Insurance company sanctioned for not meeting discovery deadline

By Michelle Massey, East Texas Bureau | Nov 3, 2009


TEXARKANA, Ark. – An Arkansas judge has ordered Foremost Insurance Co. to pay $315,000 in sanctions for what he called its "half-hearted" effort to produce court ordered discovery documents.

Foremost faced a court order to produce extensive amounts of discovery in a class action accusing insurance companies of not including payments to general contractors under homeowners' policies. The original lawsuit filed Sept. 8, 2004, in the Circuit Court of Miller County, Ark., and alleged claims of civil conspiracy, unjust enrichment and fraud.

Plaintiffs alleged that Foremost destroyed file documents, so Miller County Circuit Court Judge Kirk Johnson in March ordered the company to produce hard copies and files in an electronic format to determine what data may have been lost or destroyed.

Foremost claims the cost to produce the thousands of documents is overly burdensome, and says the plaintiffs have refused to work to develop a reasonable discovery plan. It estimates that just to produce the requested e-mails from Foremost employees will cost between $7 and $20 million.

Judge Johnson stated, "The defendant did not make any good faith effort to comply with the order of March 26, 2009. In fact, the Defendant made virtually no effort whatsoever to comply with the order until the 11th hour, which was wholly inadequate."

Foremost previously sought a protective order, arguing that quality assurance documents are privileged and the release of some documents would violate policyholders' right to privacy.

Ignoring the request for a protective order, Judge Johnson ordered Foremost to produce the documents by April 26. The order required the

defendant to produce all quality assurance documents and all e-mails relating to overhead and profit from the beginning of the class period until present.

Although Foremost attempted to comply with the judge's order, Judge Johnson believes the company did not comply with the deadline or produce all requested documents.

According to the Oct. 23 order granting sanctions, the task of producing quality assurance documents was left up to one employee, "who was apparently too busy with her regular duties and life issues to devote any effort to complying with the court's order until some six calendar days prior to the expiration of the deadline."

The judge wrote that the insurance company failed to devote enough manpower or hours to meet the order's demands. Judge Johnson wrote that Foremost limited the amount of time to comply with the order to 125-150 hours per week and elected to hire and train students to work part time, with only a few regular employees working part-time for document production.

By the deadline of June 29, Foremost had produced 23,000 documents with the remainder of the document production not expected to be completed until after the class certification hearing.

Regarding the production of e-mails, the judge believes that Foremost's objections to the production of e-mails because it is too expensive and virtually impossible to achieve because of software difficulties is a "half-hearted effort to provide cover for the refusal to provide the ordered documents."

Further, the judge wrote, "The Court believes that the Defendant did not want to produce the contradictory and damaging documents prior to the class certification hearing and it was 'dragging its feet' to inundate Plaintiffs with large numbers of documents immediately prior to the class certification hearing rather than giving them several weeks to review those documents prior to the hearing."

Judge Johnson ordered a fine of $5,000 per day for each day past the deadline, totaling $315,000.00.

Other defendants are facing similar orders. A hearing is scheduled for Plaintiffs' Motion for Sanctions against Chubbs and Chubb's Motion for Sanctions against the Plaintiffs on Nov. 10.

The plaintiffs are represented by Texarkana attorneys John Goodson and Matt Keil of the law firm Keil and Goodson, attorneys Michael B.
Angelovich, Cary Patterson, Brady Paddock and Christopher Johnson of the Texarkana law firm Nix, Patterson and Roach LLP.

Chivers v State Farm, Case No 2004-294-3

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