Nye v. The Hartford Accident and Indemnity Company
Filing
37
ORDER granting in part and denying in part plaintiff Nye's 16 Motion to Compel; granting in part and denying in part defendant The Hartford's 24 Motion for Protective Order. Signed by US Magistrate Judge Veronica L. Duffy on 06/18/2013. (Duffy, Veronica)
UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
WESTERN DIVISION
JEFF NYE,
)
CIV. 12-5028-JLV
)
Plaintiff,
)
ORDER ON PLAINTIFF’S
)
MOTION TO COMPEL
vs.
)
AND DEFENDANT’S REQUEST
)
FOR PROTECTIVE ORDER
THE HARTFORD ACCIDENT AND
)
[DOCKET NOS. 16 & 24]
INDEMNITY COMPANY,
)
)
Defendants.
)
)
INTRODUCTION
This diversity action is before the court on plaintiff Jeff Nye’s complaint
against defendant The Hartford Accident and Indemnity Company (“The
Hartford”) alleging bad faith, intentional infliction of emotional distress,
vexatious refusal to pay, and seeking punitive damages. See Docket No. 1-1.
Pending is Mr. Nye’s motion to compel defendant to respond to certain
discovery requests that Mr. Nye served on The Hartford. See Docket No. 16.
Defendant resists this motion and filed a separate motion for a protective order.
See Docket Nos. 24 and 28. The Chief District Judge, the Honorable Jeffrey L.
Viken, referred these motions to this magistrate judge for resolution pursuant
to 28 U.S.C. § 636(b)(1)(A).
1
FACTS
The facts relevant to the pending motion are as follows. On August 2,
2006, Jeff Nye injured his lower back while working at Knology, Inc., formerly
known as Prairie Wave Communications (“Knology”). Mr. Nye was injured
while he performed typical employment duties in a warehouse environment.
The Hartford accepted coverage of this claim. Mr. Nye’s treatment for his back
injury included physical therapy, pain relief injections, several spinal fusion
surgeries, and chiropractic treatment. Mr. Nye suffers from failed back
syndrome and chronic pain syndrome.
At various points in his treatment, Mr. Nye was released to return to
work with various restrictions, such as weight limitations. In April 2008,
Mr. Nye’s treatment providers recommended a sedentary restriction. Knology
was unable to find a suitable position to accommodate this restriction and
Mr. Nye was terminated from his employment in December 2008. Mr. Nye
continued receiving medical treatment. According to The Hartford, in April
2009 an initial petition was filed with the South Dakota Department of Labor
seeking a determination of total and permanent disability; Mr. Nye apparently
contacted The Hartford stating that he did not authorize this petition and that
he did not wish to proceed with the petition. Mr. Nye’s counsel dismissed the
initial petition without prejudice.
In July 2009, Dr. J. Parker Mickle, Physician Advisor for The Hartford,
2
determined that Mr. Nye could not return to his previous employment. In
August 2009, Mr. Nye’s personal physician, Dr. Chris Dietrich, determined that
Mr. Nye was unable to work.
In September 2009, The Hartford determined that Mr. Nye was
permanently partially disabled and began the process of compensating Mr. Nye
through worker’s compensation. According to The Hartford, Mr. Nye retained
counsel rather than complete the forms regarding permanent partial disability.
In November 2009, Mr. Nye filed another petition with the South Dakota
Department of Labor, asserting permanent and total disability. The Hartford
alleges that it complied with South Dakota law in compensating Mr. Nye with
benefits according to his condition at the time. The Hartford states that it
stopped making payments in April 2010 because the benefits available under
the policy were exhausted.
On September 12, 2010, the Social Security Administration determined
that Mr. Nye was disabled as of February 11, 2008. Mr. Nye and The Hartford
reached a settlement on August 11, 2011, which stipulated that Mr. Nye is
permanently and totally disabled. Mr. Nye alleges that he incurred substantial
costs and a reduction in disability benefits because he had to retain counsel to
reinstate his worker’s compensation benefits.
Mr. Nye alleges that The Hartford mishandled his worker’s compensation
claim. He filed a complaint in the Seventh Judicial Circuit of South Dakota,
3
alleging bad faith, intentional infliction of emotional distress, vexatious refusal
to pay, and seeking punitive damages. The Hartford removed this lawsuit to
federal court based on diversity jurisdiction.
Counsel for Mr. Nye served The Hartford with Plaintiff’s First Set of
Requests for Production of Documents on September 10, 2012. The Hartford
served plaintiff with responses to these requests on October 10, 2012, but did
not provide any documents. Plaintiff’s counsel sent a letter to counsel for the
Hartford on October 15, 2012, citing District of South Dakota orders on
discovery requests. Counsel engaged in several telephone conferences to
attempt to resolve these differences before filing the instant motions. Mr. Nye
filed a motion to compel defendant to produce the requested documents.
Docket No. 16. The Hartford filed a motion for a protective order, seeking to
limit the scope of plaintiff’s requests. Docket No. 24.
DISCUSSION
A.
Good Faith Certification
Mr. Nye’s counsel has certified that he contacted opposing counsel
numerous times prior to filing the instant motion to compel and attempted in
good faith to resolve the parties’ discovery dispute. See Docket Nos. 16 and 182. Similarly, The Hartford filed a certification asserting that counsel had
attempted to resolve discovery issues before filing a motion for protective order.
Docket No. 26. Thus, the court finds that the good faith requirements of
4
D.S.D. Local Rule 37.1 and Federal Rule of Civil Procedure 37 have been met.
B.
Scope of Discovery in a Civil Case
Federal Rule of Civil Procedure 26(b)(1) sets forth the scope of discovery
in civil cases pending in federal court:
Unless otherwise limited by court order, the scope of discovery is as
follows: Parties may obtain discovery regarding any nonprivileged
matter that is relevant to any party’s claim or defense–including the
existence, description, nature, custody, condition, and location of any
documents or other tangible things and the identity and location of
persons who know of any discoverable matter. For good cause, the
court may order discovery of any matter relevant to the subject
matter involved in the action. Relevant information need not be
admissible at the trial if the discovery appears reasonably calculated
to lead to the discovery of admissible evidence. All discovery is
subject to the limitations imposed by Rule 26(b)(2)(C).
See FED. R. CIV. P. 26(b)(1). Rule 26 contains specific limitations relative to
electronic discovery and other objections to providing discovery:
(B)
Specific Limitations on Electronically Stored Information. A party
need not provide discovery of electronically stored information
from sources that the party identifies as not reasonably
accessible because of undue burden or cost. On motion to
compel discovery or for a protective order, the party from whom
discovery is sought must show that the information is not
reasonably accessible because of undue burden or cost. If that
showing is made, the court may nonetheless order discovery
from such sources if the requesting party shows good cause,
considering the limitations of Rule 26(b)(2)(C). The court may
specify the conditions for the discovery.
(C)
When Required. On motion or on its own, the court must limit
the frequency or extent of discovery otherwise allowed by these
rules or by local rule if it determines that:
(i)
the discovery sought is unreasonably
cumulative or duplicative, or can be
5
obtained from some other source that is
more convenient, less burdensome, or less
expensive;
(ii)
the party seeking discovery has had ample
opportunity to obtain the information by
discovery in the action; or
(iii)
the burden or expense of the proposed
discovery outweighs its likely benefit,
considering the needs of the case, the
amount in controversy, the parties’
resources, the importance of the issues at
stake in the action, and the importance of
the discovery in resolving the issues.
See FED. R. CIV. P. 26(b)(2)(B) and (C). If a party fails to respond to a proper
request for discovery, or if an evasive or incomplete response is made, the party
requesting the discovery is entitled to move for a motion compelling disclosure
after having made a good faith effort to resolve the dispute by conferring first
with the other party. See FED. R. CIV. P. 37(a).
The scope of discovery under Rule 26(b) is extremely broad. See
8 Charles A. Wright & Arthur R. Miller, Federal Practice & Procedure § 2007,
36-37 (1970) (hereinafter “Wright & Miller”). The reason for the broad scope of
discovery is that “[m]utual knowledge of all the relevant facts gathered by both
parties is essential to proper litigation. To that end, either party may compel
the other to disgorge whatever facts he has in his possession.” 8 Wright &
Miller, § 2007, 39 (quoting Hickman v. Taylor, 329 U.S. 495, 507-08 (1947)).
The Federal Rules distinguish between discoverability and admissibility of
6
evidence. FED. R. CIV. P. 26(b)(1), 32, and 33(a)(2). Therefore, the rules of
evidence assume the task of keeping out incompetent, unreliable, or prejudicial
evidence at trial. These considerations, however, are not inherent barriers to
discovery.
The advisory committee’s note to the 2000 amendments to Rule 26(b)(1)
provide guidance on how courts should define the scope of discovery in a
particular case:
Under the amended provisions, if there is an objection that discovery
goes beyond material relevant to the parties’ claims or defenses, the
court would become involved to determine whether the discovery is
relevant to the claims or defenses and, if not, whether good cause
exists for authorizing it so long as it is relevant to the subject matter
of the action. The good-cause standard warranting broader discovery
is meant to be flexible.
The Committee intends that the parties and the court focus on the
actual claims and defenses involved in the action. The dividing line
between information relevant to the claims and defenses and that
relevant only to the subject matter of the action cannot be defined
with precision. A variety of types of information not directly pertinent
to the incident in suit could be relevant to the claims or defenses
raised in a given action. For example, other incidents of the same
type, or involving the same product, could be properly discoverable
under the revised standard . . . . In each instance, the determination
whether such information is discoverable because it is relevant to the
claims or defenses depends on the circumstances of the pending
action.
The rule change signals to the court that it has the authority to
confine discovery to the claims and defenses asserted in the
pleadings, and signals to the parties that they have no entitlement to
discovery to develop new claims or defenses that are not already
identified in the pleadings. . . . When judicial intervention is invoked,
the actual scope of discovery should be determined according to the
reasonable needs of the action. The court may permit broader
7
discovery in a particular case depending on the circumstances of the
case, the nature of the claims and defenses, and the scope of the
discovery requested.
See FED. R. CIV. P. 26(b)(1) advisory committee’s note. The advisory committee
also cautions courts to keep in mind that decisions as to relevance at the
discovery stage are being made “well in advance of trial.” Id. (1970
amendment). Therefore, a “flexible treatment of relevance [at the discovery
stage] is required. . .” Id.
The party seeking discovery must make a threshold showing of relevance
before production of the requested information is required. Hofer v. Mack
Trucks, Inc., 981 F.2d 377, 380 (8th Cir. 1992). “Relevancy . . . encompass[es]
‘any matter that could bear on, or that reasonably could lead to other matter
that could bear on, any issue that is or may be in the case.’ ” E.E.O.C. v.
Woodmen of the World Life Ins. Society, No. 8-03-CV-165, 2007 WL 1217919
at *1 (D. Neb. March 15, 2007) (quoting Oppenheimer Fund, Inc. v. Sanders,
437 U.S. 340, 351 (1978)). “Mere speculation that information might be useful
will not suffice; litigants seeking to compel discovery must describe with a
reasonable degree of specificity, the information they hope to obtain and its
importance to their case.” Id. (citing Cervantes v. Time, Inc., 464 F.2d 986,
994 (8th Cir. 1972)). Discoverable information itself need not be admissible at
trial; rather, “discovery of such material is permitted if reasonably calculated to
lead to the discovery of admissible evidence.” See FED. R. CIV. P. 26(b)(1)
8
advisory committee’s note (2000 amendment).
Once the party seeking discovery establishes the threshold relevance of
the requested information, the burden shifts to the party resisting discovery to
demonstrate some valid reason not to provide the discovery. Penford Corp. v.
Nat’l Union Fire Ins. Co., 265 F.R.D. 430, 433 (N.D. Iowa 2009); St. Paul
Reinsurance Co. v. Commercial Fin. Corp., 198 F.R.D. 508, 511 (N.D. Iowa
2000). Rule 26(b)(2) requires the court to limit discovery if it determines, for
example, that the discovery sought is unreasonably cumulative or duplicative
or that “the burden or expense of the proposed discovery outweighs its likely
benefit . . .” See FED. R. CIV. P. 26(b)(2)(C); see also Roberts v. Shawnee Mission
Ford, Inc., 352 F.3d 358, 361 (8th Cir. 2003) (“The rule vests the district court
with discretion to limit discovery if it determines, inter alia, the burden or
expense of the proposed discovery outweighs its likely benefit.”).
“All discovery requests are a burden on the party who must respond
thereto. Unless the task of producing or answering is unusual, undue or
extraordinary, the general rule requires the entity answering or producing the
documents to bear that burden.” Cont’ Illinois Nat’l Bank & Trust Co. of
Chicago v. Caton, 136 F.R.D. 682, 684-85 (D. Kan. 1991) (internal citation
omitted). The articulation of mere conclusory objections that something is
“overly broad, burdensome, oppressive, or irrelevant” is insufficient to carry the
resisting party’s burden–that party must make a specific showing of reasons
9
why the relevant discovery should not be had. Cincinnati Ins. Co. v. Fine
Home Managers, Inc., No. 4-09-CV-234, 2010 WL 2990118, *1 (E.D. Mo. July
27, 2010); Burns v. Imagine Films Entm’t, Inc., 164 F.R.D. 589, 593 (W.D.N.Y.
1996). “The party opposing discovery has the burden to show that its
objections are valid by providing explanation or factual support.” Hohn v.
BSNF Ry. Co., No. 8-05-CV-552, 2007 WL 2572440 at *3 (D. Neb. May 10,
2007); see also Rubin v. Islamic Republic of Iran, 349 F. Supp. 2d 1108, 1111
(N.D. Ill. 2004).
Mr. Nye’s claims are bad faith, intentional infliction of emotional distress
(“IIED”), and vexatious refusal to pay. He requests both compensatory and
punitive damages.
To prove that The Hartford acted in bad faith, Mr. Nye must show that
The Hartford had no reasonable basis for denying benefits, and that it acted
with knowledge or a reckless disregard as to the lack of a reasonable basis for
the denial of policy benefits. See Sawyer v. Farm Bureau Mut. Ins. Co., 2000
S.D. 144, ¶ 18, 619 N.W.2d 644, 649. To assert a claim of intentional infliction
of emotional distress against The Hartford, Mr. Nye must show four elements:
(1) an act by The Hartford amounted to extreme and outrageous conduct; (2)
The Hartford intended to cause Mr. Nye severe emotional distress; (3) The
Hartford’s conduct was the cause-in-fact of Mr. Nye’s distress; and (4) Mr. Nye
suffered an extreme disabling emotional response to The Hartford’s conduct.
10
Fix v. First State Bank of Roscoe, 2011 S.D. 80, ¶ 19, 807 N.W.2d 612, 618.
Plaintiff may establish the second element by showing the defendant acted
recklessly, as opposed to intentionally. Petersen v. Sioux Valley Hosp. Ass’n.,
491 N.W.2d 467, 469 (S.D. 1992); see Wangen v. Knudson, 428 N.W.2d 242
(S.D. 1988).
Mr. Nye also alleges The Hartford’s actions amount to vexatious refusal
to pay insurance benefits in violation of South Dakota law. In South Dakota,
an insured may recover the costs of its attorney fees in an action against an
insurer who “has refused to pay the full amount of such loss, and that such
refusal is vexatious or without reasonable cause.” SDCL § 58-12-3. The court
must determine three issues before it can award attorney fees: “First, whether
the insurance company refused to pay the full amount of a loss. Second,
whether the refusal was vexatious or without reasonable cause. And third,
what is a reasonable charge for the work performed to enforce the insurance
contract claim, vis-a-vis any other claims jointly brought.” Tripp v. Western
Nat. Mut. Ins. Co., 2010 WL 4791819, *1; Civ. No. 09–4023, Docket No. 105, at
3 (D.S.D. Nov. 17, 2010) (citing Biegler v. Am. Family Mut. Ins. Co., 2001 S.D.
13, ¶ 56, 621 N.W.2d 592, 606).
Mr. Nye also requests punitive damages “in order to punish and deter
Defendant from continuing in this course of conduct.” Docket No. 1-1 at 5.
Because he is seeking punitive damages, Mr. Nye must show that The Hartford
11
acted with malice, actual or implied. See Bertelsen v. Allstate Ins. Co., 2011
S.D. 13, ¶ 39, 796 N.W.2d 685, 698–99 (citing SDCL § 21–3–2). “Actual malice
is a positive state of mind, evidenced by a positive desire and intention to injure
one another, actuated by hatred or ill-will towards that person.” Id. at ¶ 40,
796 N.W. 2d at 699 (quoting Biegler, 2001 S.D. 13, ¶ 45, 621 N.W.2d at 605).
Implied malice can be inferred or imputed by law. Id. “Presumed malice may
not ‘be motivated by hatred or ill-will but is present when a person acts
willfully or wantonly to the injury of others.’ ” Id. (quoting Biegler, 2001 S.D.
13, ¶ 45, 621 N.W.2d at 605). When a party seeks punitive damages, the jury
must evaluate “(1) the degree of reprehensibility of the defendant's misconduct,
(2) the disparity between the harm (or potential harm) suffered by the plaintiff
and the punitive damages award, and (3) the difference between the punitive
damages awarded by the jury and the civil penalties authorized or imposed in
comparable cases.” Roth v. Farner–Bocken Co., 2003 S.D. 80, ¶ 46, 667
N.W.2d 651, 665–66 (citing State Farm v. Campbell, 538 U.S. 408, 418 (2003)).
The jury may consider evidence that the harm caused to a plaintiff was a
company policy or practice. Id. at ¶ 65, 667 N.W.2d at 669. With these claims
in mind, the court turns to the instant discovery dispute.
C.
Defendant’s Request for Protective Order and Procedural History
Because the grant of a confidentiality agreement or protective order
would affect plaintiff’s outstanding discovery requests and motion to compel,
12
this court will address the defendant’s motion for protective order first.
The Hartford moves for a protective order to limit the scope of plaintiff’s
discovery requests and alleviate privacy and proprietary concerns. Docket No.
25. Defendant’s motion also objects to the plaintiff’s motion to compel and
includes substantial discussion of the facts and lawsuit at issue. The Hartford
“vehemently denies that it ever acted in bad faith.” Id. at 2. The proper way to
raise such an argument is via a dispositive motion under Federal Rules of Civil
Procedure 12(b)(6) or 56, not through discovery objections.
The Hartford mentions a stipulated confidentiality agreement [Docket No.
25 at 23], but the motion requests relief beyond that confidentiality agreement.
At first, The Hartford asserts “[t]his motion does not seek an Order that
Hartford does not need to comply with Plaintiff’s discovery requests; rather, it
seeks an Order confining discovery to a reasonable scope.” Docket No. 25 at 2.
The Hartford later states: “Hartford requests that the Court enter an Order on
each of these requests that Hartford does not need to produce the requested
documents and limiting the scope of the requests.” Id. at 15-16.
The Hartford later filed a formal response to plaintiff’s motion to compel,
which incorporates the motion for protective order and essentially reiterates the
same objections. Docket No. 28. Mr. Nye filed a reply in support of his own
motion to compel and in opposition to The Hartford’s motion for protective
order. Docket No. 33. The Hartford then filed a reply in support of its motion
13
for protective order. Docket No. 35.
1.
Standards Governing Requests for Protective Orders
Federal Rule of Civil Procedure 26(c) governs the granting of a protective
order by the court, as follows:
(c) Protective Orders.
(1) In General. A party or any person from whom discovery is
sought may move for a protective order in the court where the
action is pending–or as an alternative on matters relating to a
deposition, in the court for the district where the deposition
will be taken. The motion must include a certification that the
movant has in good faith conferred or attempted to confer with
other affected parties in an effort to resolve the dispute without
court action. The court may, for good cause, issue an order to
protect a party or person from annoyance, embarrassment,
oppression, or undue burden or expense, including one or
more of the following:
(A) forbidding the disclosure or discovery;
(B) specifying terms, including time and place, for the
disclosure or discovery;
(C) prescribing a discovery method other than the one
selected by the party seeking discovery;
(D) forbidding inquiry into certain matters, or limiting
the scope of disclosure or discovery to certain matters;
(E) designating the persons who may be present while
the discovery is conducted;
(F) requiring that a deposition be sealed and opened only
on court order;
(G) requiring that a trade secret or other confidential
research, development, or commercial information not be
revealed or be revealed only in a specified way; and
14
(H) requiring that the parties simultaneously file
specified documents or information in sealed envelopes,
to be opened as the court directs.
(2) Ordering Discovery. If a motion for a protective order is
wholly or partly denied, the court may, on just terms, order
that any party or person provide or permit discovery.
(3) Awarding Expenses. Rule 37(a)(5) applies to the award of
expenses.
See Fed R. Civ. P. 26(c).
Rule 26(c) confers “ ‘broad discretion on the [district] court to decide
when a protective order is appropriate and what degree of protection is
required.’ ” Miscellaneous Docket Matter No. 1 v. Miscellaneous Docket Matter
No. 2, 197 F.3d 922, 925 (8th Cir. 1999) (quoting Seattle Times Co. v.
Rhinehart, 467 U.S. 20, 36 (1984)). Under Rule 26(c), a court may grant a
protective order only upon a showing of good cause by the moving party. Id.
The movant must articulate a particular and specific demonstration of fact, as
distinguished from “stereotyped and conclusory statements.” Id.
2.
Stipulated Confidentiality Agreement
The Hartford wishes to protect confidential information such as claim
standards and personnel information. Since the filing of the motion for
protective order, the parties have filed an executed confidentiality agreement.
Docket No. 36-1.1 Good cause appearing, Defendant’s motion for a protective
1
In his reply, Mr. Nye states that he executed this document on February
19, 2012, but the confidentiality agreement clearly states 2013 as the year of
15
order is granted in part as to the confidentiality agreement. Defendant’s
requests to limit the scope of discovery will be discussed below.
D
). .
Individual Discovery Requests: Plaintiff’s Requests for Production
of Documents
1.
The Hartford’s General Objections
At the outset of its response to Plaintiff’s First Request for Production of
Documents, The Hartford states a “General Response” and “General
Objections.” Docket No. 18-1 at 1-3. Mr. Nye argues that these objections
should be dismissed without discussion. In response, The Hartford notes that
it does not rely on the “General Objections,” because it specifically stated the
basis for objection for each discovery request.
To the extent that defendants has interposed boilerplate objections to
Mr. Nye’s requests for production before providing the substance of defendants’
responses to the requests for production, the court overrules those boilerplate
objections. “[B]oilerplate objections are unacceptable.” Kooima v. Zacklift
Intern. Inc., 209 F.R.D. 444, 446 (D.S.D. 2002). “The party resisting discovery
must show specifically how each interrogatory or request for production is not
relevant or how each question is overly broad, burdensome or oppressive.” Id.
(citing St. Paul Reins. Co., Ltd. v. Commercial Fin. Corp., 198 F.R.D. 508, 512
(N.D. Iowa 2000)).
execution.
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2.
Plaintiff’s Request No. 5: Claims Manuals
Plaintiff’s Request for Production of Documents No. 5 reads as follows:
All claims manuals, memoranda, directives, letters, and other forms
of written or computerized communication that were IN EFFECT AT
ANY TIME FROM 2004 TO PRESENT that are directed to claims
personnel, claims managers, claims supervisors, or any other person
acting on behalf of defendant Hartford in the handling of claims, that
refer or relate in any way to the handling of claims generally or to the
handling of claims of like character to the claim at issue in this
action, including without limitation;
a.
The documents reflecting defendant Hartford’s claim
settlement policies as they existed at the time defendant
denied the claim at issue in this action.
b.
The documents reflecting any subsequent change in
policy.
Docket No. 18-1 at 5-6 (emphasis in original).
The Hartford objected on four grounds. Id. at 6. First, The Hartford
argues that this request is overly broad because it is not limited in time,
subject matter, or territory. Second, The Hartford claims that the request is
irrelevant to the issues in this case and is not reasonably calculated to lead to
the discovery of admissible evidence. The Hartford argues that documents and
information presented to employees who have no knowledge of Mr. Nye’s
worker’s compensation claim are irrelevant to this lawsuit. The Hartford also
claims that the request sought information that is proprietary and confidential,
including trade secrets. Finally, The Hartford objected on the basis that the
information is requested primarily to cause undue expense and that the
17
prejudice associated with producing the requested documents outweighs any
potential probative value. Id.
Mr. Nye asserts the claims manuals will be relevant to show the
procedures followed by claims adjusters when an injured employee cannot
return to work due to a disability. Mr. Nye anticipates that these manuals will
instruct adjusters on applicable law, which will be relevant to whether the
claims adjusters knowingly violated South Dakota law. Docket No. 17 at 10.
The Hartford agreed to provide, pursuant to a confidentiality agreement,
the following worker’s compensation claims standards: Compensability
Investigation, Medical Investigation, Permanent Partial Disability, Return to
Work, Indemnity Payment, Oversight, Reserve, Independent Medical Exam,
Claim Handler Medical Management, and Claim Handler Medical Report
Review. Docket Nos. 25 at 22 and 28 at 6. The Hartford asserts that these
standards address all of the direct and peripheral issues present in Mr. Nye’s
claim and that these are the materials claims adjusters would have consulted
while evaluating Mr. Nye’s claim. Docket No. 25 at 23.
Mr. Nye continues to request all claims manuals “that refer or relate in
any way to the handling of claims generally or to the handling of claims of like
character to the claim at issue in this action.” Docket Nos. 18-1, 33. Mr. Nye
notes that The Hartford admits that it maintains an index of worker’s
compensation claims handling standards. Docket No. 33 at 3 n.1 (citing
18
Docket No. 25 at 28). Mr. Nye states that The Hartford has not specifically
stated why providing all claims manuals will be unduly burdensome.
This court has previously discussed the discoverability of claims
manuals. Signature Dev., LLC v. Mid-Continent Cas. Co., No. 11-5019, 2012
WL 4321322, at *12 (D.S.D. Sept. 18, 2012); see also Hurley v. State Farm
Mut. Auto Ins. Co., 2012 WL 1600796, *5 (D.S.D. 2012); Brown Bear v. Cuna
Mut. Group, 266 F.R.D. 310, 329 (D.S.D. 2009). In Hurley v. State Farm, the
plaintiff moved to compel discovery relating to his bad faith action against State
Farm. Hurley, 2012 WL 1600796, at *1. The plaintiff sought to recover under
the underinsured motorist (“UIM”) provisions of his policy. Id. The district
court ordered State Farm to produce the entire Automobile Insurance
Company’s claims manual, finding that this claims manual could lead to
relevant information “relating to how UIM claims are handled.” Id. at *5.
Similarly, in Brown Bear v. Cuna Mut. Group, the plaintiff’s claims
manuals request was limited to the “How to file a total disability claim”
provision of the policy in dispute. Brown Bear, 266 F.R.D. at 329. This court
found that this information could reasonably lead to evidence regarding how
policy language was applied to different policyholders. Id. In each of these
cases, the requests were tailored to claims manuals relevant to the claim at
issue.
Although the scope of discovery is quite broad, “litigants seeking to
19
compel discovery must describe with a reasonable degree of specificity, the
information they hope to obtain and its importance to their case.” Woodmen of
the World Life Ins. Society, 2007 WL 1217919 at *1 (citing Cervantes, 464 F.2d
at 994). Mr. Nye has not met his threshold burden to show that all claims
manuals are relevant to this litigation.
The court finds that worker’s compensation claims manuals may be
relevant to determine the processes followed by claims adjusters. Additionally,
worker’s compensation manuals would have a direct bearing on whether The
Hartford followed its own procedures and South Dakota law when processing
Mr. Nye’s claim. Mr. Nye has established the threshold relevance of the
requested documents as to workers’ compensation claims manual. The
Hartford has only agreed to produce a subset of the worker’s compensation
claims manual. The burden now shifts to The Hartford to demonstrate why full
discovery of all workers’ compensation claims manuals should not be provided.
The Hartford asserts that the subset2 of the worker’s compensation
claims manual it has agreed to provide “should be sufficient.” Docket No. 25 at
23. This court notes that Mr. Nye could not have requested specific standards
from the worker’s compensation manual as he does not have the index to the
2
The Hartford agrees to provide the following standards: Compensability
Investigation, Medical Investigation, Permanent Partial Disability, Return to
Work, Indemnity Payment, Oversight, Reserve, Independent Medical Exam,
Claim Handler Medical Management, and Claim Handler Medical Report
Review. Docket No. 25 at 22.
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manual. The Hartford explains that “the reluctance to provide the index was
predicated on Plaintiff’s counsel’s continued insistence that Hartford provide all
materials conceivably falling within the scope of the request.” Docket No. 35 at
5. The Hartford does not assert any specific facts to demonstrate why
providing the entire worker’s compensation manual is burdensome.
The Hartford requests in camera review of any further claims manuals
the court orders The Hartford to produce. Docket No. 25 at 23. But defendant
cites no authority or legal reason for this additional step. As discussed above,
the court will grant a protective order incorporating the terms of the stipulated
confidentiality agreement. In camera review is usually used when sensitive or
confidential information is at issue and the court must determine whether it
should be produced and, if so, what protections need be erected prior to
production. That has already been done by the parties in this case via the
confidentiality agreement. The court sees no need for in camera review and
defendant has not adequately supported the request for such review.
Therefore, Mr. Nye’s motion to compel is granted as to the entire worker’s
compensation claims manual. Any required disclosure will be in accordance
with the parties stipulated confidentiality agreement. The Hartford's request to
limit production to a subset of worker's compensation claims standards is
denied. Mr. Nye’s request for all claims manuals is likewise denied.
21
3.
Plaintiff’s Request No. 6: Personnel Files
Plaintiff’s Request for Production of Documents No. 6 reads as follows:
Copies of all personnel filed of each person who handled, reviewed,
supervised, and/or audited the Plaintiff’s claim with Defendant,
including all persons in the chain of command above these
individuals up to the head of the claims department. This request
includes, but is not limited to, the following individuals: Lee Ann
Lucas; Cory Blakeman; Bill Campbell; Wanda Hall; John Hopp; Tom
Melgoza; Janet Thomas.
Docket No. 18-1 at 6. Mr. Nye agreed that none of these documents would be
used for any purpose outside of this lawsuit or disseminated to the public
without first redacting the employee’s identifying information. Id. at 7.
The Hartford objected to this request on four grounds. First, The
Hartford claims these documents are irrelevant. Next, The Hartford asserts
that the production of personnel files would violate employees’ right to privacy.
The Hartford argues that these documents are proprietary and confidential and
include trade secrets. Finally, The Hartford objected on the basis that the
information is requested primarily to cause undue expense and that the
prejudice associated with producing the requested documents outweighs any
potential probative value. Id.
Mr. Nye asserts that personnel files may be relevant to show a “improper
corporate culture” or improper handling of his claim. Docket No. 17 at 11.
These names of the listed employees appeared in Mr. Nye’s claim file. Docket
No. 25 at 26. The Hartford responds that only Lee Ann Lucas and her
22
supervisor Cory Blakeman were involved with Mr. Nye’s claim on a day-to-day
basis. Id. Mr. Melgoza and Mr. Campbell were involved in discussions
regarding the authority to settle Mr. Nye’s claim. The Hartford objects to
production of personnel files “in the chain of command above these individuals
up to the heads of the claims department.” Id. at 26-27. The Hartford agrees
to produce the annual performance reviews of Ms. Lucas and Mr. Blakeman
and will include performance reviews, pay criteria, and information regarding
bonuses and incentives. Id. at 24-25.
Both parties acknowledge that “the district court in the Western Division
of the District of South Dakota has traditionally and uniformly allowed
discovery of personnel files in insurance bad faith cases.” Docket No. 17 at 11
and Docket No. 25 at 24 (citing Lyon v. Bankers Life & Cas. Co., CIV. 09-5070JLV, 2011 WL 124629 at *8 (D.S.D. Jan. 14, 2011)). “Personnel files may
reveal an inappropriate reason or reasons for defendant’s action with respect to
plaintiff’s claim or an ‘improper corporate culture.’ . . . However, personnel
files also typically contain documents such as health care documents, life
insurance, wages or salary, W-4s, I-9s, retirement account information,
information about employees’ bank accounts for purposes of electronic
deposits, and counseling information regarding employee assistance
programs.” Signature Dev., 2012 WL 4321322, at *13 (citing Lyon, 2011 WL
124629 at *8). The Hartford may redact or withhold these portions of the
23
employee files.
At first The Hartford asserted that the additional employees listed had
limited involvement with Mr. Nye’s claim. Docket No. 25 at 26. Later, The
Hartford stated that the additional employees were not involved. Docket No. 35
at 6. The Hartford has not set forth specific facts to demonstrate that
producing the relevant discovery would be overly broad, unduly burdensome,
or oppressive. Plaintiff’s request Number 6 is granted subject to the provisions
listed in the confidentiality agreement and redactions or withholding as
discussed above. Defendant's request that production be limited to Ms. Lucas
and Mr. Blakeman is denied.
4.
Plaintiff’s Requests Nos. 8-12: Bonus or Award Programs,
Goals, Targets, or Objectives, Performance Based Incentive
Plans, and Increasing Productivity
Plaintiff’s request numbers 8, 9, 10, 11 and 12 read as follows:
Request No. 8: Any and all documents that reference bonus or award
programs for which the personnel handling or reviewing Plaintiff’s
claims are or have been eligible in the past, from January 2004, to
the present. This would include the claims handlers, supervisors,
managers, or any other individuals in the chain of command up to
the head of Claims.
Request No. 9: Any and all documents referring to goals, targets, or
objectives from January 1, 2004, to present, which are or have been
communicated to claims personnel handling worker’s compensation
claims.
Request No. 10: Any and all documents in use since January 1,
2004, to Present, which relate to the manner in which claim
personnel, including supervisory personnel, might receive salary,
bonuses, commission or awards.
24
Request No. 11: Any and all documents used by or communicated to
claims personnel from January 1, 2004, to present, that contain
information about performance based incentive plans.
Request No. 12: All documents relating to efforts to increase
Defendant’s claim department productivity or profitability from
January 1, 2004, to present.
Docket No. 18-1 at 8-9.
The Hartford objected to the requests for bonus or award programs,
goals, targets, or objectives on the grounds that they were irrelevant, overly
broad, and sought proprietary information. Id. Further, The Hartford argued
that these requests were “propounded primarily for the purpose of causing
annoyance, harassment, and creating undue expense.” Id. Finally, The
Hartford stated that production would be unduly burdensome. Id.
The Hartford asserts that these request should be limited to Ms. Lucas and
Mr. Blakeman. Docket No. 28 at 7.
Courts in this District have held that “[q]ualifying for a monetary bonus,
or other employee incentive, because of the manner in which defendant's
employees respond to a claim, is certainly relevant to a bad faith claim.” Lyon,
2011 WL 124629 at * 10 (citing Pochat v. State Farm Mut. Auto. Ins. Co., CIV
08-5015, 2008 WL 5192427, *5 (D.S.D. Jan. 11, 2008) (“such information
[regarding employee award and financial bonus program is] ... relevant to
plaintiff's bad-faith insurance and breach of contract claims....”)). Employee
bonus plans can also be relevant to an award of punitive damages in an
25
insurance bad faith case. See id. (citing Torres v. Travelers Ins., CIV 01-5056
(Docket 327, pp. 29-31, 43) (D.S.D. 2009); see also Lillibridge v. Nautilus Ins.
Co., CIV 10-4105, 2013 WL 1896825 at *11 (D.S.D. May 3, 2013).
In Lyon, the request for bonus or award information was limited to one
department. Here, Request 8 is limited in scope to those “handling or
reviewing Plaintiff’s claims” and Request 9 is limited in scope to “claims
personnel handling worker’s compensation claims.” Requests 10, 11, and 12
shall be limited in scope to “claims personnel handling worker’s compensation
claims.” The Hartford has not demonstrated how production will be unduly
burdensome. Any confidential or proprietary information can be protected by
the confidentiality agreement in place. Requests 8-12 are granted, with the
limitation that Requests 10,11, and 12 shall be limited in scope to “claims
personnel handling worker’s compensation claims.”
5.
Plaintiff’s Request No. 13: Loss Ratios
Plaintiff’s Request 13 reads as follows:
All documents relating to efforts to reduce loss ratios or claim severity
costs on workers compensation coverage from January 1, 2004, to
present. This Request includes all documents relating to claim
severity or loss ratios for workers compensation coverage on either a
national level, regional level, branch level, or individual adjuster level,
or any other criteria whatsoever.
The Hartford objected to this request on the grounds that it was overly
broad, unduly burdensome, and sought irrelevant, proprietary and confidential
information. Further, The Hartford alleges this request is “propounded
26
primarily for the purpose of causing annoyance, harassment, and creating
undue expense.” The Hartford also asserts that the term “claims severity
experience” is undefined, vague, and ambiguous.3
Mr. Nye asserts that information relating to loss ratios is relevant to how
employees are rewarded for keeping costs low. The Hartford asserts that it
does not possess any responsive documents to this request and alternatively
that the request does not specify with particularity the documents plaintiff
seeks. Because “[c]laims ratios are inherently tied to bonus programs,”
Request No. 13 is granted for the same reasons Requests 8-12 were granted.
See Lyon, 2011 WL 124629 at *10. To the extent that The Hartford possesses
responsive documents, The Hartford shall turn these over to plaintiff.
6.
Plaintiff’s Request No. 16: Site Map
Plaintiff’s Request Number 16 reads as follows:
A site map of any company website available to Defendant’s claim
handlers that contains any kind of information about how claims are
to be handled, or about company directives, bulletins, or company
developments, or company news, or company philosophies, or any
other matters related to the company.
The Hartford asserts that it does not maintain a site map. Docket No. 25
at 28. This court cannot order the defendant to produce what it does not
possess. Accordingly, plaintiff's motion to compel as to this discovery request
3
As Mr. Nye notes, this term does not appear in the request. See Docket
No. 17 at 13 n.1. Perhaps The Hartford was referring to the term “claim
severity costs.”
27
is denied as moot. Defendant's request that production be limited in this
instance is denied as moot because there is nothing to produce. Sanctions
shall apply should it come to light at a later date that responsive documents
did indeed exist.
7.
Plaintiff’s Request Nos. 18 & 19: Bad Faith Claims and
Transcripts
Plaintiff’s Requests Numbers 18 and 19 read as follows:
Request No. 18: Any and all documents that identify past litigation
involving claims of bad faith against the Defendant. This information
is to be provided from January 1, 2004, to present.
Request No. 19: Any and all transcripts of depositions or trial
testimony of any of Defendant’s employees or officers from January
1, 2004 to present, in any suit alleging bad faith.
Docket No. 18-1 at 11-12.
The Hartford objected to these requests on the grounds that they are
overbroad and unduly burdensome and seek information that is irrelevant,
confidential, and protected by the attorney-client privilege and the work
product doctrine. The Hartford also asserts that the requested documents are
in the public record and that production would be “virtually impossible” due to
the costs and manpower that would be required.
Mr. Nye states that prior litigation claims and transcripts are relevant to
whether The Hartford knew it was acting in bad faith.4 The Hartford has
4
As The Hartford notes, Mr. Nye includes a reference to The Hartford
refusing to defend lawsuits against Mr. Nye. See Docket Nos. 17 at 14 and 28
28
detailed with specificity the costs and burden associated with producing all bad
faith prior litigation materials. See Docket No. 25 at 30-31 and Docket No. 31.
The parties have since reasonably narrowed the relevant materials to 95 cases
involving bad faith allegations against all Hartford entities for Worker’s
Compensation claims for the years 2006 to 2011. Docket Nos. 33 at 11-12 and
35 at 8. The remaining dispute centers on the method of production.
Whether The Hartford has engaged in similar conduct with other
insureds that is similar to the facts of the instant case is relevant. See
Signature Dev., 2012 WL 4321322 at *15; Lyon, 2011 WL 124629 at *13.
Likewise the transcripts related to prior lawsuits are relevant. The Hartford
has the benefit of access to the transcripts of the depositions of its officers or
other personnel who have testified in bad faith cases relating to worker’s
compensation claims. The information would certainly be available to The
Hartford in preparation for this trial. These transcripts are readily available to
defendant and would be very difficult, if not impossible, for plaintiff to obtain.
As the court noted in Lyon, “[t]he piecemeal process of obtaining this
information by plaintiff would be extremely costly and contrary to the cause of
providing a ‘just, speedy, and inexpensive determination of every action . . . . ’ ”
at 8-9. This court is only aware of the denial of benefits claims and has not
been presented with any information that The Hartford refused to defend Mr.
Nye. As such this statement (“The transcripts will also identify other evidence
that could be used to show The Hartford acted recklessly in refusing to defend
the lawsuits against Nye.”) has no bearing on the instant discovery motions.
29
Lyon, 2011 WL 124629 at *12 (citing F.R. CIV. P. 1).
Defendant has not provided a privilege log pursuant to Rule
26(b)(5)(A)(ii), but generally objects to disclosure of prior litigation materials
based on attorney-client privilege and the work product doctrine. “Documents
filed in other litigation, unless otherwise subject to a protective order under
Rule 26(c), are not protected by either the attorney-client/work product
privilege or proprietary privilege as those documents are filed as part of a
court’s record.” Id. at *14. “Testimony of defendant’s officers or personnel in
previous litigation is, by its very nature, public testimony in an adversarial
environment to which neither the attorney-client privilege nor the attorneywork product privilege could attach. A transcript of that testimony is not
privileged.” Id.
The Hartford offers to produce a list of these 95 lawsuits and suggests
that Mr. Nye can obtain this publicly available information. Mr. Nye requests
copies of the transcripts and relevant documents as this court recently outlined
in Signature Development. See Signature Dev., 2012 WL 4321322 at *16. To
require Mr. Nye to obtain these documents when The Hartford already has
access to them “places defendant at an unusually significant advantage over
this individual plaintiff litigant.” Lyon, 2011 WL 124629 at *14.
Accordingly, Mr. Nye's motion to compel as to Requests 18 and 19 is
granted in part as follows: the Hartford is ordered to produce to plaintiff a copy
30
of the complaint and answer as to each of the 95 bad faith lawsuits relating to
worker’s compensation claims, including any amended complaints and
answers thereto. In addition, if a dispositive motion was filed in any of these
cases (a Rule 12(b)(6) motion to dismiss or a motion for summary judgment),
defendant shall produce a copy of each of the briefs filed in regard to that
dispositive motion, though not the supporting affidavits and other documents.
If necessary, The Hartford must obtain these limited initial documents from
either its in-house counsel, or from outside counsel who represented The
Hartford in each of these cases. After plaintiff reviews these limited initial
pleadings, plaintiff may identify files that he believes have a factual or legal
nexus to his own claims in this case and request copies of the entire litigation
file as to those related claims. The Hartford shall produce the transcripts of
deposition or trial testimony of its employees and officers from these cases as
requested by plaintiff in their entirety. The Hartford's motion to limit the scope
of these files is denied as moot as the parties have subsequently agreed to the
limitation of 95 cases. The Hartford's request to produce only a list of cases is
denied.
CONCLUSION
Based on the foregoing, it is hereby
ORDERED that pursuant to Rule 26(c) and good cause appearing,
defendant’s motion for protective order [Docket No. 24] is granted in part as
follows:
31
1.
The court adopts and incorporates the parties’ stipulated
confidentiality agreement [Docket No. 36-1].
2.
Counsel cannot file sealed documents in CM/ECF. If it is
necessary to attached a protected document to a pleading, counsel
shall file an attachment to the pleading with a notation that the
protected document is being delivered to the Clerk of Court to be
filed under seal pursuant to the terms of this order. Counsel must
manually serve the protected document on opposing counsel.
3.
When the protected document is received by the Clerk of Court, it
will be scanned and added to CM/ECF as a sealed attachment.
The original will be destroyed after scanning unless counsel
delivers the protected document to the Clerk of Court with a
written request to return the document to counsel.
4.
To the extent the above provisions conflict with the confidentiality
agreement, the above provisions govern.
IT IS FURTHER ORDERED that plaintiff’s motion to compel [Docket No.
17] is granted in part and denied in part as more specifically described above;
defendant’s motion for protective order to limit the scope of discovery [Docket
No. 24] is denied in part as described above.
IT IS FURTHER ORDERED Plaintiff has not requested an award of
attorneys fees or any other sanction in connection with his motion. For that
32
reason, none are granted.
IT IS FURTHER ORDERED that the parties shall, within 14 days,
propose new deadlines to accomplish the orderly administration of this case.
NOTICE OF RIGHT TO APPEAL
Pursuant to 28 U.S.C. § 636(b)(1)(A), any party may seek reconsideration
of this order before the district court upon a showing that the order is clearly
erroneous or contrary to law. The parties have fourteen (14) days after service
of this order to file written objections pursuant to 28 U.S.C. § 636(b)(1)(A),
unless an extension of time for good cause is obtained. See FED. R. CIV. P.
72(a); 28 U.S.C. § 636(b)(1)(A). Failure to file timely objections will result in
the waiver of the right to appeal questions of fact. Id. Objections must be
timely and specific in order to require review by the district court. Thompson
v. Nix, 897 F.2d 356 (8th Cir. 1990); Nash v. Black, 781 F.2d 665 (8th Cir.
1986).
Dated June 18, 2013.
BY THE COURT:
/s/
Veronica L. Duffy
VERONICA L. DUFFY
UNITED STATES MAGISTRATE JUDGE
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