White Bear Yacht Club v. Cincinnati Insurance Company, The

Background

White Bear Yacht Club (WBYC) insured multiple buildings at its social club in Dellwood, Minnesota, against weather-related damage through The Cincinnati Insurance Company (Cincinnati). WBYC alleged that wind and hailstorms damaged its property in April and July 2019 and submitted claims in May and December 2019.

In August 2020, Cincinnati requested examinations under oath (EUOs) of WBYC representatives with knowledge of the claims. It also requested documents and information about property repairs, the current claims, and wind and hail claims WBYC had made to other insurers in 2015 and 2017. The parties later conducted an EUO of WBYC’s general manager, Christopher Nathlich. Cincinnati then requested additional EUOs of people Nathlich identified as possible sources of information, including WBYC board members. The parties disagreed about whether the policy allowed those additional examinations and whether Cincinnati could use subpoenas or other discovery before appraisal.

WBYC filed a state-court case seeking, among other relief, an order requiring Cincinnati to participate in an appraisal and appointing an appraisal umpire. Cincinnati removed the case to federal court. WBYC later moved to compel appraisal, while Cincinnati moved to compel additional EUOs. The appraisal motion was pending before the district judge and was not decided in this order.

EUOs and mootness

WBYC argued that Cincinnati’s EUO motion was moot because WBYC had agreed to produce the requested people. The court rejected that argument. It found a continuing dispute because WBYC’s agreement was conditioned on Cincinnati advancing the appraisal, while Cincinnati maintained that it could conduct the EUOs and subpoena former WBYC affiliates before advancing the appraisal.

Multiple examinations and choice of representatives

The insurance policy stated that Cincinnati could examine an insured under oath “at such times as may be reasonably required.” Minnesota’s standard fire-insurance law similarly requires an insured to submit to EUOs “as often as may be reasonably necessary.” The court held that these provisions allow Cincinnati to request multiple EUOs, subject to a requirement that the requests be reasonable.

The court rejected Cincinnati’s argument that WBYC had to produce the particular representatives Cincinnati selected. The policy and statute did not define who must testify for an insured organization or require the organization to produce a specific person. Because the policy was ambiguous on that issue, the court construed the ambiguity in favor of the insured. WBYC therefore could select its representatives.

The court also held that WBYC must provide a representative who is reasonably prepared to address the organization’s knowledge about the insurance and claims. The court found no evidence, such as excerpts from Nathlich’s EUO transcript, showing that he was unprepared or that WBYC had additional responsive information he failed to gather. Cincinnati could seek another EUO if it reasonably believed WBYC had additional information, but it could not insist on a particular representative. Cincinnati could return to court if WBYC refused to provide a witness or provided one who was not reasonably prepared.

Subpoenas and discovery stay

Cincinnati asked the court to declare that it could subpoena several people formerly associated with WBYC. Because no subpoenas had been issued, the court held that the dispute about any particular subpoena did not present a live controversy and denied that part of Cincinnati’s motion.

WBYC also asked the court to stay discovery until the district judge ruled on the appraisal motion and, if appraisal were ordered, until appraisal was completed. The court denied that request. It concluded that discovery into matters relevant to Cincinnati’s defenses—including whether WBYC concealed unrepaired earlier damage or failed to cooperate with the investigation—was relevant to the litigation and did not need to await appraisal.

At the same time, the court rejected Cincinnati’s suggestion that appraisal should be delayed until discovery was completed. The court found no policy provision allowing Cincinnati to require completion of federal-court discovery before appraisal could proceed. It stated that appraisal should occur when the policy’s conditions for appraisal are satisfied, even if the insurer’s investigation has not answered all its questions. The court did not decide whether appraisal would be ordered in this case.

Disposition

The court ordered that Cincinnati’s Motion to Compel Examinations Under Oath was granted in part and denied in part. The court separately ordered that WBYC’s oral motion to stay discovery pending appraisal was denied.