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ITT Corp. v. Travelers Casualty & Surety Co.

United States District Court, D. Connecticut

August 31, 2017

ITT CORPORATION
v.
TRAVELERS CASUALTY & SURETY CO.

          RULING ON PLAINTIFFS' MOTION TO COMPEL DEFENDANT TO RESPOND TO ORDERED DISCOVERY AND TO PRODUCE DOCUMENTS

          JOAN GLAZER MARGOLIS UNITED STATES MAGISTRATE JUDGE.

         I. PROCEDURAL HISTORY

         The factual and procedural history behind this litigation is set forth in considerable detail in this Magistrate Judge's Ruling on Pending Discovery Issues, filed January 27, 2017 (Dkt. #191), 2017 WL 385034 [“January Discovery Ruling”]; Ruling on Pending Discovery Issues Regarding Depositions, filed February 14, 2017 (Dkt. #202), 2017 WL 589192; Ruling Following In Camera Review of Wigmore Memo, filed February 27, 2017 (Dkt. #203), 2017 WL 750693; Ruling Following In Camera Review of Waisman and Sennott Documents, filed March 16, 2017 (Dkt. #212), 2017 WL 1020970; Ruling on Non-Party John Hake's Motion for Protective Order, filed March 24, 2017 (Dkt. #213), 2017 WL 1102675 [“First Hake Ruling”][1]; Ruling Following In Camera Review of Hake Personnel Records from Dodson Group, filed April 4, 2017 (Dkt. #219); Ruling Following In Camera Review of Hake Personnel Records from Kemper Insurance Companies, filed April 12, 2017 (Dkt. #223); Ruling on Non-Party John Hake's Motion for Clarification, filed May 26, 2017 (Dkt. #252); Ruling Following In Camera Review of Non-Party John Hake's Medical Report, filed June 6, 2017 (Dkt. #259); and Ruling Following Second In Camera Review of Non-Party John Hake's Medical Report, filed July 28, 2017 (Dkt. #293).[2]

         This ruling addresses plaintiffs' pending Motion to Compel Defendant to Respond to Ordered Discovery and to Produce Documents, filed May 12, 2017 (Dkt. #241), [3] seeking the production of some discovery that was the subject of the January Discovery Ruling, and of some more recent discovery. On June 2, 2017, defendant filed its brief in opposition (Dkt. #256), [4] to which plaintiffs filed their reply brief two weeks later. (Dkt. #278).

         II. ISSUES PRESENTED

         Plaintiffs argue that Travelers “refuses to answer [some discovery], as ordered” by the January Discovery Ruling, and that other ordered discovery was produced with “entire categories of unpermitted redactions[.]” (Dkt. #241, Brief at 1, 5)(emphasis in original).[5]Plaintiffs specifically allege that defendant “willfully violat[ed]” the January Discovery Ruling (id. at 1) with respect to Interrogatory No. 11 of Plaintiffs' First Set of Interrogatories and Document Demands, served on September 14, 2015 (Exh. 5; Dkt. #241-6); Request No. 7 of Plaintiffs' [Fourth Set of] Requests for Admission, dated August 2, 2016 (Exh. 6; Dkt. #241-7); and Requests Nos. 34, 43, 187, and 197 of Plaintiffs' [Ninth Set of] Requests for Admission, dated October 5, 2016 (Exh. 7; Dkt. #241-8). Travelers argues that its refusal to answer interrogatories with information about its litigation with other policyholders, and to redact production of other policyholders' files, permissibly protects the confidentiality of other claimants and insureds because the January Discovery Ruling allowed Travelers to “redact the names of the claimants and its insureds, as appropriate, substituting the parties' actual names or initials.” (Dkt. #256, Brief at 7-8; January Discovery Ruling at 8 (footnote omitted); 2017 WL 385034, at *4 (footnote omitted)). Travelers likewise argues that plaintiffs' Requests for Admissions [“RFAs”] about coverage positions asserted by Travelers to other policyholders “are inapplicable because Travelers paid indemnity [to those policyholders] pursuant to settlements, not a coverage position.” (Dkt. #256, Brief at 8).

         Plaintiffs also seek to compel responses to six additional requests for discovery which Travelers refuses to produce “without substantial justification[, ]” despite “five meet and confers between the parties[.]” (Dkt. #241, Brief at 5-6). Plaintiffs seek to compel Travelers' response to Request No. 1 of Plaintiffs' [Second Set of] Document Demands, dated August 5, 2016 (Exh. 9; Dkt. #241-10); Request No. 1 of Plaintiffs' Fourth Document Demand, dated December 2, 2016 (Exh. 10; Dkt. #241-11); Requests Nos. 2-3 of Plaintiffs' Fifth Set of Document Demands, dated February 3, 2017 (Exh. 11; Dkt. #241-12); and Requests Nos. 1-2 of Plaintiffs' Sixth Set of Document Demands, dated March 10, 2017 (Exh. 12; Dkt. #241-13). Travelers argues that plaintiffs have not demonstrated a compelling and substantial need for this discovery; the requests are irrelevant or overbroad; the subject documents are either protected by confidentiality agreements, or publicly available; and the production of some subject documents is prohibited by Conn. Gen. Stat. §§ 38a-14(j) and 38a-69(a). (Dkt. #256, Brief at 9-10).

         III. DISCUSSION

         A. CONFIDENTIALITY

         The parties continue to dispute Travelers' responses to three of plaintiffs' interrogatories discussed in the January Discovery Ruling. In Plaintiffs' First Set of Interrogatories and Document Requests to Travelers Casualty and Surety Company, Travelers was asked to:

9. IDENTIFY each INSURED that has notified [Travelers] of claims against it involving AGGREGATE EXPOSURES, to which [Travelers has] asserted that coverage under an XN POLICY only responds if the INSURED'S loss arises from a single accident or occurrence.
10. IDENTIFY each XN POLICY which is, or has been, the subject of LITIGATION within the last twenty-five years, including LITIGATION with [Travelers'] reinsurers.
11. Identify, by case caption, number and jurisdiction, the LITIGATION referenced in [Travelers'] response to interrogatory no. 9.

(Exh. 5; Dkt. #241-6, at 8). Travelers objected to these interrogatories based on relevance, undue burden, and privacy claims of other policyholders, and this dispute was referred to this Magistrate Judge by Judge Meyer. (Travelers' Response to First Set of Interrogatories and Document Request, dated September 25, 2014, 13-16; Dkt. #181). Subsequently, Travelers represented that there are twenty-seven XN policyholders with asbestos-products liability claims for which it has made payments under XN policies, and plaintiffs proposed a compromise wherein Travelers respond to discovery requests related to only twelve of those policyholders. (Dkt. #188, at 4-5). Travelers argued that the proposed compromise would unfairly invade other policyholders' privacy interests in their insurance and claim information. (Dkt. #187, at 2; Dkt. #189, at 2-4).

         In the January Discovery Ruling, this Magistrate Judge ordered discovery with respect to eighteen of the twenty-seven files, selected by this Magistrate Judge based upon their chronological identification number; agreed that Conn. Gen. Stat. § 38a-988 does not bar production of these documents; found that these files are subject to the Protective Order in place in this case; and, as previously mentioned, further permitted Travelers to “redact the names of the claimants and its insureds, as appropriate, substituting the parties' actual names or initials.” (Dkt. #191 at 8 (footnote omitted); 2017 WL 385034, at *4 (footnote omitted)). The January Discovery Ruling further ordered that “defendant shall respond to Interrogatories Nos. 8-11 to the extent they pertain only to the eighteen asbestos product liability claims specified above and No. 10 is further limited to fifteen years, not twenty-five years[.]” (Id. at 13; 2017 WL 385034, at *6).

         After the January Discovery Ruling, Travelers' Second Supplemental Response to Certain Interrogatories and Document Requests in Plaintiffs' First Set [sic] of Interrogatories and Document Requests identified, by reference to the chronological identification number, sixteen files that were the subject of litigation, as sought in interrogatory No. 10; the two remaining case files had not resulted in lawsuits. (Dkt. #241, Brief at 2; Exh. 1; Dkt. #241-2, at 6-7). In response to interrogatory No. 11, which sought case captions, numbers and jurisdictions of that litigation, Travelers answered, “In order to protect the confidentiality of policyholders [identified by chronological identification numbers], Travelers has not identified caption, number or jurisdiction for the litigation involving their XN policies, which has been resolved by confidential settlements and/or settlements in bankruptcy proceedings.” (Exh. 1; Dkt. #241-2, at 7; Dkt #241, Brief at 8-9).

         Plaintiffs argue that Travelers' “refusal to respond” is “a willful violation” of the January Discovery Ruling “which unconditionally directs Travelers to respond to Interrogatory No. 11 with respect to the sixteen policyholders[]” who had been involved in litigation with defendant (Dkt. #241, Brief at 9) and that Travelers' confidentiality arguments already had been rejected by the Court in the January Discovery Ruling (id. at 12). Travelers argues that providing case captions, numbers, and jurisdictions would unmask the insureds' identity to plaintiffs, and effectively moot its permissible efforts to redact the insureds' names elsewhere. (Dkt. #256, Brief at 8, 11). However, as plaintiffs point out in their supplemental responses, Travelers already has identified seven of these sixteen policyholders (3M Corp., Kentile Floors, Viking Pump, Warren Pumps, Armstrong Contracting and Supply Corp. [“ACANDS”], Armstrong Cork, and The Flintoke Co.), and moreover, has admitted to specific identifying litigation data relating to three of them (Viking Pump, Warren Pumps, and 3M Corp.) (Exhs. 18-20; Dkts. ##241-19 to 241-21; Dkt. #241, Brief at 12-13; Dkt. #278, at 3). Thus, the motion is moot with respect to the three policyholders for which defendant already provided litigation information (Viking Pump, Warren Pumps, and 3M Corp.). With respect to the other four policyholders identified (Kentile Floors, ACANDS, Armstrong Cork and The Flintoke Co.), given the immediate availability that anyone with internet access has to court filings throughout the country, plaintiffs have the ability to locate this information on their own initiative. Although plaintiffs argue that Travelers' confidentiality concerns are only pretext to conceal damaging evidence in other cases (Dkt. #278, at 3), this judicial officer agrees that at least with respect to some of the insureds, plaintiffs have already “demonstrated that they can locate litigation involving XN policies in the public record[, ]” rendering unnecessary such disclosures by Travelers. (Dkt. #256, at 19). Thus, the balance of this portion of the ruling will focus on the remaining nine policyholders (sixteen minus seven) whose identities have not been disclosed.

         Travelers further argues that unmasking the identities of other policyholders would “turn over to a potential business competitor proprietary information regarding the extent of that policyholder's asbestos problem as well as its litigation strategies in resolving those claims.” (Id. at 12). Travelers' concern on behalf of its other policyholders is not purely speculative: one such policyholder provided a declaration in opposition to the Motion to Compel, [6] urging that disclosure to plaintiffs “of ACME Corporation's strategies and thought processes-conveyed in large part through confidential settlement negotiations with Travelers-would harm ACME Corporation in connection with its current efforts to prove its entitlement to coverage under policies issued by many different insurers.” (Id. at 11 & Exh. S, at 3; Dkt. #256-16). Travelers is thus reasonably concerned that by effectively identifying any additional policyholders to plaintiffs, it would share information policyholders provide to insurers only with the expectation that it not be disclosed, “especially to other companies that may be in direct competition with its business goals.” (Dkt. #256, at 12). Because ACME Corporation has expressed legitimate concerns about maintaining the confidentiality of its identity, Travelers need not provide any further identifying information about ACME Corporation.

         Travelers persuasively argues that an order to answer Interrogatory No. 11 for the unidentified policyholders will moot the Court's efforts in the January Discovery Ruling to protect those policyholders' identities. In light of Travelers' responses to date, and the competing confidentiality concerns, the Court requires supplemental filings from both sides on or before September 15, 2017. Plaintiffs shall indicate why they require disclosure of litigation information for the eight unidentified policyholders (besides ACME Corporation), when seven policyholders already have been identified by Travelers. Defendant shall file a supplemental brief or affidavit explaining how many of these eight remaining unidentified policyholders (besides ACME Corporation) are in direct competition with plaintiffs and the nature of the “proprietary information” (Dkt. #256, at 12) that would be revealed by answers to Interrogatory No. 11.

         In addition, plaintiffs allege that Travelers produced a host of documents pursuant to the January Discovery Ruling with unpermitted redactions of “policy numbers, claims related data, aggregate amounts paid under the XN policies for asbestos product liability claims, and reinsurer names.” (Dkt. #241, Brief at 15-16, referring to Exhs. 8 & 22, Dkts. ##241-9 & 241-23). Plaintiffs argue that these redactions evidence Travelers' “bad faith conduct” and attempt to “thwart [p]laintiffs' investigation and to make those documents essentially unusable for depositions, motion practice, and trial[, . . . and to] deliberately obscure data that exposes its fraud.” (Id. at 16). Travelers argues that the redactions in Exhibits 8 and 22 “show that the unredacted text strikes the same balance [as previously permitted redactions in Dkts. ##191 and 203] and affords [p]laintiffs substantive information regarding the policyholders' asbestos claims without divulging their dollar amounts, percentages and other settlement information regarding their defense and settlement strategies.” (Dkt. #256, Brief at 12).

         The January Discovery Ruling did not invite Travelers to determine what redactions would “strike[] the same balance” as in this Court's previous rulings, but instead specifically permitted Travelers to redact the claimants' and insureds' “names, . . . as appropriate.” (Dkt. #191, at 8; 2017 WL 385034, at *4). While Travelers may still redact the names of claimants and insureds for the purpose of protecting the identity of these policyholders, Travelers may not redact other claims-related data. If any additional redaction is absolutely necessary to protect the identity of policyholders, Travelers may submit the unredacted documents to Chambers for in camera review, with a short explanation as to why the proposed redactions are necessary to maintain confidentiality of the policyholder's identity, on or before September 15, 2017.

         B. TRAVELERS' COVERAGE POSITION ASSERTIONS TO OTHER POLICYHOLDERS

         Plaintiffs seek to compel Travelers' response to five RFAs admitting Travelers “did not take the position that XN POLICY/POLICIES insuring [a particular policyholder] were only triggered if the per occurrence limits of the insurance policies underlying the XN POLICY/POLICIES insuring [that policyholder] had been exceeded.” (Dkt. #241, Brief at 13-15; Exhs. 6 & 7; Dkt. #241-7, at 3; Dkt. #241-8, at 8, 9, 34, 36). Plaintiffs requested this admission with respect to five policyholders: A.H. Robins Company Incorporated (RFA No. 7 of August 2, 2016, Exh. 6, Dkt. #241-7, at 3); ACANDS (RFA No. 34 of October 5, 2016, Exh. 7, Dkt. #241-8, at 8); Armstrong Cork Company (RFA No. 43 of October 5, 2016, Exh. 7, Dkt. #241-8, at 9); the 3M Company, formerly known as Minnesota Mining & Manufacturing Company (RFA No. 187 of October 5, 2016, Exh. 7, Dkt. #241-8, at 34); and the Flinkote Company (RFA No. 196, Exh. 7, Dkt. #241-8, at 36).

         Travelers answered these RFAs admitting that it “registered an indemnity payment under . . . the XN policies insuring [these policyholders] . . . pursuant to a confidential settlement agreement[, ]” and “[e]xcept as admitted, this Request is inapplicable as Travelers paid the indemnity under the XN policies” pursuant to a confidential settlement agreement.[7](Dkt. #241, Brief at 13-14; Exhs. 20-21; Dkt. #241-22, at 4-5; Dkt. #241-21, at 6-7, 9-10, 13-14, 17-18.)

         In their Motion to Compel, plaintiffs argue that Travelers has not responded to the RFAs which inquire whether Travelers ever asserted a particular coverage position to these policyholders; instead, Travelers' responses relate to the circumstances under which Travelers paid these policyholders. (Dkt. #241, Brief at 14). In its opposition to the motion, Travelers reasserts that the RFAs are inapplicable because payments to these policyholders were made pursuant to settlement, not to a coverage position. (Dkt. #256, at 8, 13).

         As plaintiffs observe, “[t]hat Travelers settled with [a policyholder] does not answer the critical question, which is whether, before it made a payment under [a policyholder's] XN policies, Travelers told [that policyholder] that its XN policies did not respond to product losses exceeding the underlying aggregate limit.” (Dkt. #241, Brief at 14). Whether Travelers paid policyholders pursuant to a settlement is irrelevant because plaintiffs' RFAs inquire “about a coverage position Travelers was obligated to disclose to its insured well before litigation and any settlement.” (Id.). Because “[e]ither Travelers asserted that [coverage] position before it settled with those insureds, or it did not[, ]” (Dkt. #278, at 4-5) Travelers is ordered to respond to these RFAs.

         C. DISCOVERY RELATED TO ASBESTOS LOSS-RELATED RESERVES DATA

         Request No. 2 of Plaintiffs' Fifth Set of Document Demands to Travelers Casualty and Surety Company Regarding Reserves, dated February 3, 2017, seeks “ALL DOCUMENTS provided to Milliman, Inc. in connection with its actuarial analysis of [Travelers'] reserving for asbestos related loss in connection with the Connecticut Insurance Department [“CID”] Examination Report as of December 31, 2009.” (Dkt. #241, Brief at 22; Exh. 11; Dkt. #241-12, at 4).[8] Travelers objected on the grounds that the documents sought are protected by attorney-client privilege and attorney work product doctrine; they include confidential information and documents protected by the privacy rights of Travelers' other policyholders; the information is not relevant; the request is overly broad and unduly burdensome; and the documents are protected by Conn. Gen. Stat. §§ 38a-14(j) and 38a-69(a). (Dkt. #241, Brief at 22; Exh. 29; Dkt #241-30, at 3-4).

         1. RELEVANCE AND PRIVILEGE

         In Connecticut, the discovery of insurance reserve information is based on relevance and privilege. U.S. Bank Nat'l Ass'n v. Lawyers Title Ins. Corp., No. CV095013702, 2010 WL 1629942, at *4 (Conn. Super. Ct. Mar. 22, 2010). Although discovery of loss reserves is often denied because it is not relevant to the underlying cause of action, “[m]ost courts . . . are willing to permit discovery if the underlying action involves allegations of bad faith because the mind set of the insurer then becomes relevant to the underlying cause of action.” Id. (citation omitted); see also Esposito v. Cutler, Nos. LLICV146010013S, LLICV146010019S, 2015 WL 4571197, at *3 (Conn. Super. Ct. June 30, 2015)(insurance reserves were not discoverable because plaintiffs did not assert that defendants acted in bad faith). Reserve-related discovery can be important in such cases because “[b]ad faith is a state of mind which must be established by circumstantial evidence[, . . . making the] actions of the defendant in respect to the reserve . . . relevant.” Groben v. Travelers Indemnity Co., 266 N.Y.S.2d 616, 619 (N.Y. Sup. Ct. 1965), aff'd, 282 N.Y.S.2d 214 (N.Y.App.Div. 1967).

         According to plaintiffs, Travelers misrepresented, in bad faith, the coverage position of its XN policies; as such, the reserve information is relevant to “the issue of Travelers' financial motive for taking the bad faith position it did as of 2009.” (Dkt. #241, Brief at 23-24).[9] In response to plaintiffs' request for reserve information, Travelers asserts a blanket privilege objection (Travelers Casualty and Surety Company's Response to Plaintiffs' Fifth Set of Document Demands Served on February 3, 2017, Exh. 29, Dkt. #241-30, ...


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