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Houston Casualty Company v. Supreme Towing Co. Inc.

November 4, 2011


The opinion of the court was delivered by: Karen Wells Roby United States Magistrate Judge

SECTION: "A" (4)


Before the Court isa Motion to Quash Deposition (R. Doc. 51), filed by Non-Party attorney Gregory L. Ernst seeking an order quashing a Notice of Deposition filed by Stone Energy Offshore ("Stone Energy"), LLC, as successor by acquisition of Bois d' Arc Offshore, Ltd., which seeks to depose Ernst on August 24, 2011. Houston Casualty Company ("HCC") also filed a Memorandum in Support of the Motion for Protective Order to Quash Depositions of Defense Counsel in the Underlying Limitation Action Noticed by Stone Energy Offshore, LLC. (R. Doc. 59.) Supreme Towing Company, Inc. ("Supreme Towing"), and Stone Energy oppose the motion. (R. Doc. 61.)

I. Background

This matter was filed by HCC seeking a Declaratory Judgment, pursuant to Federal Rule of Civil Procedure 57 and 28 U.S.C. § 2201, et seq., that it does not owe any marine insurance coverage to the defendant, Supreme Towing Company, Inc for its liability as a result of an allision between an unmanned oil well and the M/V CAPTAIN BRENNAN.

Supreme Towing, as the named insured under a policy issued by Houston Casualty, has made a claim for defense and indemnity as a result of a matter asserted by Bois D'Arc Energy, Inc., and its successor in interest, Stone Energy Co. Inc.*fn1 The claim involved a casualty involving damage to Stone Energy/BD's Main Pass Well # 14 and related structures, equipment, and oil and gas produced from the well. On or about July 28, 2007, the well was damaged by an allision with a vessel. This was litigated in the matter In Re: Supreme Towing Co., Inc. as owner and operator of the M/V CAPT. BRENNAN, Civil Action No. 2:07-cv-09231-JCZ-KWR. This matter was bifurcated for trial.

However, on August 12, 2010, the presiding Judge found that Supreme Towing was solely liable for the allision for failing to comply with Coast Guard navigational regulations and by failing to equip the vessel with up to date navigational charts, electronic navigational charts, data, and up to date notices to mariners.

On November 8, 2007, Houston Casualty issued a reservation of rights and non-waiver letter to Supreme Towing for failure to comply with Coast Guard regulations regarding the navigation of the M/V Capt. Brennan. In this reservation of rights, Houston Casualty reserved all rights to decline coverage for Stone Energy's claims based on Supreme Towing's failure to comply with the terms, conditions, warranties, and exclusions of the policy. It did, however, agree to fund Stone Energy's defense of the lawsuit.

Following the August 2010 decision in the other litigation, Houston Casualty issued an additional reservations of rights and non-waiver letter to Supreme Towing on September 29, 2010, expressly reserving all rights to decline coverage for Supreme Towing's defense and indemnity.

As to the instant motion, Stone Energy served a Notice of Deposition on attorney Gregory L. Ernst ("Ernst"), who is directly adverse to Stone Energy in the underlying limitation matter, purportedly to obtain facts regarding whether HCC waived its policy defenses under the protection and indemnity policy and breached the duty of good faith owed to its assured in handling of the allision claim.*fn2 Stone Energy and Supreme Towing contend that they should be allowed to question counsel regarding the claim to HCC and whether HCC knew or should have known of potential coverage defenses immediately after the allision.

HCC, although not a direct party to the limitation action, alleges that it is an interested party because it has maintained security for the limitation and is also funding Supreme Towing's and Capt. Barrios' defenses, subject to a reservation of rights. HCC, in support of the motion, seeks all costs and attorneys fees incurred in connection with the allegedly improperly sought discovery.

Stone Energy and Supreme Towing oppose the motion.

II. Standard of Review

Rule 26(b)(1) provides that "[p]arties may obtain discovery regarding any non-privileged matter that is relevant to any party's claim or defense." Fed.R.Civ.P. 26(b)(1). The Rule specifies that "[r]elevant information need not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence." Id. The discovery rules are accorded broad and liberal treatment to achieve their purpose of adequately informing litigants in civil trials. Hebert v. Lando, 441 U.S. 153, 176 (1979). Nevertheless, discovery does have "ultimate and necessary boundaries." Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351 (1978) (quoting Hickman v. Taylor, 329 U.S. 495, 507 ...

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