'Failure to communicate' could lead to $45 M in discovery costs

TEXARKANA, ARK. -- "What we have here is a failure to communicate," Richard Griffen a Houston attorney for Foremost Insurance Company argued in a recent hearing involving his client.

Also quoting the movie "Cool Hand Luke," plaintiffs' attorney John Goodson responded, "Some men you just can't reach, so you get what we have here today."

Insurance companies are on self-defense in a Miller County, Ark., class action suit filed on Sept. 8, 2004, by plaintiffs' attorneys John Goodson and Mike Angelovich, both of Texarkana. After a loss or damage to an insured real property, plaintiffs allege that insurance companies failed to disclose or pay the general contractors' overhead and profit (GCOP) fee. GCOP is simply the fee paid for services of a general contractor.

Although the previous claims were paid by the insurers, the plaintiffs want more, stating they are entitled to GCOP money. The complaint states the GCOP is a paid-for benefit to the customer and is 20 percent of the estimated job cost in the construction industry. Plaintiffs assert the insurance companies' fraudulently concealed their obligation to pay the additional fee.

Previously, Circuit Court Judge Kirk Johnson was quoted in the Texarkana Gazette as stating he did not want general objections, "especially on those that would drag out the proceedings and drive up the cost of litigation." That didn't happen.

After a hearing on July 16, Judge Johnson ordered defendant Foremost Insurance Company to produce all of its claim files, even though the defendants estimated the cost for production at $45 million.

The order follows months of fighting between the plaintiffs and defendant Foremost Insurance over interrogatory responses and the production of discovery. Plaintiffs state that they "have gone to great lengths to provide answers to Foremost's voluminous discovery requests that are responsive and very comprehensive."

Replying on behalf of Foremost, attorney Richard Griffen describes finding responses to the interrogatory questions as "scavenger hunting" and states "Foremost is amazed at the lengths to which plaintiffs have gone to avoid simply answering each interrogatory separately and fully in writing."

Although the tables turned, the bickering carried over into the July 16 hearing as plaintiffs demanded Foremost's production of its 1996 - 2006 claims, which would include over 600,000 individual claim files. Although Foremost is seeking and attempting to protect the privacy rights of its insured, plaintiffs' attorney John Goodson describes the defendants' efforts at protecting its claim files as "lame."

Attorney Griffen responded by stating, "We thinketh he protesteth too much."

Declaring its continued efforts to produce claims samples for plaintiff, defendant Foremost argues plaintiffs continued efforts are "harassment and to cause Foremost to incur unnecessary excessive expenses."

To substantiate its argument, Foremost describes how the plaintiffs agreed to reviewing only a representative sample of around 2,000 claim files from the other defendants. Within the order for production the court responds to this claim stating, "the court does not believe that it is the function of the court to impose an agreement on the parties especially one that was rejected by a party and who at the last minute wants the benefit of that agreement."

Foremost states the order is "outrageous discovery abuse." To produce all of its claim files within 90 days while reviewing all of it in an effort to protect insured's privacy rights, defendant Foremost estimates a cost at $45 million, including among other things, thousands of attorney hours and new computer software to transfer the computer files into something legible.

In addition to the court order finding that Foremost has denied the plaintiffs copies of its claim files and ordering its production, the court also denied Foremost's inspection of plaintiff Joe Sherrouse's property "until the issues are more clearly defined after class certification hearing�since the court is prohibited from an in depth analysis of the merits of the case prior to class certification by Arkansas."

Defendant Foremost filed a motion for reconsideration on the court's findings on August 2. Within it, defendant requests an extension of time and for the plaintiffs to pay the production costs.

Case No: 2004-294-3