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stating that "unauthorized settlement will not preclude coverage if the insurance company was not prejudiced"
Summary of this case from CNL Hotels Resorts, Inc. v. Houston Casualty CompanyOpinion
CASE NO. 3:98-cv-351-J-20B.
July 7, 2000
ORDER
This cause is before the Court on objections to three Orders of the Magistrate Judge filed September 1, 1999 (Dkt. 42), April 7, 2000 (Dkt. 111) and June 8, 2000 (Dkt. 177).
In this cause Harris Specialty Chemicals, Inc., ("Harris") seeks, inter alia, a declaratory judgment that defendant insurance companies are required to investigate, defend and indemnify it against certain third-party claims that Enviroseal, a sealant manufactured by Harris and applied to building exteriors, caused unanticipated and unacceptable "whitening" on affected building surfaces and resulted in other damage. Harris also seeks reimbursement for costs incurred in remediating these damages and for costs incurred in settling damage claims of unhappy building owners.
I. Standard of Review and Pertinent Legal Principles:
Rule 72(a) of the Federal Rules of Civil Procedure permits a party, within ten (10) days of being served with a copy of a Magistrate Judge's Order, to file objections to that Order. Furthermore, in accordance with Title 28 U.S.C. § 636 and Rule 72(a), the District Judge assigned to the case shall consider the objections and shall either modify or set aside any portion of the Magistrate Judge's Order found to be clearly erroneous or contrary to law.
The United States Supreme Court defined the clearly erroneous standard as follows:
A finding is `clearly erroneous' when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.Pullman-Standard v. Swint, 456 U.S. 273, 102 S.Ct. 1781, 72 L.Ed.2d 66 (1982) citing United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 325 541, 92 L.Ed.2d 746 (1948).
II. Order Concerning Expert Witness Disclosure:
First, the Magi Plaintiff's Motion for Leave to File Second Amended Complaint (Dkt. 184), and Plaintiff's Amended Motion for Leave to File Second Amended Complaint (Dkt. 187), are DENIED. Plaintiff may, however, cite to Fla. Stat. § 627.428 in any request for attorneys' fees or costs of suit. strate Judge's Order of September 1, 1999 (Dkt. 42), denied Harris' Motion for Extension of Time to Disclose Expert Witnesses (Dkt. 37), filed on August 17, 1999. Harris filed its Supplementation to its Pending Motion to Extend Time to Disclose Expert Witnesses (Dkt. 40) on August 31, 1999. U.S. Fire and Zuirch filed oppositions. (Dkts. 38, 39). The Magistrate Judge found Harris had not established "good cause" for modification of the Scheduling Order, concluding Harris had failed to establish that despite diligence, the established deadlines could not be met.
Harris filed a Motion for Reconsideration to Presiding Judge (Dkt. 44). Defendant United States Fire Insurance Company ("U.S. Fire") and Zurich Insurance Company ("Zurich") filed responses. (Dkts. 45 and 46).
The Case Management and Scheduling Order (Doc. #26) filed on August 18, 1998 contained the parties' agreement of a June 15, 1999 deadline for the Rule 26(a)(2) disclosure of expert testimony. Harris' Motion, which was filed after the June 15, 1999, and a year after the parties had all agreed to disclose experts by June 15, 1999, sought to extend that deadline to September 1, 1999, because at the conclusion of the deposition of its employee Robert Allen, Harris realized "out of an abundance of caution," an expert as to what constitutes "property damage" under the insurance policies might be necessary, having previously intended to rely on Mr. Allen to testify concerning all technical issues. Without the deadline extension, Harris asserts it will not have an expert on that issue. Harris also argues the Magistrate Judge did not make a finding of prejudice to defendants if experts were belatedly disclosed, and proffers that the delay in disclosing experts was due to good faith settlement negotiations.
Upon a complete review of Harris Motion for Reconsideration to Presiding Judge (Dkt. 44), the objections thereto, and the Order at issue, this Court does not find the Order of the Magistrate Judge filed September 1, 1999 (Dkt. 42) to be clearly erroneous or contrary to law. The Magistrate Judge's Order has a proper legal and factual basis and therefore this Court is not left with a definite and firm conviction that any mistake may have been committed.
III. Order Concerning Motion to Compel Against National Union:
Secondly, on April 7, 2000, the Magistrate Judge entered an Order (Dkt. 111) granting in part and denying in part Harris' Motion to Compel against defendant National Union Insurance Company ("National Union"). (Dkt. 85). The Magistrate'sOrderrequiredproduction of documents concerning claims handling, training and/or seminar materials of Andrew Nadolna and John Conklin, National Union's Fed.R.Civ.P. 30(b)(6) designees, which were requested in the depositions and later in a letter.
National Union filed an Opposition (Dkt. 107) objecting to production of insurance manuals without any finding or testimony that they were used in this case or were otherwise relevant to this claim for declaratory relief as to comprehensive general liability policies. As to the underwriting procedures, National Union asserts that Mr. Conklin testified no underwriting procedure manuals were used in the writing of the subject National Union policies and could not determine if such written material was used by Mr. Conklin's predecessor, Ms. Cossetti who is no longer employed with National Union. National Union also gave its view of the agreement reached at deposition — that the requested documents be delineated in a letter, to which counsel would respond as if a formal document request, not that the documents would be produced without objection.
The Magistrate Judge found that Mr. Nadolena testified in deposition that the materials sought by Harris were distributed to him by National Union and were not gathered on his own accord, that counsel agreed at deposition to treat the letter as a formal request and that counsel would "respond to it quickly." The Magistrate Judge also noted that although the material referred to in Mr. Nadolena's deposition concerned third party claims (not claims brought by an insured against the insurance company — such as in this case) and Mr. Nadolena could not think of anything specific in those materials that were used in the handling of the subject policies, the request for material could reasonably bear on the issues in this case, the Magistrate Judge ordered the production of the training/seminar material and underwriting manual referenced in requests number two in Doc. #85, Ex. D: "All claims handling training and/or seminar material retained by Mr. Nadolna, as set forth by his deposition testimony"
As to underwriting manuals referred to by Mr. Conklin, the Magistrate Judge rejected National Union's argument that because the material was not used by Mr. Conklin, the material should not be produced. Finding that the manual could foreseeably be relevant to Harris's claims, e.g., National Union should have followed procedures therein but did not, production was compelled of the training/seminar material and underwriting manual referenced in request four in Doc #85, Ex. D: "All underwriting manuals, directives or guidelines of National Union Fire Insurance Company set forth by Mr. Conklin in his deposition testimony." The Magistrate Judge also granted Plaintiff's Motion for Costs and Fees. (Dkt. 85).
National Union filed Objections (Dkt. 124) that the production of a broad range of insurance manuals, especially materials concerning third-party claims (which are not involved in this case), is over broad and production would only add to Harris' counsels' war chest of materials to be used againstinsurance companies. National Union subsequently filed Mr. Conklin's Affidavit (Dkt. 158) which stated that the manual was not created until September 1996 so could not have been used in the writing of the 1994-95 and 1995-96 policies.
Harris responded (Dkt. 154) that by failing to file a motion for protective order as to these requests, National Union waived all objections except for privilege, citing a prior Magistrate Judge's Order concerning an earlier motion to compel against National Union (Dkt. 61). Harris also counters National Union's assertions that material concerning third-party claims is not relevant, with the statement that over 150 claims from third parties have been filed against Harris which have been turned over to National Union for handling, and from review of documents produced by U.S. Fire, Harris has reason to believe that proper claims procedures were not followed.
Upon complete review of National Union's Objections to Magistrate Judge's Order filed April 7, 2000, the response thereto, and the Order at issue, the Court does not find the Order of the Magistrate Judge filed April 7, 2000 to be clearly erroneous or contrary to law. The Magistrate Judge's Order has a proper legal and factual basis and therefore this Court is not left with a definite and firm conviction that any mistake has been committed.
IV. Order for Sanctions, Fees and Costs Against Zurich
On November 18, 1999 Zurich produced Terese Wallschlaeger to provide testimony on its behalf in connection with Plaintiff's Rule 30(b)(6) deposition notice. At the end of the deposition, counsel for Zurich instructed Wallschlaeger not to answer several questions concerning her concurrence with certain statements contained in a book published by the Insurance Institute of America. Plaintiff filed a motion to compel as to counsel's instructions to Wallschlaeger. (Dkt. 76). The Magistrate Judge (Dkt. 84) granted the Motion to the extent Ms. Wallschlaeger was able to answer the questions as a corporate representative of Zurich. The Magistrate Judge found that the ". . . do you agree with" questions were outside the scope of the 30(b)(6) designation, but there was no assertion of privilege. The witness was required to testify as to her knowledge. The Magistrate Judge found that "if Ms. Wallschlaeger knows the position of Zurich as to the questions, she must answer them" and granted the Motion "to the extent Ms. Wallschlaeger shall answer the disputed questions, if she is able, as the corporate representative of Zurich . . ." (Dkt. 84 at 4).
Harris filed a Motion for Sanctions, Costs and Fees Against Zurich for Failure to Comply With the Court's Discovery Order. (Dkt. 172). Zurich subsequently filed a Supplemental Affidavit of Ms. Wallschlaeger. (Dkt. 176). By Order filed June 8, 2000, The Magistrate Judge, after examining the original answers and supplemental responses of Ms. Wallschlaeger, found that, with the exception of question 12, the answers and supplemental answers were not responsive to the questions and granted the Motion for Sanctions, ordering Ms. Wallschlaeger to provide fully responsive answers within ten days and awarded Plaintiff's costs and fees to be either agreed upon or detailed in an affidavit (Dkt. 177). Zurich filed its objections. (Dkt. 182).
The issue is whether Ms. Wallschlaeger's answers and supplemental answers comply with the Magistrate's Order. The Magistrate Judge found they did not. This Court finds that Zurich's Objections to Magistrates' June 7, 2000 Order Granting Plaintiff's Motion for Sanctions, Costs and Fees (Dkt. 182) should be granted in part. The Supplemental Affidavit of Terese Wallschlaeger (Dkt. 176) complies with the Magistrate Judge's Order (Dkt. 84) and in addition to objections as to the form of the question, the responses given specifically state that she does not know what Zurich's corporate position is as to each quoted passage. She does give a statement as to her knowledge and experience of Zurich's practices. While each of the statements given as to the practice of Zurich is identical and not specifically tailored to each quoted passage, this Court finds the responses to be sufficient However, prior to the filing of the Supplemental Affidavit, the Court finds the Objections should be overruled as Zurich had not complied with the Magistrate's Order of February 23, 2000.
Accordingly, it is ORDERED:
1) Harris' Motion for Reconsideration to Presiding Judge of Order Denying Motion for Extension of Deadline to Disclose Expert Witnesses (Dkt. 44) is OVERRULED.
2) National Union's Objections to District Court (Dkt. 124) are OVERRULED.
3) Zurich's Objections to Magistrate's June 7, 2000 Order is GRANTED IN PART and DENIED IN PART as set forth in this Order.
4) All requests for fees and costs shall remain pending with the Magistrate Judge.