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Anderson v. Mountain States Mutual Casualty Co.

United States District Court, D. Colorado

April 28, 2016




This matter is before the court on various discovery disputes raised in “Plaintiff’s [sic] Marshall Anderson Written Material Submitted for April 15th, 2016 Conference” [#44, filed April 14, 2016] and “Defendant Mountain States Mutual Casualty Company’s Written Materials Submitted for April 14, 2016 at 1:30 p.m. Discovery Conference” [#47, filed April 15, 2016]. These discovery issues are referred to this court pursuant to 28 U.S.C. § 636(b)(1)(A) and the Order Referring Case dated June 19, 2015 [#7].


Plaintiff Marshall Anderson (“Plaintiff or “Mr. Anderson”) asserts three claims for Underinsured Motorist Benefits, Breach of Contract, and Violation of the Insurance Fair Conduct Act resulting from the denial of his claim for underinsured motorist (“UIM”) insurance benefits by Defendant Mountain States Mutual Casualty Company (“Defendant” or “Mountain States”), associated with an automobile collision involving Plaintiff and non-parties to this action. [#4]. In his Complaint, Mr. Anderson contends that Defendant has “unreasonably delayed and/or denied payment of the [underinsured motorist] benefits for the damages incurred, ” and that as a result of the unreasonable delay, he is entitled to recover “the covered benefit owed…plus statutory damages of two times the covered benefit, plus reasonable attorney fees and court costs.” [#4 at 7]. A Scheduling Order was entered in this case on July 17, 2015, and provides for discovery closing on March 14, 2016. [#17]. By Order dated March 17, 2016, the deadline for discovery was extended until May 30, 2016. [#38].

Mr. Anderson now seeks an unredacted claims file, an evaluation, settlement authority, and reserve information from Defendant. Specifically, Plaintiff requests that the court “order that Defendant produce all of its claims information regarding reserve information in an un-redacted format, and produce all other documents listed in its Supplemental Privilege Log for an in camera review for the court.” [#44 at 3]. Defendant contends that the information sought by Mr. Anderson is not discoverable, either because it is not reasonably calculated to lead to admissible evidence or because it is protected from disclosure by the attorney-client privilege. [#47]. The court addresses each of these issues in turn.


I. Reserve and Settlement Authority Information

Mr. Anderson asserts that Defendant should be required to produce all of its claims information regarding reserve information in an unredacted format, because it is relevant to his claims of bad faith. [#44 at 3]. Mr. Anderson also seeks information regarding the settlement authority. [#44 at 1]. “Reserves are the funds insurance companies set aside to cover future expenses, losses, claims, or liabilities associated with a particular case….settlement authority generally refers to an insurance agent’s ability to accept an offer of settlement that binds the principal up to and including a certain amount of money.” See Sunahara v. State Farm Mut. Auto. Ins. Co., 280 P.3d 649, 656 (Colo. 2012) (internal quotations and citations omitted). Reserve information and settlement authority do not typically reflect a thorough factual or legal evaluation of the case at hand. Id. Rather, they reflect a basic evaluation of the value of the claim and the risk of an adverse judgment. Id.

Rule 26(b)(1) governs the discoverability of information in this action, [1] and provides in pertinent part:

Unless otherwise limited by court order, the scope of discovery is as follows: Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties’ relative access to relevant information, the parties’ resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit. Information within this scope of discovery need not be admissible in evidence to be discoverable.

Fed. R. Civ. P. 26(b)(1) (eff. Dec. 1, 2015).[2] In this case, Plaintiff seeks the reserve and settlement authority information not for the purposes of assigning a value to the claim, but to ascertain whether Defendant acted in good faith while handling his claim. [#44]. Defendant does not contend that this information is privileged, but, relying upon the Colorado Supreme Court’s holding in Sunahara v. State Farm, objects to its production based on lack of relevance.

Like Sunahara, this case involves a first-party claim brought by an insured against an insurer for UIM benefits. Unlike Sunahara, Mr. Anderson has also brought a claim for bad faith against Mountain States. The Colorado Supreme Court in Sunahara observed:

[W]e noted in Silva that reserves and settlement authority-and, under our reasoning in this case, the liability assessments and fault evaluations underlying those figures as well-might be relevant and reasonably calculated to lead to admissible evidence when a first-party plaintiff sues his or her insurance company for bad faith or for a declaratory judgment. Silva, 47 P.3d at 1193. In bad faith and declaratory judgment actions, evidence of reserves and settlement authority could shed light on whether the insurance company adjusted a claim in good faith, or promptly investigated, assessed, or settled an underlying claim. Id.

Sunahara, 280 P.3d at 657-58. As discussed above, Plaintiff contends that Mountain States has unreasonably delayed and/or denied benefits to him that are payable under the UIM policy. [#4 at ¶¶ 47-48]. Plaintiff further alleges that Defendant “has not thoroughly and fairly evaluated the Plaintiff’s claims and has not complied with the terms and agreements set forth in the Policy that covers the Plaintiff. The Defendant has been evasive in not timely responding to the Plaintiff’s claims” and that Defendant has “been unreasonable and negligent in the handling of the Plaintiff’s claims.” [Id. at ΒΆΒΆ 70, 71]. In the description of his claims as reflected in the Scheduling Order, Mr. Anderson further ...

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