Stan Koch and Sons Trucking, Inc. v. American Interstate Insurance Company

Background

Stan Koch and Sons Trucking, Inc. purchased a workers’ compensation insurance policy from American Interstate Insurance Company for coverage from May 1, 2013, through February 1, 2014, after the policy was terminated early. Koch alleges that American Interstate improperly applied premium increases, called debits, when calculating the policy’s schedule rating and thereby overcharged Koch by approximately $445,000. American Interstate also asserted a counterclaim seeking $133,220 for premiums it contended remained unpaid after the early termination.

Koch later hired Patrick Charais of Synergetic Solutions to audit the insurance premiums. Charais prepared a report, which Koch provided to American Interstate while seeking a refund. American Interstate moved to compel further responses to discovery requests concerning Koch’s safety-policy enforcement and communications involving Charais. It also sought sanctions based on Koch’s allegedly late or inadequate document production and the preparation of Koch’s corporate representative, William Sullivan, for a deposition.

Discovery Requests Concerning Safety Policies

The court denied as moot the portion of the motion concerning Request No. 12 because Koch represented that it had produced its employee safety manual and had no other responsive documents, and American Interstate did not challenge that representation.

The court denied the motion to compel a further response to Request No. 13. That request sought all documents reflecting incidents, traffic violations, and traffic accident reports involving Koch’s employees from May 1, 2012, to the present. Although Koch’s boilerplate objections did not comply with the federal discovery rules, the court found that Request No. 13 itself was not sufficiently focused or proportionate to the needs of the case. The court also concluded that the request did not reasonably seek the driver disciplinary files that American Interstate said it wanted. The court therefore would not order production of documents that were either irrelevant or not actually requested.

Communications Involving Patrick Charais

Koch withheld communications involving Charais and internal Koch communications concerning his work, asserting attorney-client privilege and work-product protection. Attorney-client privilege generally protects confidential communications made to seek or provide legal advice. Work-product protection generally covers materials prepared because of anticipated litigation rather than in the ordinary course of business.

The court held that Koch had not shown that communications involving Charais were protected by attorney-client privilege. Sullivan, Koch’s Director of Risk Management, retained Charais to audit the premiums for the business purpose of determining whether Koch had been overcharged. Koch did not show that Koch’s in-house counsel retained Charais to assist in providing legal advice, that Charais was the functional equivalent of a Koch employee, or that Charais otherwise fit within the circumstances in which communications with a consultant may be privileged.

The court did not make the same final determination about internal Koch communications involving in-house counsel Kevin Giebel. The record did not show whether Giebel was acting as legal counsel or in a business role, or why each person included in the communications needed to receive them for purposes of obtaining or providing legal advice. The court gave Koch an opportunity to submit the internal communications for private court review and to file detailed declarations addressing those issues. That opportunity did not extend to communications sent, forwarded, or copied to people outside Koch, including Charais; those communications had to be produced.

The court rejected Koch’s work-product argument. Koch had not provided sufficient evidence showing when it reasonably anticipated litigation concerning recovery of allegedly excessive premiums or that the communications were prepared because of that anticipated litigation. The fact that Charais was investigating the premium calculation did not by itself establish that the communications were prepared for litigation rather than for a business investigation. The court therefore ordered Koch to produce the communications relating to Charais’s work within ten days, except for internal communications being submitted for attorney-client-privilege review. The court did not reach American Interstate’s separate argument that producing Charais’s report caused a waiver of work-product protection.

Sanctions and Further Deposition

The court declined to impose the broad reimbursement sought by American Interstate for all time spent conferring about discovery and preparing the motion. It found that American Interstate’s request was too broad, particularly because some of its discovery requests were not consistently tailored to relevant and proportionate information.

The court nevertheless ordered Koch to pay the costs of a further deposition of Sullivan. It found that Sullivan was inadequately prepared for at least some noticed topics, including Koch’s document-retention policy, efforts to preserve and collect documents, and defenses to American Interstate’s counterclaim. The court also found that Koch’s late production of documents interfered with the purpose of the scheduling order, which required substantial completion of document discovery before depositions.

The further deposition was limited to two hours. Koch had to prepare Sullivan on Topics 1 and 25 by having him review relevant documents and speak with knowledgeable company personnel. For Topics 8, 10, 21, and 22, Sullivan had to review relevant documents and follow up with knowledgeable individuals if necessary. Koch had to pay out-of-pocket deposition expenses, the fees of one American Interstate attorney for the deposition, and three hours of that attorney’s preparation time. The court reserved a separate decision on fees related to the portions of the motion on which American Interstate received relief, pending the private review of Koch’s documents.

Disposition

The court ordered that American Interstate’s Motion to Compel Discovery was GRANTED IN PART AND DENIED IN PART, as set out in the order.