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CX Reinsurance Co. Limited v. B&R Management, Inc.

United States District Court, D. Maryland

June 22, 2017

CX Reinsurance Company Limited, f/k/a CNA Reinsurance Company Limited
B&R Management, Inc., et al.;

         Dear Counsel:

         Pursuant to an order referring this case to me for discovery, [ECF No. 78], I have reviewed Defendant Jessica-Carl, Inc.'s (“Jessica-Carl's”) Motion to Compel and Plaintiff CX Reinsurance Company Limited's (“CX Re's”) Opposition. [ECF Nos. 87-3, 87-7]. I have also reviewed CX Re's Motion for Leave to Supplement its Opposition to Jessica-Carl's Motion to Compel (“Motion to Supplement”), [ECF No. 136], the corresponding Supplement, [ECF No. 138], as well as Jessica-Carl's Opposition to the Motion to Supplement, [ECF No. 140], and a related Motion to Seal, [ECF No. 141]. No hearing is deemed necessary. See Loc. R. 105.6 (D. Md. 2016). For the reasons set forth below, CX Re's Motion to Supplement will be GRANTED; Jessica-Carl's Motion to Seal will be GRANTED; and Jessica-Carl's Motion to Compel will be GRANTED IN PART and DENIED IN PART.

         I. Background

         In this action, CX Re seeks to rescind two general liability insurance policies (“Policies”) issued to Jessica-Carl, B&R Management, Inc. (“B&R Management”), and other named insureds (collectively “Defendants”) in 1997 and 1998, alleging that Defendants made misrepresentations of material fact in the underlying insurance application (“Application”). See Pl.'s First Am. Compl., [ECF No. 25 at ¶¶ 1 & 11].

         The Policies provide insurance coverage for certain risks, including lead exposure, relating to specified residential rental properties in Baltimore, Maryland (“Properties”). Id. at ¶ 13. Policies, [ECF Nos. 1-2 & 1-3]. Specifically, CX Re avers that Defendants falsely denied the existence of past lead paint violations in connection with the Properties in response to a question on the Application. Id. at ¶¶ 25-26. If Defendants had answered this question truthfully, CX Re argues it would not have issued the Policies or that it would have issued the Policies subject to substantially higher premiums or substantially different terms. Id. at ¶ 41. CX Re contends that it “has incurred and paid costs of at least $853, 328 in connection with the adjustment, defense, settlement and satisfaction of judgments in these and other claims and lawsuits under the Policies[, ]” including lawsuits alleging bodily injury due to exposure to lead paint in the Properties. Id. at ¶¶ 34-37. Consequently, CX Re also demands an award of damages resulting from fraud in connection with the aforementioned conduct. Id. at ¶¶ 1-2. CX Re asserts that it first learned of the misrepresentation on the Application while conducting “a broad underwriting review of many insureds[]” in August 2015, and filed this action shortly thereafter in November, 2015. Id. at ¶¶ 27-28.

         Discovery in this matter is underway, and the instant dispute involves Jessica-Carl's First Requests for Production. See Def.'s Mot., [ECF No. 87-3]. In its Response, CX Re objected to Request Nos. 7, 8, and 10 on relevance and privilege grounds. Id. at 5 & 10-12. Jessica-Carl served CX Re with its Motion to Compel on January 31, 2017, Pl.'s Opp., [ECF No. 87-7, 1], seeking production of documents pursuant to the above requests, as well as a privilege log, Def.'s Mot., [ECF No. 87-3, 5-6]. In its Opposition, CX Re declined to respond, arguing instead that CX Re's March 10, 2017 “settlement in principle” with B&R Management, once finalized, would render the Requests irrelevant and the Motion moot. [ECF No. 87-7, 1-2]. However, the settlement-in-principle never finalized. Pl.'s Mot. to Suppl., [ECF No. 136 at ¶ 10].[1] Following the parties' failed attempts to resolve the dispute, Jessica-Carl filed its Motion to Compel and related memoranda on March 30, 2017. [ECF No. 87]. See Loc. R. 104.8 (D. Md. 2016).[2] On May 9, 2017, CX Re filed a Motion to Supplement, seeking to address the substantive arguments raised in the Motion to Compel. Pl.'s Mot. to Suppl., [ECF No. 136]. Jessica-Carl opposes CX Re's Motion to Supplement. Def.'s Opp., [ECF No. 140].[3] I will address each of these motions in turn.

         II. Discussion

         A. CX Re's Motion to Supplement

         As noted above, CX Re timely opposed Jessica-Carl's Motion to Compel, but failed to address the substance of the issues raised therein. Pl.'s Mot. to Suppl., [ECF No. 136 at ¶8]. CX Re's settlement-in-principle with B&R Management fell through on or about April 4, 2017, and CX Re now seeks leave to supplement its Opposition. Id. at ¶¶ 8 & 10. Jessica-Carl opposes CX Re's Motion to Supplement on the basis of tardiness, and suggests that CX Re must suffer the consequences of the “risk” it took by foregoing a substantive response in the first instance. Def.'s Opp., [ECF No. 140, 3]. I note that CX Re offers no explanation why it waited over a month to file its Motion to Supplement, after realizing there would be no imminent settlement with B&R Management. See Id. at 3, n. 2. Nevertheless, since the Supplement narrows the grounds of CX Re's objections and presents relevant information that will aid the court in resolving this dispute, I will treat CX Re's Motion to Supplement as a Motion for Leave to File a Surreply and will grant the motion in accordance with Local Rule 105.2(a).

         B. Jessica-Carl's Motion to Compel

         i. Legal Standard

         Federal Rule of Civil Procedure 26(b)(1) permits discovery of “any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case.” In determining proportionality, the Court must consider “the importance of the issues at stake in the action, the amount in controversy, the parties' relative access to relevant information, the parties' resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit.” Fed.R.Civ.P. 26(b)(1).

         ii. Request for Document Production No. 10

         Jessica-Carl's Request for Document Production No. 10 asks CX Re for “[a]ll documents pertaining to the ‘broad underwriting review' conducted by [CX Re's] London-based business manager … including but not limited to any written review, all communications related to such review, and any documents reviewed during the course of the underwriting review.” Def.'s Mot. to Compel, [ECF No. 87-3, 5]. Jessica-Carl seeks full compliance with Request No. 10, arguing that the documents at issue are “crucial” to Jessica-Carl's ability to effectively challenge CX Re's claims regarding the timeliness of this rescission action, as well as presenting affirmative defenses. Def.'s Mot., [ECF No. 87-3, 4]. CX Re correctly notes that “[t]his Request seeks all documents pertaining to CX Re's broad underwriting review of many insureds.” Pl.'s Supp., [ECF No. 138, 2]. In its Supplement, CX Re abandons its earlier privilege objections and instead argues that documents relating to CX Re's underwriting review of any landlord other than B&R Management are irrelevant to the instant case. Pl.'s Supp., [ECF No. 138, 7-8]. CX Re also aims to ...

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