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Rsui Indemnity Co. v. American States Insurance Co.

United States District Court, E.D. Louisiana

April 20, 2015



KAREN WELLS ROBY, Magistrate Judge.

Before the Court is Defendant, American States Insurance Company's ("American") Second Motion to Compel RSUI to Respond to Discovery (R. Doc. 84), seeking information concerning RSUI's handling of (1) traumatic brain injury claims and (2) lawsuits against Tony Clayton and/or the law firm of Clayton Fruge Ward. American also seeks attorney fees and costs associated with bringing this motion. The motion is opposed. See R. Doc. 90. The motion was heard for oral argument on Wednesday, March 4, 2015.

I. Background

This action is a dispute between the excess and primary liability insurance carriers of a common insured. The excess insurer, RSUI Indemnity Company ("RSUI"), seeks to recover from the primary liability insurer, American, the $2 million it paid as a result of American's alleged breach of the duty to defend the common insured. In the underlying lawsuit, the plaintiff alleged that she suffered injury to her head, neck, pelvic, spine, arm and leg as a result of a motor vehicle collision with the common insured in June 2010. It has been indicated that the Plaintiff may have been speeding and contributorily negligent.

American undertook the defense of the common insured but did not notify RSUI of the plaintiff's claims against the common insured until about two weeks before the discovery deadline and about three months before the trial. Despite the significant injuries alleged by the plaintiff and her possible contributory negligence, American's counsel failed take depositions of the plaintiff, her doctors, or attempt to obtain an independent medical examination. Also, American's counsel allegedly failed to oppose the plaintiff's motion for summary judgment, which was granted by the state trial court.

Subsequently, the plaintiff demanded $5 million, the combined policy limits of American and RSUI. American then settled for its policy limit of $1 million and received a release of American on all claims. Thereafter, RSUI negotiated a further settlement with the plaintiff for $2 million for a full release of the common insured from all liability. RSUI claims that it settled with the plaintiff for $2 million rather than intervene the eve before trial because it was left with no discovery from American to support the defense of the common insured.

On November 26, 2012, RSUI subrogated to the rights of the common insured filed this action against American alleging bad faith failure to defend by failing to investigate and to take appropriate defensive action. RSUI alleges that American's failure to defend resulted in the increased settlement value of the case.

In the instant motion, American argues that it propounded its Second Set of Interrogatories and Requests for Production of Documents seeking information from the last fifteen years concerning the manner in which RSUI has handled similar claims and claims against the firm that represented the injured plaintiff in the underlying lawsuit. See R. Doc. 84-1, at 2. American represents that RSUI responded to its requests but objected on the grounds that it was unduly burdensome and not reasonably calculated to lead to the discovery of admissible evidence. Id. American now seeks a court order overruling RSUI's objections and compelling them to respond to Interrogatories Nos. 1-6.

III. Standard of Review

Federal Rule of Civil Procedure ("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." Rule 26(b)(1) 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."

The Court notes that the discovery rules are accorded a broad and liberal treatment to achieve their purpose of adequately informing litigants in civil trials. Herbert 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 (1947)). Furthermore, "it is well established that the scope of discovery is within the sound discretion of the trial court." Coleman v. American Red Cross, 23 F.3d 1091, 1096 (6th Cir. 1994).

Under Rule 26(b)(2)(C), discovery may be limited if: (1) the discovery sought is unreasonably cumulative or duplicative, or is obtainable from another, more convenient, less burdensome, or less expensive source; (2) the party seeking discovery has had ample opportunity to obtain the discovery sought; or (3) the burden or expense of the proposed discovery outweighs its likely benefit. In assessing whether the burden of the discovery outweighs its benefit, a court must consider: (1) the needs of the case; (2) the amount in controversy; (3) the parties' resources;

(4) the importance of the issues at stake in the litigation; and (5) the importance of the proposed discovery in resolving the issues. Fed.R.Civ.P. 26(b)(2)(C)(iii).

Rule 26(b)(3) provides that "[o]rdinarily, a party may not discover documents and tangible things that are prepared in anticipation of litigation or for trial by or for another party in its representative (including the other party's attorney, consultant, surety, indemnitor, insurer, or agent)." However, such materials may be discoverable when either allowed by Rule 26(b)(1), or when a party shows a "substantial ...

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