Jordache Enterprises, Inc. v. Affilated FM Insurance Company

Background

Affiliated FM Insurance Company asked the court to stay, or pause, discovery while the court considered Affiliated FM’s pending motion to dismiss. The plaintiffs had indicated that they intended to seek discovery about Affiliated FM’s denial of their insurance claim for COVID-19-related losses.

Affiliated FM argued that discovery was premature. It contended that the insurance policy clearly and unambiguously barred the plaintiffs’ claim because the properties did not suffer the physical loss or damage required for coverage, the policy’s Contamination and Loss of Use Exclusions applied, and the alleged facts did not trigger the policy’s limited communicable-disease coverages. Affiliated FM also argued that the policy’s communicable-disease coverages were limited to a $100,000 sublimit, while the plaintiffs’ claim totaled $51,580,820.

Court’s reasoning

The court cited Federal Rule of Civil Procedure 26(c), which permits a court to issue an order protecting a party from undue burden or expense in discovery. It also considered the factors identified in Republic of Turkey v. Christie’s, Inc., including the breadth of the requested discovery, the burden of responding, the prejudice to the party opposing the stay, and the strength of the pending motion.

Affiliated FM argued that discovery into the policy’s terms and the denial of coverage could be irrelevant if the court determined that the policy was clear and barred the claim. The opinion notes that Affiliated FM’s motion to dismiss raised issues concerning physical loss or damage, policy exclusions, and the limited communicable-disease coverages.

Disposition

The court granted the application for a discovery stay. It found that a stay was appropriate under Rule 26(c) and ordered that discovery be stayed pending resolution of Affiliated FM’s motion to dismiss. The opinion does not resolve that motion to dismiss or decide whether the insurance policy provides coverage.