Insurer’s Claims Handlers Who Never Worked on The Claim Ordered to Testify – A Classic FAFO
In a decision that is sure to set off alarm bells in the insurance industry, a Special Master serving the U.S. District Court for the Western District of Michigan, ordered the depositions of six claim handlers who were never involved in the claim at issue in the litigation. In this case, Wolverine World Wide, Inc. (“Wolverine”), a footwear company, was sued over its alleged disposal of PFAS, also known as “forever chemicals”. Wolverine sued its insurers, including Travelers, seeking defense and indemnity for these claims. During the course of the litigation, Wolverine sought information regarding Travelers’ claims handling practices. Travelers alleged that its claims handling practices conformed to both its own custom and practices and to industry standards. The court found that this sort of information was relevant to the case and that Wolverine had the right to discover it. Wolverine attempted to obtain Travelers’ claims notes, claims handling manuals and other related information. Travelers refused to produce these types of documents arguing that they were irrelevant or privileged. Having no other way to secure the information, Wolverine then served deposition notices on those who worked in the same unit – the Major Case Specialists in the Strategic Resolution Group – a group that investigates, analyzes, evaluates, and handles complex commercial and environmental claims.
Travelers objected to the deposition notices and argued that the six claims handlers had never worked on the Wolverine claim, had no personal knowledge of the claim, and that allowing the depositions to go forward would violate the court’s previous ruling that prohibited discovery of other policyholders. Travelers also argued that the appropriate vehicle to obtain this information would be through a F.R.C.P. 30(b)(6) deposition.
In rejecting Travelers’ arguments and allowing the depositions to go forward, the Special Master noted that Rule 26(b) should be liberally construed to provide broad discovery. Moreover, the fact that the six claims handlers had nothing to do with the Wolverine claim was not dispositive. The purpose of the depositions was to discover information regarding Travelers’ policies, practices and procedures in handling long tail environmental claims. Since Travelers argued that it handled the Wolverine claim in a fair and reasonable manner (according to custom and practices), Wolverine should be permitted to understand the bases for this position. In a final, and what should be an obvious lesson for insurers, the court stated, “The fact that Travelers has been recalcitrant in its production of claims handling materials during discovery supports Wolverine’s argument that they cannot get this information any other way and is compelling.” In other words, what could have been, and should have been, an easier road for Travelers, ended up not being one.
The case is Wolverine World Wide, Inc., v. The Travelers Indemnity Company, et al., No. 1:19-cv-00010 (W.D. Mich.)