Webcor-Obayashi Joint Venture v. Zurich American Insurance Company

Background

The parties submitted a joint letter presenting two discovery disputes. The first involved Webcor-Obayashi Joint Venture’s requests for information about the interpretation and drafting history of Zurich’s Cost of Making Good Exclusion. Request for Production No. 33 sought documents concerning the exclusion, including training materials, internal guidelines, interpretive materials, notes, emails, and other claims-handling materials. The plaintiff also sought a deposition of a designated Zurich representative under Federal Rule of Civil Procedure 30(b)(6) about the exclusion’s drafting history.

The plaintiff argued that this information was relevant because Zurich had denied coverage based on the exclusion. It contended that the exclusion’s drafting history, Zurich’s own interpretations, and guidance given to employees could help show what Zurich intended to exclude. The plaintiff requested an order requiring Zurich to produce non-privileged documents, provide a detailed privilege log identifying documents withheld as privileged, and produce a Rule 30(b)(6) witness.

Zurich said it had no non-privileged documents interpreting the exclusion and that privileged coverage opinions concerning the plaintiff’s claims would be listed on a privilege log. Zurich argued that identifying potentially privileged opinions in thousands of other claim files would be unreasonably burdensome. It also argued that the drafting-history request was too broad because it lacked time limits and was not limited to a particular version of the exclusion, and that drafting history was irrelevant because insurance policies are interpreted according to their ordinary meaning.

The second dispute concerned the plaintiff’s request for a Rule 30(b)(6) deposition and documents about Zurich’s communications with coverage counsel regarding the underlying claim. The plaintiff said the information could be relevant to a possible advice-of-counsel defense and sought an order compelling Zurich either to provide the witness and documents or to waive that defense. Zurich responded that the plaintiff should first ask through an interrogatory whether Zurich would actually assert the defense.

Court’s Analysis and Rulings

The court concluded that the plaintiff was entitled to seek the first category of discovery. It relied on California decisions holding that interpretive materials and drafting history can be relevant to construing insurance-policy language. The court therefore ordered Zurich to produce all non-privileged documents, provide a privilege log, and produce a Rule 30(b)(6) witness concerning the exclusion’s drafting history.

The court noted the plaintiff’s stated limitations: discovery about drafting history would be limited to the particular version of the exclusion in the 2009 policy issued to the plaintiff, and the plaintiff was not seeking documents interpreting the exclusion that appeared only in unrelated claims files. With those limits and understandings, the court found the requested discovery proportionate, reasonable, and relevant.

As to the second dispute, the court agreed with Zurich that the requested information was privileged and that Zurich’s answer did not assert an advice-of-counsel defense. Because that defense had not been asserted, the court held that the protected testimony and documents were not relevant and discoverable at that time. The order did not compel Zurich to provide that discovery or expressly state a separate disposition using the word “denied.”

Disposition

The court ordered the first category of discovery subject to the stated limitations and declined to compel the second category of privileged communications. Judge Susan Illston signed the order on December 22, 2020.