Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-3_13-cv-08194/USCOURTS-azd-3_13-cv-08194-3/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1441 Petition for Removal- Breach of Contract

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UNITED STATES DISTRICT COURT

DISTRICT OF ARIZONA

White Mountain Communities 

Hospital Incorporated, )

)

Plaintiff, ) 3:13-cv-8194 JWS

)

vs. ) ORDER AND OPINION

)

Hartford Casualty Insurance Company, ) [Re: Motions at Docs. 166, 167]

)

Defendant. )

)

I. MOTIONS PRESENTED

At docket 166, Plaintiff/Counter-defendant White Mountain Communities Hospital

Incorporated (“White Mountain”) filed a motion to compel depositions of three Hartford

Casualty Insurance Company (“Hartford”) employees. Defendant/Counter-claimant

Hartford responded at docket 173. White Mountain’s reply is at docket 179. Hartford

requested oral argument, but an argument would not be of additional assistance to the

court.

At docket 167 Hartford filed a motion to compel three depositions and discovery

responses. White Mountain responds at docket 175. Hartford replies at docket 177. 

Oral argument was not requested and would not assist the court.

Case 3:13-cv-08194-JWS Document 183 Filed 12/09/15 Page 1 of 8
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II. BACKGROUND

Hartford issued a commercial property insurance policy to White Mountain

covering the period from April 1, 2011 thru April 1, 2012. The policy provided insurance

coverage against business income losses as well as property losses. White Mountain’s

hospital located near Springerville was affected by the Wallow Fire, which began

burning on May 29, 2011, and which led to the temporary evacuation of Springerville

through June 13, 2011. White Mountain sought payment under the policy for business

income losses and property damage. Originally, Hartford processed the business

income loss claim pursuant to the “Civil Authority” provision of the policy, which insures

against business income loss in the event access to the property is prohibited by order

of a civil authority.1 Hartford paid $433,520 based on the provision. Later, in

November, after a new adjuster was appointed to the file, Hartford decided that there

could be coverage under the “Business Income Coverage” provision in the policy2

based on reported smoke damage, but it determined that a reasonable period for

repairs would have been 60 days. It then paid another $250,000 to White Mountain for

business income lost during the additional 60 days. In total, Hartford paid White

Mountain $723,548 on the claims, consisting of a little over $40,000 for property

damage claims and $683,520 for business interruption through August 6, 2011. 

White Mountain filed suit, alleging it is entitled to be paid more money on its

business income loss claim. It brought a breach of contract claim, an insurance bad

faith claim, and a punitive damages claim against Hartford based upon Hartford’s denial

of additional payments and upon allegations of inadequate investigation and delayed

payments. The court granted summary judgment in favor of Hartford on all of White

Mountain’s claims, and it allowed Hartford to file a counterclaim for breach of contract

and bad faith and to seek recoupment based on information discovered during the

1Doc. 79-1 at p. 50.

2Doc. 79-1 at p. 64.

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litigation process. The remaining issue in the case, therefore, is whether Hartford

overpaid White Mountain business interruption losses based on its alleged

misrepresentations regarding damage to the hospital. The primary basis for Hartford’s

counterclaim is based on the allegation that White Mountain led Hartford’s adjuster to

believe that the hospital was only partially operational because of smoke damage.3

III. STANDARD OF REVIEW

Federal Rule of Civil Procedure 26(b)(1) provides for liberal discovery: “Parties

may obtain discovery regarding any nonprivileged matter that is relevant to any party’s

claim or defense.”4 However, the requested discovery must also be proportionate to the

needs of the case considering the importance of the issues at stake in the action, the

amount in controversy, the parties’ relative access to relevant information, the parties’

resources, the importance of the discovery in resolving the issues, and whether the

burden or expense of the proposed discovery outweighs its likely benefit.5 Relevance

for purposes of discovery is defined broadly; “[r]elevant information need not be

admissible at the trial if the discovery appears reasonably calculated to lead to the

discovery of admissible evidence.”6

The court must limit the requested discovery if it is shown to be “unreasonably

cumulative or duplicative;” if “the party seeking the discovery has had ample opportunity

to obtain the information;” or if the requested discovery is not proportional to the needs

3Doc. 139 at pp. 9-11. 

4Fed. R. Civ. P. 26(b)(1). 

5Fed. R. Civ. P. 26(b)(1). Rule 26(b)(1) was recently amended to “restore the

proportionality factors to their original place in defining the scope of discovery.” The

considerations that bear on proportionality have been moved from Rule 26(b)(2)(C)(iii). The

amendment “does not change the existing responsibilities of the court and the parties to

consider proportionality, and the change does not place on the party seeking discovery the

burden of addressing all proportionality considerations.” See Fed. R. Civ. P 26(b) advisory

committee’s note to 2015 amendment. 

6Fed. R. Civ. P. 26(b)(1). 

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of the case as discussed above.7 Additionally, the court may, with good cause, limit

discovery in order “to protect a party or person from annoyance, embarrassment,

oppression, or undue burden or expense.”8

III. DISCUSSION

A. Hartford’s motion to compel

Hartford seeks to depose three individuals associated with White Mountain. The

first is Suzanna Bueno. Bueno was White Mountain’s director of accounting at the time

White Mountain submitted its insurance claim. White Mountain objects to Hartford’s

deposition request on the basis that Bueno has no relevant information. It argues that

she only handled the financial aspects of White Mountain’s claim and has no knowledge

about the alleged misrepresentations made to Hartford. The record cited supports

Hartford’s request. White Mountain disclosed Bueno as a witness and anticipated that

she would testify “regarding her conversations with Hartford and review and preparation

of the updated claims.”9 Thus, White Mountain acknowledges that she communicated

with Hartford representatives about the insurance claim. Also, Jerry Campeau, White

Mountain’s CEO during the claim process, testified that she may have told Hartford that

White Mountain was in danger of shutting down.10 She was also present during a

November 2011 meeting where Hartford alleges White Mountain made specific

misrepresentations. The court finds that she could have personal knowledge regarding

the allegations in Hartford’s counterclaim, and therefore, Hartford’s request to depose

her is warranted. 

Hartford also seeks to depose Rick Jackson. Jackson was White Mountain’s

certified public accountant at the time of the insurance claim. Again, the record cited by

7Fed. R. Civ. P. 26(b)(2)(C). 

8Fed. R. Civ. P. 26(c)(1). 

9Doc. 167-1 at p. 47. 

10Doc. 167-1 at pp. 30-32. 

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Hartford demonstrates that Jackson was involved in the efforts to negotiate with

Hartford about White Mountain’s insurance claim. It also appears that he may have

been at the November 2011 meeting, which is the primary basis for Hartford’s

counterclaim.11

 Therefore, the court concludes that Hartford’s request to depose

Jackson is warranted, as it could reasonably lead to the discovery of relevant

information. 

Lastly, Hartford requests to depose Greg Was, who is White Mountain’s current

CEO. The court finds this to be a closer call. Was was not White Mountain’s CEO at

the time of the insurance claim, and therefore, he has no personal knowledge about

representations that may have been made to Hartford employees about smoke damage

or the functioning of the hospital. That said, he has been the CEO during the course of

the lawsuit; he was the CEO in August of 2014 when Hartford discovered that a

property damage specialist had toured the hospital shortly after the fire and found no

odor or smoke damage. Thus, he was CEO during the time that such information was

allegedly withheld from Hartford. Given that Hartford’s counterclaim alleges that White

Mountain concealed material information during claim processing and during litigation,

the court concludes that Was may have relevant information regarding the counterclaim. 

Also, he verified White Mountain’s discovery responses to interrogatories and requests

for production and admissions.

Hartford also argues that White Mountain failed to answer Hartford’s second set

of interrogatories and requests for production after Hartford agreed to two extensions of

time in which White Mountain could respond. A few days after the second extended

deadline passed and after an attempted meet and confer, Hartford filed its motion to

compel. It argues in the motion that White Mountain, in failing to timely respond, waived

its opportunity to object to Hartford’s requests and asks that the court direct White

Mountain to respond to its requests without objection. On the same day Hartford filed

11Doc. 167-1 at p. 147. 

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the motion to compel, White Mountain submitted its responses with objections and

without production of any documents. The failure to provide specific, timely objections

to discovery results in a waiver.12 White Mountain is directed to file another response to

Hartford’s second set of interrogatories and requests for production without objections. 

It is also directed to examine its records and make the inquiries necessary to determine

whether there are any documents responsive to Hartford’s request. 

White Mountain’s response to Hartford’s motion to compel presents arguments

that challenge the validity of Hartford’s counterclaim on the merits. However, the motion

to compel only addresses whether the requested depositions are relevant for purposes

of discovery, which it is. The merits of the counterclaim are not properly decided here. 

B. White Mountain’s Motion to Compel

White Mountain seeks to depose three Hartford employees. The first is Paul

Marriott, a director for Hartford who works in Hartford, Connecticut. Marriott is the

supervisor of national general adjuster Walter Taylor. Taylor, in turn, directly supervised

Mike Kenney, the Hartford adjuster assigned to White Mountain’s insurance claim. 

White Mountain has not met its burden of showing that Marriott could reasonably have

relevant information regarding Hartford’s counterclaim; that is, there is nothing to

suggest he has knowledge about the representations made by White Mountain

personnel or what specifically prompted Kenney to provide more money to White

Mountain in late 2011. White Mountain cites to an email Marriott wrote to counsel in

January of 2012 to demonstrate that Marriott was the “ultimate decision maker” on the

claim, but that email involves a dispute about how lost wages apply to business

interruption calculations. The issue in Hartford’s counterclaim is whether it overpaid

White Mountain based on misrepresentations and omissions regarding the operability of

the hospital and not based on miscalculations related to net income. The record cited

shows that Taylor would be the appropriate supervisor to depose, and Hartford

12Richmark Corp. v. Timber Falling Consultants, 959 F.2d 1468, 1473 (9th Cir. 1992). 

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indicates in its response that it has offered White Mountain the opportunity to redepose

Taylor, if necessary.

The second Hartford employee White Mountain seeks to depose is Peter

Gallagher. Gallagher is a forensic accountant with Hartford and is located in Hartford

Connecticut. He supervised Mary Faucher, who was the primary accountant on the

insurance claim. To demonstrate Gallagher’s relevance to the counterclaim, White

Mountain cites an email that shows Gallagher was included in a conference call in

December of 2011 to discuss White Mountain’s business income losses. As noted

above, the counterclaim involves the issue of whether White Mountain led Hartford to

believe that it was owed more business loss compensation as a result of smoke

damage. The calculations and accounting aspects of the insurance claim are not in

dispute for purposes of Hartford’s counterclaim. The court concludes that at most

Gallagher was only tangentially involved in the accounting aspect of the claim and, thus,

would not be reasonably likely to have relevant information here. 

Finally, White Mountain would like to depose Steve Palazzolo. Palazzolo, like

Taylor, is a national general adjuster for Hartford who supervises other general

adjusters. He filled in for Taylor as Kenney’s supervisor for roughly one month around

the time Hartford alleges White Mountain employees made misrepresentations about

the hospital’s status. In support for its deposition request, White Mountain cites an

email authored by Palazzolo in November of 2011 discussing the claim and the potential

property damage to the hospital.13 The email demonstrates that Palazzolo could have

relevant information regarding the counterclaim and that his deposition would be

appropriate. 

13Doc. 179-6 at p. 114. 

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V. CONCLUSION

 Based on the preceding discussion, Hartford’s motion to compel at docket 167 is

GRANTED. White Mountain's additional response to Hartford's second set of

interrogatories shall be provided within 28 days from the date this order is filed. No

attorney’s fees are warranted given that White Mountain’s opposition to the deposition

of Greg Was was substantially justified.14 White Mountain’s motion to compel at docket

166 is GRANTED as to Steve Palazzolo but otherwise DENIED. No attorney’s fees are

warranted. 

DATED 9th day of December 2015.

 /s/ JOHN W. SEDWICK

SENIOR UNITED STATES DISTRICT JUDGE

14Fed. R. Civ. P. 37(a)(5)(A)(ii). 

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