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Nei v. The Travelers Home And Marine Insurance Co.

United States District Court, D. Montana, Missoula Division

July 26, 2018

STEVEN NEI, Plaintiff,



         This case arises out of an automobile accident that occurred on January 6, 2015, on Highway 93 near Florence, Montana. As a result of that accident, Plaintiff Steven Nei (“Nei”) brought this action against his insurance company, Travelers Home and Marine Insurance Company (“Travelers”), seeking medical payments and underinsured motorist coverages under his automobile policies. In preparing the case, Nei sought discovery of Travelers' claims file, claims manuals, claims procedures, its pattern and practice, and incentives for bonuses. Travelers objected to most of Nei's discovery requests, resulting in the present motion to compel. (See Doc. 25.) Argument on the motion was heard on July 18, 2018. (See Min. Entry, Doc. 34.) The motion is granted in part and denied in part.


         On January 6, 2015, an elderly woman named Shirley MacDonald ran a stop sign and pulled her SUV out in front of the Ford Taurus occupied by Nei and his daughter. Nei was not able to stop or avoid the accident. He was not at fault. As a result of the accident, Nei has been diagnosed with injuries to his brain, spine, arm, hand, and extremities. After the accident, USAA, MacDonald's insurer, paid Nei its liability limit of $300, 000. After Travelers was notified of Nei's claims, it took the position that the claim was not worth more than the USAA liability limits.

         From 2009 through the date of the accident, Nei paid Travelers premiums for automobile insurance on his family's vehicles. He paid for medical payment coverage of $5, 000 and underinsured motorist coverage of $500, 000 for each of his three vehicles. Nei argues that these coverages should stack.

         On August 2, 2017, Nei filed a state court complaint against Travelers in the Fourth Judicial District Court, Missoula County, alleging bad faith and unfair claims practices and seeking a declaration of coverage and punitive damages. (Doc. 1-3.) That action was removed to this Court on September 26, 2017, (Doc. 1), and on January 10, 2018, a preliminary pretrial conference was held. The case is set for trial in February 2019. (See Doc. 21.)


         I. Legal Standard

         A motion to compel may be filed when a party disagrees with the objections interposed by the other party and wants to compel more complete answers. See Moreno Rivera v. DHA Global Forwarding, 272 F.R.D. 5 (D.P.R. 2011). The Court has wide discretion in controlling discovery. Jeff D. v. Otter, 643 F.3d 278, 289 (9th Cir. 2011) (citing Little v. City of Seattle, 863 F.2d 681, 685 (9th Cir. 1988)). If no claim of privilege applies, the production of evidence can be compelled regarding any matter that is “relevant to any party's claim or defense and proportional 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, and the importance of discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit.” Fed.R.Civ.P. 26(b)(1). While “relevance” is defined broadly, Moe v. System Trans., Inc., 270 F.R.D. 613, 618 (D. Mont. 2010), “[t]he 2015 Amendment to Rule 26(b)(1) emphasized the importance of proportionality in discovery requests, ” Frost v. BNSF Rwy. Co., 218 F.Supp.3d 1122, 1134 (D. Mont. 2016) (citing 2015 Committee Notes). “However, the change was not intended to permit the opposing party to refuse discovery simply by making a boilerplate objection that it is not proportional.” Id. (internal quotation marks omitted). While the party seeking discovery has the burden to show the relevancy of the request, “the parties and the court have a collective responsibility to consider the proportionality of all discovery and consider it in resolving discovery disputes.” McCall v. St. Farm Mut. Auto. Ins. Co., 2017 WL 3174914, at *6 (D. Nev. July 26, 2017) (quoting In re Bard IVC Filters Prods., 217 F.R.D. 562, 563 (D. Ariz. 2016)).

         II. Discussion

         Nei objects to Travelers' responses to Interrogatories 10, 11, 12, and 13 and Requests for Production 6, 7, 13, 15, 16, 17, 18, 19, 20, 24, 28, 29, 30, 32, 33, and 34. Those specific discovery requests and objections are attached. (See Appendix.) Nei (1) objects to Travelers' use of boilerplate objections, (2) seeks a complete, unredacted claims file, and (3) requests that Travelers be ordered to produce the requested historical and claim information.

         Ultimately, both Nei's requests and Travelers' objections suffer from infirmities: Nei's requests lack “reasonable particularity, ” Fed.R.Civ.P. 34(b)(1)(A), while Travelers' objections also lack particularity, Fed.R.Civ.P. 34(b)(2)(B), and fail to state “whether any responsive materials are being withheld, ” Fed.R.Civ.P. 34(b)(2)(C).

         A. Boilerplate Objections

         A party must state objections to discovery requests with specificity. See Fed.R.Civ.P. 33(b)(4); 34(b)(2)(B). Additionally, objections to requests for production “must state whether any responsive materials are being withheld on the basis of that objection” and “[a]n objection to part of a request must specify the part and permit inspection of the rest.” Fed.R.Civ.P. 34(b)(2)(C). The recitation of “boilerplate objections or blanket refusals” is therefore not consistent with the requirements of the discovery rules. Burlington N. & Santa Fe Ry. Co. v. U.S. Dist. Ct., 408 F.3d 1142, 1149 (9th Cir. 2005). The Local Rules also require specific reasons for discovery objections. See Local Rule 26.3(a)(2)-(3) (requiring an objection “be followed by a statement of reasons”). “The burden lies on the objecting party to show that a discovery request is improper. Where a party's objections are themselves vague and impermissibly overbroad, and no specifics are given, the objecting party fails to carry its burden.” Russell v. Daiichi-Sankyo, Inc., 2012 WL 1161435, *2 (D. Mont. 2012). Nonetheless, the Court has an obligation to review the discovery requests to ensure that they are not frivolous. Moreno Rivera, 272 F.R.D. at 57.

         Travelers' alleged “boilerplate” objections state either:

Travelers objects to this Interrogatory as irrelevant, overly broad, burdensome, oppressive, not proportional to the needs of the case, seeking non-discoverable expert information beyond that allowed by Rule 26(b)(4) of the Federal Rules of Civil Procedure; or Travelers objects to this Request for Production as irrelevant, overly broad, not limited in duration, burdensome, oppressive, not proportional to the needs of the case, and seeking information that is confidential and/or proprietary business information.

         Irrespective of their individual application, none of Travelers' objections state whether responsive material was withheld as explicitly required by Rule 34(b)(2)(C). At the July 18 hearing, counsel for Travelers argued that this omission is immaterial because the existence of an objection implies the existence of responsive materials. However, Rule 34 was specifically amended in 2015, Fed.R.Civ.P. 34 (Advisory Comm. Notes), to make such a statement mandatory. The failure to clarify the existence of responsive materials also hamstrings the Court's ability to assess the relevancy and proportionality of the discovery request. Travelers' objections fail to comply with Rule 34 and can be overruled on those grounds alone.

         Travelers' objections also lack specificity in their individual application. Travelers' argument that while they may be broad and overlap, “the objections apply, ” (Doc. 27 at 18), is a truism. Almost any discovery request could be objected to by generally stating the limitations of civil discovery. That does not mean, however, that those objections are sufficiently specific.

         On the other hand, as argued by Travelers, many of Nei's requests are themselves overbroad, failing to reasonably define the parameters of the information sought. See Fed. R. Civ. P. 26(b)(1). As a result, neither Nei's requests nor Travelers' objections are helpful in determining the amount of discovery that is proportional under these circumstances. See Fed. R. Civ. P. 26(b)(1). At a minimum, however, proportional discovery lies somewhere in the middle.

         Accordingly, Travelers' objections are overruled in part and it is required to provide responsive materials as outlined below.

         B. Claims File

         Nei also seeks a complete, unredacted copy of his claims file. Travelers insists that it has produced the claim file, excepting only the privilege portions outlined in the privilege logs, which have been properly supplemented pursuant to Rule 26(e). Travelers further insists that the privileged information was appropriately withheld. Nei argues that Travelers is impermissibly attempting to use privilege as both a sword and a shield. Nei further argues that Travelers has sent him on “a never-ending wild good chase, ” releasing different portions of the claims file at different times and with over 1, 500 pages of shuffled, duplicate pages of documents. (See Doc. 26 at 16.) At this point, it is not entirely clear what portions of the claims file have been produced and which redacted. It seems that the Third Supplemental Privilege Log (March 27, 2018) outlines all that has been withheld. Because this case sits in the unique procedural posture where both bad faith litigation and claim investigation are pending at the same time, in camera review of most of the withheld documents is necessary.

         A federal court sitting in diversity applies the privilege law of the forum state, Theme Promotions, Inc. v. News Am. Marketing FSI, 546991, 1007 (9th Cir. 2008), and applies federal law in determining the application of the work product doctrine, Moe, 270 F.R.D. at 622. Thus the Court here applies Montana privilege law and federal work product law.

         Under Montana law, privilege is construed narrowly, Am. Zurich Ins. Co. v. Mont. Thirteenth Jud. Dist. Ct., 280 P.3d 240, 245 (Mont. 2012), and “[t]o the extent an attorney acts as a claims adjuster, claims process supervisor, or claims investigation monitor, and not as a legal advisor, the attorney-client privilege does not apply, ” Barnard Pipeline, Inc. v. Travelers Property Cas. Co. of Am., 2014 WL 1576543, at *3 (D. Mont. 2014) (internal quotation marks omitted). “An insurer in a bad faith case waives the attorney-client privilege by relying on advice of counsel as a defense to a bad faith charge.” Id. “To deserve protection [under this privilege], . . . documents must contain confidential communications for the purpose of seeking legal advice.” Id. at *6.

         To be protected under the work product doctrine, the document must be “prepared in anticipation of litigation.” Fed.R.Civ.P. 26(b)(3)(A). This does not include documents prepared in the ordinary course of business, Barnard Pipeline, Inc., at *4, and the party withholding the documents has the burden to show that each document withheld “was prepared or obtained because of the prospect of litigation, ” Moe, 270 F.R.D. at 625 (internal quotation marks omitted). “Often, in insurance bad faith litigation, the work product doctrine does not apply to materials that are generated before the insurer has formally denied the insured's claim because such materials are prepared as part of the ordinary course of business.” Barnard Pipeline, Inc., at *4. But, once an insured has filed a bad faith action, “all documents generated by the insurer are generated ‘in anticipation of litigation' and are not part of the ordinary course of business.” Id.

         The Third Supplemental Privilege Log outlines approximately 43 pages withheld pursuant to either privilege or work product. Only one entry pre-dates Travelers' knowledge of Nei's lawsuit, and is described as emails between attorney Adrienne Harris and Anthony Schwisow about “a separate claim that was inadvertently added to claim notes.” (See Doc. 26-10 at 5 (THMI00105-06, 1/2716 and 1/21/16).) All of the other documents post-date Travelers' knowledge of this bad faith lawsuit, (see Notice of Removal, Doc. 1 at ¶ 2 (indicating Travelers became aware on August 28, 2017)), and relate to communication with Travelers' current counsel, Jon Wilson. It appears all the other information withheld under the previous privilege logs-including communications with previous counsel Spoon Gordon Ballew-has been provided.

         The question of whether the documents identified in the Third Supplemental Privilege Log have been properly withheld is complicated by the fact that Travelers has never formally denied Nei's claim, admitting at the July 18 hearing that it continues to investigate the claim with the aid of present counsel. Thus there is a question about invoking the attorney-client privilege based on the extent to which present counsel acted as a “claims adjuster, claims process supervisor, or claims investigation monitor, and not as a legal advisor, ” Barnard Pipeline, Inc., at *3.

         There is also a work product question because “the work product doctrine applies to documents generated by an insurer after the insured files a bad faith claim against the insurer, even when the insurer has not yet formally denied the insured's claim.” Id. at *4. But, work product protection is not absolute, and “a party may discover work product materials if it can establish the relevance of the materials, the requisite need for the materials, and the requisite hardship in obtaining the materials by other means.” Id. at *5 (citing Fed.R.Civ.P. 26(b)(3)(A)(i)-(iii)). “To obtain ordinary work product materials, the requesting party must show a ‘substantial need' for the materials.” Id. And, “[t]o obtain opinion or mental impression work product as defined in Fed.R.Civ.P. 26(b)(3)(A)(ii), the requesting party must show a ‘compelling or overwhelming need' for the materials.” Id. (citing Moe, 270 F.R.D. at 626-27).

         As explained in Barnard Pipelines, Inc.:

Because an insurer's “claims file reflects a unique, contemporaneous record of the handling of the claim” that cannot be obtained elsewhere, because the “strategy, mental impressions and opinion of the insurer's agents concerning the handling of the claim are directly at issue” in an insurance bad faith claim, the need for such materials is compelling, and both ordinary and opinion work product protection is generally overcome in bad faith litigation when asserted by the insurer's agents.

Id. (internal citations omitted). But, an “insured cannot establish a compelling need for the opinion work product of an insurer's attorneys” “unless the insurer relies on the advice of counsel defense.” Id.: see Holmgren v. St. Farm Mut. Auto. Ins. Co., 976 F.2d 573, 577 (9th Cir. 1992) (“[O]pinion work product may be discovered and admitted when mental impressions are at issue in a case and the need for the ...

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