White Bear Yacht Club v. Cincinnati Ins. Co.

582 F.Supp.3d 624

WHITE BEAR YACHT CLUB, Plaintiff,

v.CINCINNATI INSURANCE CO., The Defendant.

Case No. 21-cv-01741 (SRN/HB)

United States District Court, D. Minnesota.

Signed January 28, 2022

Bradley K. Hammond, Smith Jadin Johnson, PLLC, Bloomington, MN, Timothy D. Johnson, Smith Jadin Johnson PLLC, Minneapolis, MN, for Plaintiff.

Anthony J. Kane, Jessica K. Allen, Pfefferle Kane LLC, Minneapolis, MN, for Defendant.

Order on Motion to Compel Examinations Under Oath

HILDY BOWBEER, United States Magistrate Judge

This matter is before this Court on Defendant Cincinnati Insurance Co.’s (Cincinnati) Motion to Compel Examinations Under Oath (EUO) [ECF No. 19]. For the reasons set forth below, the Court grants in part and denies in part the motion. Relatedly, to the extent Plaintiff's argument at the hearing and through post-hearing briefing can be considered an oral motion to stay discovery, the Court denies that motion.

I. Background

Plaintiff White Bear Yacht Club (WBYC) insured multiple buildings at its social club in Dellwood, Minnesota against weather-related damage through Cincinnati. (Hammond Aff. Ex. 5 [ECF No. 15-1].) In April and July 2019, wind and hailstorms allegedly damaged WBYC's property. (Hammond Suppl. Aff. Ex. 7 [ECF No. 26-1].) WBYC submitted claims for the damage in May and December 2019, respectively. (Id. )

On August 24, 2020, (more than a year after the claims) Cincinnati requested Examinations Under Oath (EUOs), pursuant to the insurance policy and Minnesota law, of WBYC representatives with knowledge of the wind and hail claims, as well as documents and information about the history of repairs to the property, the current claims, and wind/hail claims WBYC made to other insurers in 2015 and 2017. (Hammond Suppl. Aff. Ex. 7.) WBYC had previously submitted wind/hail damage claims for some of the same buildings to different insurers in 2015 and 2017, and Cincinnati sought to investigate the extent to which that prior damage had been paid for and repaired. (Kane Aff. Exs. B-C, E at 2-3 [ECF No. 22-1].) In response, WBYC demanded an appraisal of the covered loss and named its appraiser. (Hammond Aff. Ex. 1 [ECF No. 15-1].) Cincinnati named its appraiser but objected to advancing the appraisal process until the parties conducted the requested EUOs and resolved disputes regarding WBYC's document disclosure. (Hammond Aff. Ex. 2 [ECF No. 15-1]; Hammond Suppl. Aff. Ex. 13 [ECF No. 26-1].) After resolving the document disputes, the parties conducted an EUO of WBYC's General Manager, Christopher Nathlich, in March 2021. (Hammond Suppl. Aff. Exs. 20–21 [ECF No. 26-1].) Cincinnati requested additional EUOs of individuals Nathlich identified as potential sources of more information, but the parties disagreed about whether the insurance policy afforded Cincinatti that right and whether the EUOs would provide useful information to resolve the claims. (Id. Exs. 24–30 [ECF No. 26-1].)

During this disagreement, WBYC's appraiser sought to work with Cincinnati's appraiser to select an appraisal umpire, but they were unable to agree on a person. (Id. Exs. 25, 29; Hammond Aff. Ex. 6 [ECF No. 15-1].) WBYC then filed a case in Minnesota state court seeking, in part, a declaration and order compelling Cincinnati to participate in the appraisal, appointing an umpire, and staying the lawsuit until completion of the appraisal. (ECF No. 1-1 at 7.) Cincinnati removed the case to federal court. (ECF No. 1.)

The parties continued negotiations, and WBYC eventually agreed that all individuals then affiliated with the club from whom Cincinnati requested EUOs would appear so long as the parties could select an appraisal umpire and schedule the appraisal. (Hammond Suppl. Aff. Ex. 31 [ECF No. 26-1].) Cincinnati offered dates for the EUOs and divulged that it planned to subpoena three people formerly affiliated with WBYC, but did not acknowledge WBYC's condition to advance the appraisal. (Id. Ex. 32 [ECF No. 26-1].) The parties failed to resolve their disagreements on the EUOs and appraisal, after which WBYC filed a motion to compel appraisal [ECF No. 13]¹ and Cincinnati filed the current motion to compel EUOs. (Hammond Suppl. Aff. Ex. 33 [ECF No. 26-1].) The Court held a hearing on Cincinnati's motion on November 2, 2021. (Minutes 11/2/2021 [ECF No. 29].) The Court ordered supplemental briefing based on the parties’ discussion of the issues in the hearing, and took the matter under advisement upon receipt of those briefs. [ECF Nos. 29, 34.]

II. Standard of Review

Cincinnati's motion involves the interpretation of the insurance policy and Minnesota law on the right to conduct EUOs of an insured's representatives, and a question of Cincinnati's right to conduct discovery through subpoenas in this litigation even though it has not completed appraisal. (Def.’s Mem. at 8–9 [ECF No. 21].) Minnesota courts apply general principles of contract interpretation to insurance policies, giving unambiguous policy language its ordinary meaning to give effect to the parties’ intention as it appears from the entire contract. Bobich v. Oja , 258 Minn. 287, 104 N.W.2d 19, 24 (1960). Any reasonable doubt about the meaning of policy language must be resolved in favor of the insured. Id.

For statutory interpretation, "[t]he object of all interpretation and construction of laws is to ascertain and effectuate the intention of the legislature." Minn. Stat. § 645.16 (2020). Minnesota courts first determine whether the statute's language is ambiguous on its face, construing words and phrases according to their ordinary meaning and within the context of the statutory provisions read as a whole. State v. Pakhnyuk , 926 N.W.2d 914, 920 (Minn. 2019) ; Am. Tower, L.P. v. City of Grant , 636 N.W.2d 309, 312 (Minn. 2001). The court applies unambiguous language without further construction. City of Grant , 636 N.W.2d at 312.

III. Discussion

A. The Motion is Not Moot as to the EUOs.

WBYC argues that the motion to compel EUOs is moot because it agreed, before and during the hearing, to produce for EUOs the people Cincinnati requested. (Pl.’s Suppl. Mem. at 2–4 [ECF No. 32].)

The motion is not clearly moot. Article III limits the Court's jurisdiction to cases and controversies under the United States Constitution. U.S. Const. Art. III, § 2. A case is moot and no longer a case or controversy when the parties lack a legally cognizable interest in the outcome. Council on Am.-Islamic Rels.-Minnesota v. Atlas Aegis, LLC , 497 F. Supp. 3d 371, 376 (D. Minn. 2020). If an alleged deprivation of a legal right is on-going or there is a reasonable prospect that it will continue throughout the enforcement action, there is a live controversy. Id. at 376–77. Cincinnati claims the legal right under the policy to compel WBYC to produce representatives of Cincinnati's choice for EUOs . And the Court understands WBYC agreement to those EUOs to be contingent on Cincinnati advancing the appraisal. (See Hammond Suppl. Aff. Exs. 31-33; Pl.’s Suppl. Mem. at 4.) Cincinnati represented during the hearing that it did not oppose appraisal, but its post-hearing supplemental brief conveys that it is not willing to advance the appraisal until it conducts the EUOs and subpoenas third parties with knowledge about WBYC's 2015 and 2017 claims. (Def.’s Suppl. Mem. at 7-8 [ECF No. 30].) WBYC, in turn, objects to any attempt by Cincinnati to use subpoenas (or conduct other discovery under the Federal Rules of Civil Procedure) before the appraisal. (Pl.’s Suppl. Mem. at 4.) So long as WBYC's agreement to submit to the requested EUOs is contingent on a concession about timing that Cincinnati is not willing to make, Cincinnati's claim that the policy gives it the right to compel the EUOs presents a live controversy involving the parties’ legal rights and obligations.

B. Cincinnati May Conduct Multiple EUOs But WBYC May Choose Its Representatives

In relevant part, the insurance policy provides that "[Cincinnati] may examine any insured under oath, while not in the presence of any other insured and at such times as may be reasonably required, about any matter relating to this insurance or the claim." (Kane Aff. Ex. A § G(b) [ECF No. 22-1].) The Minnesota Standard Fire Insurance Policy governs the policy and requires that the contract include a provision stating "[t]he insured, as often as may be reasonably required, shall ... within a reasonable period after demand by this company, submit to examinations under oath by any person named by this company, and subscribe the oath." Minn. Stat. § 65A.01, subd. 3 (2021). The provision need not use the exact language so long as the "policy or contract ... afford[s] the insured all the rights and benefits of the [standard policy]." Id. , subd. 1. See also Poehler v. Cincinnati Ins. Co. , 899 N.W.2d 135, 145 (Minn. 2017). As a general matter, the policy and statute require an insured to submit to at least one EUO as reasonably necessary to assist the insurer's investigation. See, e.g. , Metropolitan Prop. & Cas. Ins. Co. v. King , No. C9-02-1737, 2003 WL 21008323, at *4 (Minn. App. May 6, 2003).

Cincinnati argues that the policy and statute obligate WBYC to submit to multiple EUOs of representatives identified by Cincinnati. (Def.’s Mem. at 9–10 [ECF No. 21].) WBYC responds that Cincinnati may conduct only one EUO. (Pl.’s Mem. at 10–11 [ECF No. 25].) The Court reads the policy and statute to allow for multiple EUOs. The contract language does not explicitly limit Cincinnati to one EUO, and allows Cincinnati to examine the insured "at such times as may be reasonably required." (Kane Aff. Ex. A § G(b) (emphasis added).) The statutory Standard Policy language similarly allows for EUOs "as often as may be reasonably necessary." Minn. Stat. § 65A.01, subd. 3. The Court finds that these provisions unambiguously provide that Cincinnati may request multiple EUOs at different times, subject to their reasonableness.

But the Court disagrees with Cincinnati's next argument—that the policy...