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Boardwalk Apartments, LLC v. State Auto Property and Casualty Insurance Co.

United States District Court, Tenth Circuit

September 5, 2013

BOARDWALK APARTMENTS, LLC, Plaintiff,
v.
STATE AUTO PROPERTY AND CASUALTY INSURANCE CO., Defendant,

MEMORANDUM AND ORDER

KAREN M. HUMPHREYS United States Magistrate Judge

This matter is before the court on plaintiff’s renewed motion to compel (Doc. 155). For the reasons set forth below, the motion shall be GRANTED.

Background

This is an action to collect on a commercial property insurance policy issued by defendant for plaintiff’s apartment complex in Lawrence, Kansas. Plaintiff alleges that one building in its apartment complex was totally destroyed by fire on October 7, 2005 and that defendant breached the insurance contract by failing to pay plaintiff’s lost business income and the full replacement cost of the building. Plaintiff also alleges that defendant engaged in misrepresentation and negligence while processing plaintiff’s insurance claim. Because the parties are familiar with the facts and procedural nature of this case as set forth in previous opinions, [1] the court’s discussion is limited to the issues pertinent to the rulings which follow.

Plaintiff previously filed a motion to compel (Doc. 86) which was granted on April 18, 2013 (Doc. 111). Defendant’s “policies and practices” concerning its investigation, evaluation, and adjustment of property loss or replacement cost claims were found to be relevant to the plaintiff’s claims and were ordered to be produced. Defendant was also ordered to produce its complete claims file and/or a privilege log setting forth any information withheld based on attorney-client privilege and/or work product doctrine.

Plaintiff’s Renewed Motion to Compel (Doc. 155)

Plaintiff’s current motion concerns the sufficiency of the documents produced by defendant in response to the court’s order. Defendant timely produced excerpts from its claims manual and a privilege log listing 78 documents withheld from the claims file on the basis of attorney-client privilege and/or work product doctrine. Plaintiff objected to the adequacy of that production. After multiple discussions between the parties, defendant later produced additional materials, including documents previously withheld based on privilege, and twice provided amended privilege logs. Despite their efforts to resolve the dispute, the parties still disagree on the sufficiency of defendant’s production.

At issue are three categories of documents: (1) specific sections of defendant’s claims manual; (2) documents and communications withheld from defendant’s claims file on the basis of privilege/work product doctrine; and (3) information regarding defendant’s loss reserves. Each category will be addressed in turn.

I. Claims Manual Materials

The court ordered defendant to identify its “practices, policies, manuals, standards or procedures related to property loss or business interruption claims” and to produce documents related to its “policies and practices” regarding investigation, evaluation, and adjustment of property loss or replacement cost claims.[2] Defendant withheld several sections of its claims manual, arguing that those sections were outside the scope of plaintiff’s original requests and therefore outside the scope of the court’s previous order.

The withheld sections contain three whose titles suggest a relationship to claims handling.[3] They are entitled: “Workflow, Processing and Claim File Organization;” “File Supervision, Instruction and Overdiary;” and “Claim File Authority and Responsibility.” Other sections withheld are titled “Reserving our Rights;” “Coverage Denials;” and “Reserving Property Claims.” Defendant asserts that the internal handling of a claims file is “wholly irrelevant” to plaintiff’s claims and outside the scope of plaintiff’s requests. The court disagrees. Proper management of the claims file is a fundamental part of investigation, evaluation and adjustment. Even defendant notes that these are internal polices related to “general handling of State Auto’s claims file.”[4] Plaintiff has specifically asserted a claim for negligent claim handling.[5] Plaintiff’s negligence claim will necessarily include plaintiff’s attempt to prove that defendant breached its duty of care in handling plaintiff’s claim; therefore, the internal polices of defendant in handling that file are directly relevant and must be produced.

Defendant contends that “Reserving Our Rights” has “nothing to do” with the investigation, evaluation or adjustment of plaintiff’s claims and “merely addresses internal company policies.”[6] Defendant fails to recognize that the internal policies of the defendant are the specific subject of the previous motion and the court’s order. Without specific evidence of why this particular policy (“Reserving Our Rights”) lies outside the scope of the requests, defendant’s argument is rejected.

Defendant argues that because it did not deny coverage in the instant case, the “Coverage Denials” section of the manual is non-responsive to plaintiff’s request. The parties disagree as to whether coverage was actually denied for the purposes of this matter, but the merits of this argument need not be reached, and neither is it appropriate in this context. The denial is, in essence, an “evaluation” of a claim. It is difficult to understand why the procedures governing coverage denial are not applicable to the evaluation of a claim. Again, defendant fails to provide more than conclusory arguments and its objections are denied.

Defendant argues that the determination of reserves, governed by the section entitled “Reserving Property Claims, ” is irrelevant to plaintiff’s claims, because it is not an investigation or evaluation of a specific claim. The determination of reserves and this section of the claims manual is ...


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