective may offer Mr. Gagnon as an impeachment witness.
For the foregoing reasons, the Court DENIES AS MOOT Plaintiffs motion in limine
(Dkt. No. 82), GRANTS IN PART AND DENIES IN PART Defendant's motion in limine (Dkt.
No. 83), and GRANTS IN PART AND DENIES IN PART Plaintiff's motion to strike (Dkt. No.
AND IT IS SO ORDERED.
.strict Court Judge
April Jp, 2017
Charleston, South Carolina
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