Tentative Ruling

Judge Donna Geck
Department 4 SB-Anacapa
1100 Anacapa Street P.O. Box 21107 Santa Barbara, CA 93121-1107

CIVIL LAW & MOTION
Astrid G Nelson Megel et al vs The Standard Fire Insurance Company et al
Case No: 19CV01261
Hearing Date: Fri Jan 24, 2020 9:30

Nature of Proceedings: Motions to Compel:Further Answer to RFP, Set One; Attendance Testimony and Production at Depo, Req for Evidence, Issue and/or Monteary Sanctions

TENTATIVE RULING: Plaintiffs’ motion to compel further responses to Request for Production of Documents, Set One, is granted in part and denied in part, as set forth herein. Defendants’ further responses, and all responsive documents, shall be provided on or before February 14, 2020. The requests for monetary sanctions by both sides are denied. Plaintiffs’ motion to compel attendance, testimony, and production at depositions is denied. The parties shall meet and confer and proceed with the depositions of the custodian of records, the PMK witnesses, and Eric Shuman as proposed by defense counsel on December 16, 2019. The depositions shall be completed within 60 days of the date of this order, or as agreed to by the parties.

BACKGROUND:

This is an insurance coverage dispute involving a homeowner’s policy. Plaintiffs Astrid G. Nelson Megel, individually and as trustee of the Westside Irrevocable Trust, and Clifford Nelson are the owners of real property located at 726 West Pedregosa Street, Santa Barbara, California. The property, which is plaintiffs’ residence, includes two rental units above the detached garage. After the tenants of the two rental units filed a lawsuit against plaintiffs, alleging that the rental units were uninhabitable, forcing them to move out and incur damages, plaintiffs tendered the defense of the action to their homeowner’s insurer, defendants The Standard Fire Insurance Company and Travelers Commercial Insurance Company. Plaintiffs’ homeowner’s policy affords coverage for claims arising out of their ownership and/or use of the subject premises, including the rental units, but defendants denied coverage, citing an exclusion in the policy for rental units with more than two “boarders.” Plaintiffs’ complaint alleges causes of action against defendants for breach of contract, breach of the implied covenant of good faith and fair dealing, and negligence.

On October 15, 2019, plaintiffs served their Request for Production of Documents, Set One, on defendants. After being granted an extension of time to respond to the discovery requests, defendants served their responses on November 27, 2019, including documents Bates Stamped 1-177. On December 10, 2019, defendants served a privilege log and supplemental documents Bates Stamped 178-210. Defendants served their verifications to the discovery on January 3, 2020. Plaintiffs contend that defendants’ document production is deficient and now move to compel further responses. Plaintiffs request evidence, issue, or monetary sanctions. Defendants oppose the motion and request monetary sanctions against plaintiffs.

In a separate motion, plaintiffs seek to compel the depositions of (1) Eric Shuman, the claims handler on plaintiffs’ file, (2) defendants’ custodian of records, and (3) the person most qualified to testify on specified subjects, including defendants’ underwriting and claims handling guidelines, the reasons defendants denied plaintiffs’ claim for defense and indemnity under the subject policy, and all other claims presented to defendants during the past ten years where coverage was denied due to the number of “boarders” at the insured location. On November 1, 2019, plaintiffs served their Notice of Deposition and Demand for Inspection and Production of Documents at Deposition, calling for the appearance, testimony, and documents by these witnesses on December 4, 2019, in Santa Barbara. On November 25, 2019, defense counsel notified plaintiffs’ counsel that he was unable to attend the depositions on December 4, 2019. On November 26, 2019, defendants served their objections to plaintiffs’ notice of depositions. Both sides request monetary sanctions against the other.

ANALYSIS:

1. Motion to Compel Further Responses to Requests for Production

On receipt of a response to a demand for inspection of documents, the demanding party may move for an order compelling a further response to the demand “if the demanding party deems that . . . [a] statement of compliance with the demand is incomplete . . . [or an] objection in the response is without merit or too general.” Code Civ. Proc. §2031.310, subd. (a). The motion to compel must be accompanied by a declaration showing “a reasonable and good faith attempt” to resolve the issues outside of court. Code Civ. Proc. § 2016.040. The motion must also set forth “specific facts showing good cause” for the discovery. Code Civ. Proc. §2031.310, subd. (b)(1). If good cause is shown, the burden is then on the responding party to justify any objections or the failure to respond fully to the discovery. Fairmont Insurance Company v. Superior Court (2000) 22 Cal.4th 245, 255.

Plaintiffs served their Request for Production of Documents, Set One, on defendants on October 15, 2019, document request Nos. 1-25. (Kar Dec., ¶11, Ex. 1.) After being granted a ten-day extension of time to respond, defendants served their responses to the requests on November 27, 2019, including documents Bates Stamped 1-177. (Kar Dec., ¶13, Ex. 3; Hanson Dec., ¶3.) The documents included copies of the subject insurance policy, the underwriting file, the claim file and notes, and correspondence between the parties, including plaintiffs’ tender letter and defendants’ denial letter. (Hanson Dec., ¶3.) On December 10, 2019, defendants served a privilege log and a supplemental document production Bates Stamped 178-210. (Kar Dec., ¶5.) Defendants served their verifications to the document requests on January 3, 2020. (Kar Dec., ¶5, Ex. A.) Plaintiffs contend that defendants’ document production is deficient and now move to compel further responses.

The specific requests for production at issue and the court’s ruling on defendants’ objections are as follows:

RFP No. 1: This request seeks all writings that concern or refer to insurance transactions involving plaintiffs from September 25, 2013, to the present. Defendants produced their complete underwriting file and plaintiffs’ homeowner’s policy. Plaintiffs contend that the response is deficient because no documents were produced evidencing the premiums paid, loss-runs, inspection reports, their original insurance application, and defendants’ approval of same. Defendants state that the inspection reports were produced (Bates Stamped 0054-0066) and that the other identified documents are not material because the sole issue in the case concerns the construction of the exclusion in the policy for rental units with two or more “boarders.” Defendants’ objections will be overruled. All writings relating to plaintiffs’ purchase and maintenance of the subject policy, including any endorsements, shall be produced.

RFP No. 2: This request seeks all underwriting manuals, policies, and guidelines for homeowner’s policies in effect from September 25, 2013, to the present. Defendants objected to, and refused to produce, the requested materials on the grounds that the information is not relevant to the issues in the case and not reasonably calculated to lead to the discovery of admissible evidence. Defendants’ objections will be overruled. Evidence about an insurer’s underwriting criteria is admissible where relevant to the issue of whether the insured made material misrepresentations while applying for insurance. See, Freeman v. Allstate Life Insurance Company (9th Cir. 2001) 253 F.3d 533, 537. Logically, if such evidence is relevant to whether the insured made material misrepresentations during the insurance application process, it is also relevant to whether the insurer made material misrepresentations at the same time. The underwriting manuals, policies, and guidelines shall be produced.

The parties shall prepare and sign a confidentiality agreement concerning the underwriting manuals, policies, and guidelines before they are produced.

RFP No. 3: This request seeks all claims manuals, policies, and guidelines for claims for defense and indemnity under homeowner’s insurance policies in effect from September 25, 2013, to the present. Defendants objected to, and refused to produce, the requested materials on the grounds that the information is not relevant to the issues in the case and not reasonably calculated to lead to the discovery of admissible evidence. Defendants’ objections will be overruled. The courts have held that claims manuals are admissible in coverage dispute litigation. See, Neal v. Farmers Insurance Exchange (1978) 21 Cal.3d 910, 923, fn. 2; Downey Savings & Loan Association v. Ohio Casualty Insurance Company (1987) 189 Cal.App.3d 1072, 1082; Moore v. American United Life Insurance Company (1984) 150 Cal.App.3d 610, 620, fn. 3. If claims manuals are admissible, it follows that they are discoverable. The claims manuals, policies, and guidelines for claims of the type presented in this case shall be produced.

The parties shall prepare and sign a confidentiality agreement concerning the claims manuals, policies, and guidelines before they are produced.

RFP No. 4: This request seeks defendants’ entire claim file relating to plaintiffs’ claim for defense and indemnity under the subject policy. Defendants produced the complete claim file, except documents noted on their privilege log, Bates Stamp Nos. 0001-0026, 0109-0111, and 0162-0177, and supplemental production Nos. 0178-0210. No further response will be required.

RFP No. 5: This request seeks all correspondence between plaintiffs and defendants concerning plaintiffs’ claim for defense and indemnity under the subject policy. Defendants produced all documents responsive to this request as part of the claim file and no further response will be required.

RFP No. 6: This request seeks all writings reflecting a claim by an insured for defense and indemnity from September 25, 2013, to the present under a homeowner’s policy that was denied because the allegations made by tenants against the insured arose out of the insured’s operation of rental units as a business. Defendants objected to, and refused to produce, the requested materials on the grounds that the information is not relevant and not reasonably calculated to lead to the discovery of admissible evidence as the sole issue in the case concerns the construction of an exclusion in the policy. Defendants’ objections will be overruled. In an action against an insurance company alleging unfair claims settlement practices, the plaintiff is entitled to discover whether the insurer engaged in a pattern of unfair practices on similar claims. Colonial Life & Accident Insurance Company v. Superior Court (1982) 31 Cal.3d 785, 792. The records of other similar claims shall be produced.

The names, addresses, and other identifying information of the insureds shall be redacted from the claims files before they are produced.

RFP No. 7: This request seeks all documents relating to or reflecting defendants’ relationship with defendant Baratto Sullivan & Company insurance brokers, or any of its agents or employees. Defendants objected to the request as vague and ambiguous. The objection will be sustained, in part. Defendants are ordered to produce all correspondence and other writings to or from Baratto Sullivan & Company relating to the subject insurance policy or plaintiffs.

RFP No. 8: This request seeks defendants’ underwriting file relating to the subject insurance policy. Defendants produced their complete underwriting file, as well as a certified copy of plaintiffs’ policy, except those documents noted on their privilege log, Bates Stamp Nos. 0027-0108. No further response will be required.

RFP No. 9: This request is duplicative of plaintiffs’ RFP No. 4. See, above.

RFP No. 10: This request is duplicative of plaintiffs’ RFP No. 6. See, above.

RFP No. 11: This request seeks all pre-risk inspection reports or investigations of the risks being insured under plaintiffs’ policy. Defendants produced all documents responsive to the request, Bates Stamp Nos. 0050-0068, and no further response will be required.

RFP No. 12: This request seeks all writings that reflect the amount of defendants’ reserve for loss and/or defense of the underlying lawsuit (Santa Barbara Superior Court Case No. 18CV01559). Defendants produced the requested information, Bates Stamp No. 0010, and no further response will be required.

RFP No. 13: This request seeks all writings that reflect or refer to the identity and title of the individuals who handled plaintiffs’ claim for defense and indemnity under the subject policy. Defendants produced the requested information, Bates Stamp No. 0014, and no further response will be required.

RFP No. 14: This request seeks a copy of the subject policy. Defendants produced a certified copy of the policy, Bates Stamp Nos. 0112-0160, and no further response will be required.

RFP No. 15: This request seeks all writings relating to defendants’ document retention or destruction policies. Defendants objected to, and refused to produce, the requested documents on the grounds that the information is not relevant to the issues in the case and not reasonably calculated to lead to the discovery of admissible evidence. Defendants’ objections will be sustained. Plaintiffs have failed to set forth “specific facts showing good cause” for the discovery. Code Civ. Proc. §2031.310, subd. (b)(1).

RFP No. 16: This request seeks defendants’ organizational charts from January 1, 2013, to the present. Defendants objected to the request on relevancy grounds. The objection will be sustained. Plaintiffs have been provided with the identity and title of the individuals who were responsible for handling plaintiffs’ claim. See RFP No. 12, above. No further response will be required.

RFP No. 17: This request seeks all writings utilized by defendants to interpret their guidelines, internal policies, and procedures. Defendants responded that no responsive documents exist. No further response will be required.

RFP No. 18: This request seeks all writings that reflect defendants’ interpretation of the policy language at issue. Defendants produced a copy of the applicable denial letter, Bates Stamp Nos. 0022-0026, and copies of claims notes, Bates Stamp Nos. 0006-0014. No further response will be required.

RFP No. 19: This request seeks all training materials used by defendants’ claims adjusters from September 25, 2013, to the present. Defendants objected to the request on relevancy grounds and the objection will be sustained. Plaintiffs have failed to set forth “specific facts showing good cause” for the discovery. Code Civ. Proc. §2031.310, subd. (b)(1). No further response will be required.

RFP No. 20: This request seeks all advertising materials used by defendants for the sale and/or underwriting of homeowner’s policies from September 25, 2013, to the present. Defendants objected to the request as overbroad and not reasonably calculated to lead to the discovery of admissible evidence. The request is overbroad and the court will sustain defendants’ objection. No further response will be required.

RFP No. 21: This request seeks all writings relied upon by defendants in denying defense and indemnity in the underlying lawsuit (Santa Barbara Superior Court Case No. 18CV01559). Defendants produced a certified copy of plaintiffs’ homeowner’s policy, Bates Stamp Nos. 0112-0160, a copy of the underlying complaint filed against plaintiffs, and copies of various claims materials, Bates Stamp Nos. 0001-0014. No further response will be required.

RFP No. 22: This request is duplicative of RFP No. 21 and no further response will be required.

RFP No. 23: This request seeks all documents relied upon by defendants in defining the term “boarders” in the subject policy. Defendants responded that the term “boarders” was construed according to its “usual and customary meaning.” Defendants also relied upon plaintiffs’ policy, Bates Stamp Nos. 0112-0160, the underlying complaint filed against plaintiffs, and various materials in the claim file, Bates Stamp Nos. 0001-0014. No further response will be required.

RFP No. 24: This request seeks all documents relied upon by defendants in defining the term “roomers” in the subject policy. Defendants responded that the term “roomers” was construed according to its “usual and customary meaning.” Defendants also relied upon plaintiffs’ policy, Bates Stamp Nos. 0112-0160, the underlying complaint filed against plaintiffs, and various materials in the claim file, Bates Stamp Nos. 0001-0014. No further response will be required.

RFP No. 25: This request seeks all writings pertaining to any investigation of coverage for the underlying lawsuit (Santa Barbara Superior Court Case No. 18CV01559). Defendants produced their entire claim file, except for documents noted on their privilege log, Bates Stamp Nos. 0001-0026, 0109-0111, and 0162- 0177, and supplemental production 0178-210. No further response will be required.

Code of Civil Procedure Section 2031.310, subdivision (h) provides that “the court shall impose a monetary sanction . . . against any party, person, or attorney who unsuccessfully makes or opposes a motion to compel further response to a demand, unless it finds that the one subject to the sanction acted with substantial justification or that other circumstances make the imposition of the sanction unjust.” The court finds that both sides should be sanctioned since court intervention should not have been necessary on all 25 requests for production. While certain of the requests clearly require a further response, others were clearly rendered moot by the supplemental responses that were provided. Given that both sides acted without substantial justification in the motion, the opposing requests for sanctions will be denied.

For the reasons set forth above, plaintiffs’ motion for order compelling further responses to Request for Production of Documents, Set One, is granted in part and denied in part. Defendants’ further responses, and all responsive documents, shall be provided on or before February 14, 2020.

2. Motion to Compel Depositions and Document Production

Where a party fails to comply with a deposition notice, the party serving the notice may bring a motion to compel. Code of Civil Procedure Section 2025.450, subdivision (a), provides:

“If after service of a deposition notice, a party to the action . . . , without having served a valid objection under Section 2025.410, fails to appear for examination, or to proceed with it, or to produce for inspection any document or tangible thing described in the deposition notice, the party giving the notice may move for an order compelling the deponent’s attendance and testimony, and the production for inspection of any document or tangible thing described in the deposition notice.”

On November 1, 2019, plaintiffs served their Notice of Depositions and Demand for Production of Documents, with a deposition date of December 4, 2019, in Santa Barbara, California. (Kar Dec., ¶6, Ex. 1.) On November 25, 2019, defense counsel notified plaintiffs’ counsel that he was unable to attend the depositions on December 4, 2019, and requested that the depositions be rescheduled. (Hanson Dec., ¶4.) On November 26, 2019, defendants served their objections to plaintiffs’ deposition notice. (Kar Dec., ¶11, Ex. 6.) Defendants objected that the deposition notice of the custodian of records failed to “describe with reasonable particularity the matters on which the examination is requested.” Code Civ. Proc. §2025.230. In addition, the deposition notice of the PMK witnesses was improper in requiring the presence of a “manager, managing agent, officer, or director” when, by law, a corporate defendant is entitled to select those of its “officers, directors, managing agents, employees, or agents” who are most qualified to testify on its behalf. Ibid. Finally, the deposition notice of Eric Shuman, defendants’ claims adjuster, improperly set Mr. Shuman’s deposition for Santa Barbara, which is more than 150 miles from Mr. Shuman’s residence in Yolo County, California. Code Civ. Proc. §2025.250, subd. (a).

The parties met and conferred on December 16, 2019, with regard to the depositions. At that time, defense counsel agreed to produce Mr. Shuman in Santa Barbara (or another location convenient in Southern California). (Hanson Dec., ¶5.) Defense counsel also agreed to produce a custodian of records for defendants once plaintiffs identified which documents needed to be produced. (Ibid.) With regard to the corporate PMK witnesses, defendants agreed to produce responsive witnesses in California as soon as plaintiffs determined which of the matters specified in the notice would be the subject of examination. (Ibid.) The deposition notice lists twenty-two topics or categories for examination (topics “a – v”), ranging from defendants’ underwriting guidelines to their claims handling guidelines to their reasons for denying plaintiffs’ claim for defense and indemnity to the compensation paid to their general agents, brokers, and producers. (Kar Dec., ¶6. Ex. 1.) Given the range of topics, defendants may have to designate more than one PMK witness.

The court finds that defendants served valid objections to plaintiffs’ deposition notice and that there is no basis for plaintiffs’ motion to compel depositions and documents, or their request for sanctions. Tellingly, plaintiffs do not assert anywhere in their papers that their deposition notice was not defective. Instead, without presenting any proof, plaintiffs accuse defendants of having “an ulterior purpose for refusing to appear, testify, and produce at deposition.” (Motion, p. 4:24-25.) This isn’t constructive. The parties shall meet and confer and proceed with the depositions of the custodian of records, the PMK witnesses, and Mr. Shuman as proposed by defense counsel on December 16, 2019. The depositions shall be completed within 60 days of the date of this order, or as agreed to by the parties.

With the above understanding, plaintiffs’ motion to compel attendance, testimony, and production at depositions will be denied.