Happy Valentines from the Ninth Circuit Court of Appeals

Ninth Circuit Court of Appeals, the Court of Appeals which sits directly below the United States Supreme Court and presides over Federal Appellate decisions in a number of Western States, has always been considered a liberal court. This is one of the reasons that insurers are sometimes hesitant to have claims presented to this esteemed Court. Lether Law Group has had the distinction of regularly appearing before this. The Ninth Circuit decided several cases favorably for Lether Law Group and its clients on first property insurance matters during the last two years.

In Clear Creek Retirement Plan II LLC v. Foremost Insurance Company Grand Rapids Michigan, Ninth Circuit Court of Appeals case number 18-357250 (2019), the court was confronted with a highly complex set of facts involving a commercial business transaction involving mobile homes. As result of the business dispute, it was alleged that an ex-business partner “stole” the mobile homes and subsequently re-sold them. As a result, there were significant coverage issues involved as to whether or not the loss involved a “theft” under a commercial property policy and also questions of whether or not Foremost had violated the Washington Insurance Fair Conduct Act. The Ninth Circuit Court of Appeals upheld a Summary Judgement Order in favor of Foremost finding that Foremost’s coverage position was correct and reasonable and that therefore there was no viable IFCA claim. Clear Creek Retirement Plan II LLC v. Foremost Insurance Company Grand Rapids Michigan, Ninth Circuit Court of Appeals case number 18-357250 (2019).

In Benito Cervantes v. Foremost Insurance Company, Ninth Circuit Court of Appeals case number 16-35315, (2018) the Ninth Circuit considered another first party property claim. In the Cervantes case, the issue was whether or not there was coverage and extra contractual exposure arising from claims involving alleged long-term water damage occurring at a rental property owned by the insured. The Ninth Circuit again upheld a Summary Judgement Order in favor of Foremost. The Court found that there was, in fact, no coverage and the insurer’s conduct was reasonable. Of particular interest was that the court held that the issue of whether or not damage was considered short-term or long-term was to be viewed objectively as opposed to reviewing the question from the subjective viewpoint of the insured. Benito Cervantes v. Foremost Insurance Company, Ninth Circuit Court of Appeals case number 16-35315, (2018).

In Live Group of USA, LLC, DBA v. Mid-Century Insurance Company, Ninth Circuit Court of Appeals case number 16-35599 (2018), the Ninth Circuit upheld a Summary Judgement ruling in favor of Mid-Century on a property insurance policy. In Live Group, a number of issues that arose in regard to a coverage regarding a fire loss at an apartment building. These issues included whether the insured was entitled to replacement cost without incurring any actual repair cost, whether the insured presented adequate claims information to support the insured’s business interruption claims, and the typical extra contractual claims. The Ninth Circuit Court of Appeals agreed with the District Court that Mid-Century fully fulfilled its obligations under the policy and the insured was not entitled to further recovery for its contractual or extra-contractual claims. Live Group of USA, LLC, DBA v. Mid-Century Insurance Company, Ninth Circuit Court of Appeals case number 16-35599 (2018).

In each of the above decisions, the Ninth Circuit carefully reviewed the issues that were presented and set forth a well-reasoned ruling in support of an insurer. These decisions underscore why it is important to present to a Federal Court of Appeals cases involving good facts with strong legal issues.

Lether Law Group was pleased to represent each of the insurers and obtained these results from the District Courts and at the Ninth Circuit. If you would like to discuss these cases in further detail, please feel free to contact our office. Lether Law Group has over 30 years in representing insurers and all variety of first party claims, including homeowners claims, commercial losses, and auto claims.

FRCP 26 AMENDMENTS AND THE EFFECTS ON INSTITUTIONAL DISCOVERY

The December 1, 2015 amendments to FRCP 26 focus largely on the proportionality of discovery by expressly outlining factors to be weighed in determining the proper scope of discovery, including 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.”

While courts have long considered the burden created by discovery requests, these amendments affirm the growing importance of proportionality. The Advisory Committee which proposed the changes appears to have been motivated to curb the high costs of discovery, especially those presented due to the increasing role and utilization of electronically-stored information. To that end, FRCP 26(c)(1)(B) was also amended to expressly grant the court’s the authority to make orders regarding allocation of discovery expenses in ruling on protective order motions. The commentary which accompanied the amendments further indicates the motivation of the Advisory Committee, stating:

The burden or expense of proposed discovery should be determined in a realistic way. This includes the burden or expense of producing electronically stored information. Computer-based methods of searching such information continue to develop, particularly for cases involving large volumes of electronically stored information. Courts and parties should be willing to consider the opportunities for reducing the burden or expense of discovery as reliable means of searching electronically stored information become available.

These high costs are particularly felt by institutional parties as they are more likely to have voluminous records and data subject to discovery. The amendments to FRCP 26 make the burden of preparing and producing discovery, and the potentially large amount of information, a primary consideration in determining how to proceed with discovery in a given case. They should also provide ammunition for institutional parties to fight back against opposing attorneys who seek to obtain leverage through overly abusive and costly discovery tactics. Until attorneys fully buy-in to the changes, we expect the amendments to FRCP 26 will result in a temporary increase in protective order motion practice initiated by parties seeking to avoid the burdens and abuses meant to be reduced by this new rule.