Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-3_13-cv-08194/USCOURTS-azd-3_13-cv-08194-0/pdf.json

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

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

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: Motion at docket 58]

)

Defendant. )

)

I. MOTION PRESENTED

At docket 58 plaintiff White Mountain Communities Hospital Incorporated (“White

Mountain”) moves to compel defendant Hartford Casualty Insurance Company

(“Hartford”) to supplement its January 30, 2014 response to White Mountain’s discovery

requests. The statement required by local civil rule 37.1 is at docket 59, and there is a 

supplement at docket 67. Hartford responds at docket 73, and White Mountain replies

at docket 82. Oral argument would not assist the court.

II. STANDARD F REVIEW

Rule 37(a)(3)(B) authorizes a party to move for an order compelling discovery. 

The scope of permissible discovery is broad. Rule 26(b)(1) provides that a party may

Case 3:13-cv-08194-JWS Document 106 Filed 12/08/14 Page 1 of 11
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

obtain discovery of any non-privileged information which is relevant to any claim or

defense. The information sought need not be admissible at trial, but it must be

reasonably calculated to lead to the discovery of admissible evidence.

III. BACKGROUND

White Mountain obtained a commercial property insurance policy underwritten by

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

coverage for business income losses in addition to property damage. White

Mountain’s hospital was affected by the wildfire known as the Wallow Fire. That wildfire

led to the temporary evacuation of many residents within the area served by White

Mountain. White Mountain sought payment under the policy for property damage and

business income losses. Hartford began its processing of White Mountain’s claim in

June of 2011. Hartford paid White Mountain $723,548 on the claims, of which

$683,520 was paid on the business income claim. Payment was made on or before

June 6, 2012, when Hartford issued its final claim correspondence.

White Mountain contends in this lawsuit that it is entitled to be paid substantially

more money on the business income claim. Its expert has estimated the loss of

business income to be between $2,760,756 and $3,214,978. White Mountain’s claim is

based in large part on the proposition that the Wallow Fire so devastated the area

served by White Mountain that residents were slow to return to the area and that their

prolonged absence led to a substantial, if temporary, diminution in the demand for

White Mountain’s services and an associated loss of income.

-2-

Case 3:13-cv-08194-JWS Document 106 Filed 12/08/14 Page 2 of 11
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

White Mountain filed suit against Hartford in state court on June 4, 2013. 1

 Its

complaint includes a claim for breach of the insurance contract, a claim of bad faith

arising from the manner in which Hartford adjusted White Mountain’s request for

payment of insurance benefits, a claim that Hartford was unjustly enriched, and a claim

for punitive damages based on Hartford’s allegedly outrageous and malicious conduct

in delaying payment and denying full payment to White Mountain.2

IV. DISCUSSION

White Mountain asks that Hartford be required to supplement some of its

January 30, 2014 discovery responses to White Mountain’s First Request for

Production of Documents. Specifically, it asks the court to order Hartford to respond

further to Requests for Production Nos. 2, 5 , 6, and 8. In its reply memorandum, White

Mountain seeks an order compelling Hartford to further respond to Requests for

Production Nos. 13, 14, and 17. The court declines to consider that request, because

the relief sought was first raised in a reply memorandum to which Hartford has not had

an opportunity to respond.3

1The case was timely removed to this court based on diversity of citizenship.

2Doc. 1-1 at pp. 14-16.

3Carepartners, LLC v. Lashway, 2007 WL 321383 *3, n.6 (W.D. Wash. 2007) (taking

same position). While the supplemental Local Rule 37.1 statement did precede Hartford’s

response, there was no argument regarding Requests Nos. 13, 14 or 17 in the underlying

motion. In responding to the motion, Hartford did not address the supplemental statement.

There is nothing in Local Rule 37.1 which calls for a response to a statement itself. Moreover,

filing a supplemental statement is at odds with the text of the local rule, which ties the statement

to the underlying motion.

-3-

Case 3:13-cv-08194-JWS Document 106 Filed 12/08/14 Page 3 of 11
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

A. Request Nos. 2 and 5

As pertinent to the pending motion, Request No. 2 asked for copies of claims

manuals, training manuals, and claim handling guidelines.4 Request No. 5 asked for all

documents relating to “Hartford Insurance’s Corporate Incentive Program.”5 As

explained in White Mountain’s motion papers, “Plaintiff requested disclosure of

Hartford’s claims standards and incentive program to understand how Hartford

employees evaluate claims of this type and how the Hartford compensates its

employees.”6 White Mountain contends that without these materials, it is not able to

assess the reasonableness of Hartford’s claims handling. Of course, this is a topic

relevant to both the contract and bad faith claims pled in the complaint. 

Hartford opposes production of these materials on several grounds. First, it

argues that when White Mountain deposed Hartford claims adjuster Michael Kenny and

Hartford’s forensic accountant Mary Faucher, White Mountain’s counsel asked no

questions about the subject matter of Requests Nos. 2 and 5.7 The tacit assumption is

that failure to question the witnesses forecloses any further discovery, although Hartford

cites no authority for that proposition. Mr. Kenny’s deposition was taken on June 3,

4Doc. 59 at p. 2. The request sought additional materials, but they are not specifically

addressed in White Mountains’ briefing.

5

Id. at pp. 3-4.

6Doc. 58 at p. 5.

7Doc. 73 at pp. 4-5.

-4-

Case 3:13-cv-08194-JWS Document 106 Filed 12/08/14 Page 4 of 11
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2014.8

 Ms. Faucher’s deposition was noticed for June 19, 2014,9

 and taken on that

date.10 By the time of the depositions, White Mountain had little information about the

topics save what was provided by Hartford’s initial response dated January 30, 2014,

and its supplemental response dated March 28, 2014. 11

Hartford’s initial response to Request No. 2 stated that “Hartford does not utilize

‘claims manuals,’ training manuals,’ or ‘claim handling guidelines.’ Hartford will produce

relevant portions of its trade secret and proprietary Claims Excellence Standards upon

entry of an acceptable Protective Order.”12

 In its supplemental response Hartford

stated that it was producing portions of the Claims Excellence Standards pursuant to

the protective order.13 Hartford’s initial response to Request No. 5 consisted of a

lengthy objection and a failure to produce any responsive documents.14 This position

was essentially repeated in its supplemental response.15

As the preceding shows, before the depositions were taken, Hartford had

produced no material responsive to Requests Nos. 2 and 5, save selected extracts from

its Claims Excellence Standards. Indeed, Hartford basically said the information sought

8Doc. 74.

9Docs. 33 and 73 at p. 4.

10Doc. 73 at p. 4.

11Doc. 73-1, at pp. 44 et seq.

12Doc. 59 at p. 3.

13

Id.

14

Id. at pp. 4-5.

15Doc. 73-1 at p. 48.

-5-

Case 3:13-cv-08194-JWS Document 106 Filed 12/08/14 Page 5 of 11
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

did not exist. Under these circumstances Hartford’s reliance on the lack of deposition

questions by White Mountain’s counsel about the materials sought in Requests Nos. 2

and 5 is unreasonable.

Hartford’s second argument against production of additional documents is that,

aside from additional portions of the Claims Excellence Standards, it has nothing to

produce responsive to Requests Nos. 2 and 5.16 It also resists providing additional

material from the Claims Excellence Standards on the grounds that the unproduced

portions are not relevant.17

The proposition that Hartford has nothing which is the functional equivalent of

claims manuals, training manuals or claims handling policies is implausible in the

extreme. It is inconceivable that a large insurance company which uses many claims

adjustors could operate without standards for training the adjustors and without

standards guiding the adjustors’ work. Perhaps Hartford uses terms other than

manuals or policies, but it must have the kind of standards embraced within the concept

of training manuals and claims handling manuals and policies. Hartford’s equivalent of

training manuals, claims handling manuals, and claims handling polices may be

contained somewhere in what it calls Claims Excellence Standards, or elsewhere. The

nomenclature is not controlling. Moreover, White Mountain points to the testimony of

Mary Faucher, Hartford’s financial analyst which supports the proposition that Hartford

16Doc. 73 at p. 5.

17

Id.

-6-

Case 3:13-cv-08194-JWS Document 106 Filed 12/08/14 Page 6 of 11
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

actually does have such standards.18

 In the Declaration of May Faucher submitted by

Hartford, Ms. Faucher avers that “I prepare and present guidelines and procedures to

insurance adjusters for smaller business interruption claims.”19 The declaration goes on

to say that she also provides adjustors with outlines of documents they should obtain

and that she prepares loss tracking reports.20

Hartford’s remaining argument against providing a further response to Requests

Nos. 2 and 5 is that the materials in its Claims Excellence Standards not already

produced are both irrelevant and proprietary trade secrets. Given the broad scope of

discovery established by the Federal Rules of Civil Procedure, the argument that the

materials are irrelevant fails. The request for these materials is reasonably calculated

to lead to the discovery of admissible evidence. Neither is Hartford’s assertion that the

material include trade secrets a bar to disclosure to White Mountain. As the Ninth

Circuit has indicated, the fact that trade secrets are important does not support the

inference “that a trade secret need never be disclosed. A trade secret must . . . be

disclosed where upon a proper showing it is made to appear that such disclosure is

relevant and necessary . . . .”21 White Mountain has shown that how Hartford handles

claims is critical to the success (or failure) of White Mountain’s lawsuit. In addition, it

bears emphasis that the existence of a comprehensive protective order created by

18Doc. 58 at pp. 6-7.

19Doc. 73-1 at p. 54.

20

Id.

21Hartley Pen Co. v. U.S. Dist. Court, 287 F.2d 324,328 (9th Cir. 1961).

-7-

Case 3:13-cv-08194-JWS Document 106 Filed 12/08/14 Page 7 of 11
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

counsel and approved by the court22

, as well as White Mountain’s recent representation

that it will not disclose any of the documents it seeks to third parties,23 provides

adequate protection for Hartford’s interest in keeping its claim handling practices

shielded from competitors. Hartford will be ordered to supplement its responses to

Request Nos. 2 and 5.

B. Requests Nos. 6 and 8

Request No. 6 essentially sought the personnel file for each adjustor who worked

on adjusting White Mountain’s claim. The persons known to be involved were listed as

Eloisa E. Gutierrez, Aaron Byrum, Michael Kenny, and Mary Faucher.24 Hartford

objected and provided no documents.25

 Request No. 8 sought “all quality assurance

audits since January 1, 2006,” for Byrum, Kenny, and Faucher, plus any other Hartford

employee who supervised them or made claims handling decisions on White

Mountain’s claim.

26

 Hartford responded with objections and produced no documents.27

With respect to Request Nos. 6 and 8, “Hartford objected on the grounds that

these requests are overbroad, the information sought is outside the proper scope of

discovery and because the requests invade the employees’ rights and expectation of

22Doc. 18.

23Doc. 82 at p. 5.

24Doc. 59 at pp. 5-6.

25

Id. at p. 6.

26

Id. at p.7.

27

Id.

-8-

Case 3:13-cv-08194-JWS Document 106 Filed 12/08/14 Page 8 of 11
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

privacy and confidentiality.”28 The court agrees that Request No. 6 is overly broad. 

First, the request seeks information covering the period from 2006 through the present. 

That time period is excessive. White Mountain’s claims were adjusted from June 2011

through June 2012. The court finds that a reasonable period of time is limited to years

2009 through 2013. Second, the request is overly broad in seeking information

regarding Ms. Gutierrez, who had almost nothing to do with processing the claim, as

well as unnamed persons whose involvement is speculative. The further response to

the request will be limited to Mr. Byrum, Mr. Kenny, and Ms. Faucher.

The argument that the request is outside the proper scope of discovery is not

persuasive. The contents of the personnel files of the three individuals may disclose

information showing that the adjustors had reasons to “low-ball” their evaluations, were

not actually competent to adjust the type of claim made by White Mountain, or did not

process the claim in a reasonable manner. Any such information would be highly

relevant to White Mountain’s claims in this lawsuit (and contrary information would

serve to defeat White Mountain’s claims). 

The argument that producing the requested information invades the employees

expectations of privacy and confidentiality is only partly persuasive. Certainly, the

employees have a reasonable expectation that no information will be disclosed which

would identify family members, social security numbers, place of residence, phone

numbers, private email addresses, anything relating to a medical condition, or similar

essentially private matters The material produced should be redacted by Hartford so

28Doc. 73 at p. 10.

-9-

Case 3:13-cv-08194-JWS Document 106 Filed 12/08/14 Page 9 of 11
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

that none of these matters are disclosed. However, an expectation that assessments of

work performance and any financial incentives to minimize payments on claims would

be kept private is unreasonable. Such an expectation would be inconsistent with

Hartford’s role as an insurer obligated to deal fairly and in good faith with its insureds,

for such obligations are sometimes the subject of litigation between Hartford and its

insureds. What is produced will be subject to the protective order, so anything negative

about an employee’s work, anything relating to an employee’s compensation, and

anything else reflected in the material produced will not be disseminated to any third

party. 

Hartford also contends that White Mountain has not demonstrated a sufficient

need for the information. The court disagrees. The performance of the adjustors and

Ms. Faucher in handling White Mountain’s claims is at the center of this lawsuit. 

Improper claims handling or incentivized claims handling–if it were to be disclosed in

the materials sought–would provide strong support for White Mountain’s position in this

lawsuit. A further response to Request Nos. 6 and 8 will be required to the extent

required by the discussion above.

V. CONCLUSION

For the reasons given above, the motion at docket 58 is GRANTED in part and

DENIED in part as set forth above. The additional responses required from Hartford

shall be provided to White Mountain within 21 days from the date of this order.

-10-

Case 3:13-cv-08194-JWS Document 106 Filed 12/08/14 Page 10 of 11
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Because the motion has been granted in part and denied in part, the court

declines to apportion expenses relating to the motion between the parties.29

DATED this 8th day of December 2014.

 /S/ 

JOHN W. SEDWICK

 SENIOR UNITED STATES DISTRICT JUDGE

29See, Fed. R. Civ. P. 37(a)(5)(C).

-11-

Case 3:13-cv-08194-JWS Document 106 Filed 12/08/14 Page 11 of 11