Jackson Family Wines, Inc. v. Zurich American Insurance Company

Background

Jackson Family Wines, Inc. brought a breach-of-insurance-contract and bad-faith action against Zurich American Insurance Company. Jackson alleges that it bought three insurance policies providing a total of $1.1 billion in coverage and suffered property and other damage from four Northern California wildfires. It submitted four fire-related claims totaling more than $430 million and alleges that Zurich deliberately delayed the claims to avoid paying coverage. Jackson’s claims include breach of the three insurance agreements, breach of the implied covenant of good faith and fair dealing, and declaratory relief.

The parties filed a joint discovery letter concerning Zurich’s motion for a protective order. Zurich sought to bar Jackson from deposing Jimmy Johnson, a Zurich employee, under the “apex doctrine,” which can protect high-level executives from depositions when the deposition could cause undue burden, harassment, or expense.

The Parties’ Positions

Zurich argued that two claims adjusters, Cynthia Frank and Allan Holt, primarily handled Jackson’s claims and made coverage and payment decisions. Zurich stated that Frank and Holt reported to Jeff Morrow, who participated in claim handling and reviewed substantive payment determinations, and that Morrow reported to Johnson. Zurich characterized Johnson’s involvement as limited to high-level financial oversight and said he did not participate in or direct substantive coverage decisions. Zurich also argued that Jackson should first depose Holt and Morrow.

Jackson disputed that Johnson was an apex witness. It argued that, even if the doctrine applied, Johnson had relevant first-hand knowledge that was critical to the case and that Jackson had pursued other discovery options. Jackson offered to conduct Johnson’s deposition remotely and limit it to five hours.

Court’s Analysis

Federal Rule of Civil Procedure 26(c) allows a court to issue a protective order for good cause to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense. The party seeking protection must show specific prejudice or harm that would result without the order.

The court explained that courts consider whether a high-level executive has first-hand knowledge of important, relevant, and material facts and whether the requesting party has obtained the information through other discovery or less intrusive means. The court may limit discovery when the information can be obtained from a more convenient, less burdensome, or less expensive source.

The court first stated that it was not clear Johnson was a true apex witness. Zurich identified him only as the head of its commercial property major claims unit and said he was two levels above the claims handlers. Zurich did not provide additional details about Johnson’s role or position in Zurich’s organizational structure.

The court then held that, even assuming without deciding that the apex doctrine applied, Jackson had shown that Johnson likely possessed relevant first-hand knowledge. According to Jackson, Frank testified that she interacted directly with Johnson about changing reserves and gave him an overall review of the claim. Frank also testified that Johnson attended a November 2020 meeting concerning the Kincade Fire claim, at which she recommended a range for reserves, and that she sent Johnson a slide deck before the meeting. Jackson also relied on documents that it said showed Johnson frequently communicated with subordinates about the fire claims and participated in decision-making.

The court further noted that Frank testified Johnson did not have enough authority to approve the recommended reserve and that she did not know who ultimately authorized it. The court therefore found that Johnson could have unique knowledge about the effort to obtain approval for the Kincade Fire reserve and about how Zurich decided what to pay, when to make payments, and why.

The court also found no indication that Jackson sought the deposition for abusive purposes. Jackson had served two sets of interrogatories and one set of requests for admission, had deposed Frank, and had noticed depositions of Holt and Morrow. The court found Zurich’s proposal to wait and then meet and confer about what facts remained known only to Johnson unworkable given the discovery schedule.

Ruling

The court denied Zurich’s motion for a protective order. Zurich was ordered to produce Johnson for a deposition on a mutually agreeable date before the close of fact discovery. The order addressed discovery only and did not decide the underlying insurance-contract or bad-faith claims.