Westfield Insurance Co. v. Icon Legacy Custom Modular Homes

321 F.R.D. 107, 2017 WL 2021514
CourtDistrict Court, M.D. Pennsylvania
DecidedMay 12, 2017
DocketNo. 4:15-cv-00539
StatusPublished
Cited by13 cases

This text of 321 F.R.D. 107 (Westfield Insurance Co. v. Icon Legacy Custom Modular Homes) is published on Counsel Stack Legal Research, covering District Court, M.D. Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Westfield Insurance Co. v. Icon Legacy Custom Modular Homes, 321 F.R.D. 107, 2017 WL 2021514 (M.D. Pa. 2017).

Opinion

MEMORANDUM

Matthew W. Brann, United States District Judge

The instant motion to compel requires me to determine whether, and to what extent, extrinsic evidence is discoverable in a declaratory insurance coverage action where bad faith is no longer at issue. At first blush, any learned practitioner would expect the proper resolution to flow naturally from rote application of settled contract principles. However, intrepid research and argumentation by counsel have plainly refuted that misconception.

The underlying concepts that animate my decision are, of course, decades-old. Yet, precisely how courts should apply them to discovery disputes like this one are far from decided. Moreover, because amended Federal Rule of Civil Procedure 26(b)(1) prioritizes proportionality, whatever guidance the prevailing ad hoc approach once offered likely commands diminished weight today.

I now seek to synthesize existing case law with this renewed focus on proportionality in discovery: I hold that litigants who wish to discover extrinsic evidence in a contract in[110]*110terpretation ease must (1) point to specific language in the agreement itself that is genuinely ambiguous or that extrinsic evidence is likely to render genuinely ambiguous; and (2) show that the requested extrinsic evidence is also likely to resolve the ambiguity without imposing unreasonable expense. Because the insured here falls well short of meeting either of these twin aims, the instant motion to compel is denied, and the case must proceed to dispositive motions.

I. BACKGROUND

Plaintiff Westfield Insurance Company seeks a declaratory judgment that it need not compensate Defendant Icon Legacy Custom Modular Homes, a homebuilder from Selinsgrove, Snyder County, Pennsylvania to whom it sold a commercial general liability policy. Specifically, Plaintiff contends that it need not compensate the insured for three claims by modular home purchasers that allegedly arose from Defendant’s faulty workmanship, because it argues that such conduct does not constitute an insurable “occurrence” under Pennsylvania law.

Initially, Defendant was sued in two separate state court proceedings in New York and Massachusetts, and Plaintiff agreed to defend it as to those actions subject to a reservation of rights. Plaintiff then initiated this action in federal court, seeking a declaration that it owes Defendant no defense or indemnity under the subject policy as to those actions.

When Defendant was sued for a third time, then in Vermont state court, Plaintiff amended its complaint and sought a similar declaration as to the newly filed action. In response, Defendant filed a counterclaim alleging that Plaintiffs decision to deny coverage in that third case was made in bad faith. Plaintiff thereafter filed a motion to dismiss, arguing that Defendant had failed to plausibly plead sufficient facts supporting its bad faith claim.

This Court granted that motion on August 29, 2016, on the basis that Defendant had proffered little in the way of a showing of bad faith. The Court’s key observation was as follows:

Most apparently, even taking for granted the similarity between any set of claims, coverage of some claims and denial of others is not per se evidence of bad faith insurance practices. For example, consider a hypothetical set of five claims, all of which are “similar” but none of which the insurer believes in good faith it is legally bound to offer coverage. The insurer could, if it wanted, offer coverage in none or all or two or three of those cases. Denial would not be made in bad faith under the law. Rather, it would be made based upon a calculated business judgment, risk avoidance, litigation forecasts, etc. The point is that “similarity” among claims is a poor predictor of bad faith denials in cases where either the claims’ alleged similarity or the claims’ coverage under the policy is not clearly established. I perceive both of those elements to be lacking here.

Just as importantly, the Court expedited that motion based upon representations by both counsel that its quick disposition would help to resolve this action or at least move it forward.

Shortly thereafter, however, the parties found themselves back on this Court’s doorsteps, detailing again that they had reached several discovery impasses. As a result, the Court held a telephonic status conference on November 1, 2016, just two months after it issued its motion to dismiss Memorandum. I issued the following Order after the call that same day:

1. The discovery deadline is extended for a final time to December 30, 2016. No further extensions will be granted.
[[Image here]]
4. The Court strongly encourages the parties to independently and efficiently resolve any additional discovery disputes, keeping in mind the discussion that took place on the October 81, 2016 conference call, the Court’s August 29, 2016 motion to dismiss memorandum, and Federal Rule of Civil Procedure 26(b)’s proportionality mandate.

Despite the Court’s admonitions, counsel, led by a December 28, 2016 letter by defense counsel, returned to the Court yet again, purportedly tangled in a discovery quagmire once more. Following that exchange, this [111]*111Court granted Defendant leave to file any appropriate motions. I also held a comprehensive oral argument on March 9, 2017, at which time the parties addressed the two motions that Defendant filed: a motion to compel of dubious timing that largely seeks extrinsic evidence tangential to the declaratory claim; and a motion for sanctions over what might best be described as trivial (and perhaps justified) dust-ups by two otherwise sterling sets of advocates.

Having delved deeply into the underbelly of the beast, I nevertheless remain of the view that “[f]or all of its procedural machinations,” this case is “rather straightforward.” Westfield Ins. Co. v. Icon Legacy Custom Modular Homes, 2016 WL 4502456, at *1 (M.D. Pa. Aug. 29, 2016). As detailed more fully below, Defendant’s motion to compel and motion for sanctions are both denied, and the case will now proceed to dispositive motions.

II. LAW

“It is well established that the scope and conduct of discovery are within the sound discretion of the trial court ... and that after final judgment of the district court ... our review is confined to determining if that discretion has been abused.” Marroquin-Manriquez v. I.N.S., 699 F.2d 129, 134 (3d Cir. 1983) (Aldisert, J.). “To find such abuse it is usually necessary to conclude that there has been an interference with a substantial right ... or that the discovery ruling is seen to be a gross abuse of discretion resulting in fundamental unfairness in the trial of the case.” Id. Thus, the United States Court of Appeals for the Third Circuit has forewarned litigants that it “will not interfere with a trial court’s control of its docket except upon the clearest showing that the procedures have resulted in actual and substantial prejudice to the complaining litigant.” In re Fine Paper Antitrust Litig.,

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Cite This Page — Counsel Stack

Bluebook (online)
321 F.R.D. 107, 2017 WL 2021514, Counsel Stack Legal Research, https://law.counselstack.com/opinion/westfield-insurance-co-v-icon-legacy-custom-modular-homes-pamd-2017.