INSURANCE: Reserve information relevant to bad faith claim, insurer not entitled to protective order excluding all information related to reserves in discovery, may seek to ameliorate any prejudice by in limine motion or cautionary instruction… Christensen.
Barnard Pipeline tendered a claim to Travelers for losses associated with construction of a pipeline in Utah. It allegedly tendered the claim 12/6/11. Travelers allegedly had 1 year to complete its investigation, but had not provided a decision when Barnard filed its complaint 1/2/13. Barnard alleges that Travelers acted in bad faith in its investigation and adjustments. It requested the entire claim file. Parts of the file concerning reserves placed on the claim were redacted. It also requested deposition of a Travelers rep about “establishment and maintenance of reserves prior to suit” regarding its claim and its “policies and procedures for establishing and maintaining reserves on property insurance claims.” Travelers objected that information as to reserves is irrelevant and not reasonably calculated to lead to discoverable information. The parties conferred and failed to resolve the issue. Travelers requests a protective order.
Travelers contends that its reserve information is simply a number arrived at pursuant to its statutory duty and has no bearing on its assessment or evaluation of coverage, and that Barnard would use it in a manner that will unfairly prejudice it. Barnard asserts that the reserve information is central to its bad faith claims and provides circumstantial evidence of Travelers’ internal investigation process and whether that and its claim handling was in good faith, and that Travelers cannot show any specific harm without a protective order. It suggests that Travelers’ claim of prejudice is more appropriately in an in limine motion or jury instruction.
While Travelers has been able to find 2 cases from other jurisdictions that support its position, the better case law supports Barnard. Almost all the cases Travelers cites in which discovery into reserve information was denied involved only a declaratory action rather and are inapposite as to what evidence is relevant or reasonably calculated to lead to admissible evidence in a bad faith case. Barnard alleges that Travelers acted in bad faith by repeatedly seeking unnecessary information as to its claim in an effort to delay payment and coerce Barnard into settling for less than Barnard believed the claim to be worth. It is clear that Barnard’s claim may implicate one or more of MCA 33-18-201 provisions. It brought its claim for declaratory judgment and bad faith in response to its perception that Travelers was unduly delaying resolution, treating the claims process in an adversarial manner, and unjustifiably seeking information in a bad faith attempt to coerce a low settlement contrary to Travelers’ actual view of the value. While maintaining reserve information is required by MCA 33-2-518, reserve information is not entirely divorced from the insurer’s view of the value of a claim. Indeed, “the reserves for all outstanding losses and loss expenses must include the estimated liability on any notice received by the insurer of the occurrence of any event that may result in a loss.” §33-2-518(2)(a) click to investigate. Thus the reserve reflects at least in part the insurer’s estimation of potential liability. This internal assessment is relevant because it sheds light on the insurer’s state of mind as it went about investigating and processing the claim. To the extent that reserve information reveals what Travelers thought or knew about Barnard’s claim at various stages of its investigation, it is relevant and at least reasonably calculated to lead to admissible evidence. Bernstein v. Travelers (ND Cal. 2006).
A protective order is denied. Travelers remains free to attack the weight & probative value of any evidence as to reserves at other stages. It may seek to exclude it through a motion in limine or a cautionary instruction. However, to assess its claim of prejudice, the reserve information must first be subject to discovery.
Barnard Pipeline v. Travelers Property Casualty, 41 MFR 253, 1/10/14.
Christian Nygren & Patrick Brown (Barnard Pipeline), Bozeman, and Richard Beal (Ashbaugh Beal), Seattle, for Barnard; Marshal Mickelson & Annie Harris (Corette Black Carlson & Mickelson), Butte, and Daniel Bentson, Seattle, and Ronald Clark, Portland (Bullivant Houser Bailey), for Travelers.
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