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J&M Associates, Inc. v. Union Fire Insurance Co. of Pittsburgh

June 27, 2008


The opinion of the court was delivered by: Jan M. Adler U.S. Magistrate Judge


Plaintiff J&M Associates, Inc. ("J&M") has filed a letter brief in support of its motion to compel the deposition of Defendant National Union Fire Insurance Company of Pittsburgh, PA's ("National Union's") Fed. R. Civ. P. 30(b)(6) witness regarding loss allocation. National Union opposes. For the reasons set forth below, the Court GRANTS J&M's motion.


On March 24, 2008, J&M served a deposition notice upon National Union, seeking to take the deposition of the person(s) most knowledgeable on three topics, including the following:

National Union's practice and procedure with regard to allocating and/or reserving for defense expenses on liability claims, including defense expenses incurred by National Union in coverage actions, as reflected on the attached J&M "AIG RMIS Risk Detail Report" (Exhibit "A" hereto).

Holtz Decl., Ex. B-2. J&M sought to take the above deposition, among others, on May 1, 2008 in New York City. Id., Ex. B-1 & B-2. National Union served objections to the deposition notice on April 17, 2008, which included the following "specific objections" to the above topic (referred to by the parties as "topic number 3"):

[T]he terms "practice and procedure" and "allocating and/or reserving" are vague, overbroad and unduly burdensome, thus inhibiting National Union in its ability to prepare sufficiently for the deposition. Given the vague and improper description of the scope of [the] Topic, National Union reserves the right to object to specific areas of questioning where the witness did not have sufficient notice and/or time to be able to prepare.

[B]y seeking information pertaining to "defense expenses incurred by National Union in coverage actions," the topic is unduly burdensome.

[I]t exceeds the permissible scope of discovery and seeks information neither relevant to any claims or defenses in this action, nor reasonably calculated to lead to the discovery of admissible evidence. J&M's "allocation bad faith" theory is not viable under California law. (Citations omitted.) Moreover, "an insured cannot base a cause of action for bad faith on non-renewal, even if there is a coverage dispute between the insurer and insured over a prior claim." {Citation omitted.), Ex. C.

Counsel for the parties corresponded both before and after National Union served its objections regarding, inter alia, the scope and parameters of the deposition sought by J&M. See id., Exs. D-I (consisting of letters and e-mails exchanged between J&M's counsel, James Holtz, Esq., and National Union's counsel, Michelle Bernard, Esq., dated between April 17, 2008 and April 23, 2008).*fn1 In particular, Ms. Bernard advised on April 17, 2008 that National Union intended to designate a representative from World Wide Facilities, Inc. ("World Wide") to testify as to topic number 3. Id., Ex. D-3. She explained that National Union "outsourced" the underwriting and marketing of Staffing Services Liability policies, such as J&M's, to World Wide, its managing general agent, and that World Wide had made the decision to non-renew J&M's policy. Id. As such, she proposed that "a representative from World Wide would be in the best position to address what role, if any, the amount of loss expense allocated to J&M . . . played in the decision to non-renew this account with National Union." Id.

Mr. Holtz responded to Ms. Bernard's proposal later that same day. Id., Ex. E-1. He advised of his position that "the bottom line is that you are producing no persons from National Union for depositions as noticed for May 1." He observed that the deposition notice did not mention "non-renewal" at all, and stated that "NATIONAL UNION must produce an employee to testify on this topic." Id. (emphasis in original). He further contended that J&M was entitled to know why National Union had allocated its coverage defense costs to J&M's loss experience, and whether it was a company practice to do so. Id.

In response, Ms. Bernard, in an e-mail dated April 18, 2008, disagreed with Mr. Holtz's statement that National Union was not producing any witnesses in response to the deposition notice. , Ex. G-1. She explained that notwithstanding its objections to the notice, which were "interposed to preserve all of National Union's rights regarding the relevance and admissibility of your Rule 30(b)(6) topics, National Union intends to produce Rule 30(b)(6) designees on May 1, 2008, in New York City." Id. She further advised that it was "entirely appropriate for National Union to designate a witness from its managing general agent World Wide to provide deposition testimony to the extent that National Union deems World Wide to be most knowledgeable regarding any of the requested topics." Id. She also stated that National Union "has no stated 'policy' or 'procedure' of allocating coverage counsel/coverage litigation expenses to the insured's loss experience," and suggested that Christine Vitucci or Audrey Samit*fn2 could provide testimony regarding the claim payment process, including the "mechanics" of how claims payments are made and how they are characterized or coded. Id. Additionally, she advised that Peter Kalin, the Manager of Underwriting Operations for World Wide, would testify regarding the decision to non-renew J&M's policy. Id.

Mr. Holtz sent a responsive e-mail the following day, on April 19, 2008, in which he explained:

[T]he 30(b)(6) notice asks essentially for someone to explain the loss allocation on the . . . AIG RMS loss run. I do not understand why you and [Matthew Elstein, Esq.] repeatedly talk about non-renewal because I am not asking for a witness on that topic, nor does the amended complaint allege a cause of action for "wrongful non-renewal." The complaint alleges that the allocation of [National Union's] coverage expenses to the insured's loss experience increased the total numbers on the loss run, which had an effect on the ability generally to market the J&M risk, was unreasonable (bad faith) and perhaps was done in retaliation for J&M fighting AIG*fn3 on the coverage denial. This has nothing to do with non-renewal by [National Union] of the expiring policy as [National Union] had freedom of choice to non-renew. Someone somewhere can explain what the AIG RMS form is and why the AIG coverage expenses incurred in fighting the action brought by J&M against National Union were allocated to the insured's loss experience, and whether that was just a one-time thing for J&M or is company policy. . . . [ΒΆ] [S]omeone knows what that form means and how it is generated and ...

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