Gowan v. Mid Century Insurance
2015 U.S. Dist. LEXIS 121053
| D.S.D. | 2015Background
- Plaintiff Stephen M. Gowan injured his right knee at work in 2000; Mid Century insured his employer and continued medical payments until it limited coverage when knee replacement was recommended.
- Mid Century retained Dr. Richard Farnham for an IME; Farnham concluded the surgery was 25% work-related (75% non-work), so Mid Century agreed to pay only 25%; injections were discontinued.
- A Mid Century file note by supervisor Janet Estes stated: "FILE STRATEGY * GOAL DENY FURTHER."
- Gowan sued for bad faith after Mid Century later authorized the surgery (performed Feb. 2014) and he filed suit two months later; he served three motions to compel discovery.
- Magistrate Judge Duffy found Gowan satisfied meet-and-confer requirements and analyzed numerous discovery disputes (personnel files, IME reports, claims-file reliance, IT custodian identity, regulatory proceedings, and witness address).
- The court granted all motions to compel and ordered Mid Century to produce the requested discovery within 14 days, subject to the existing protective order.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Production of personnel files for claims handler and supervisors | Files may reveal improper reasons, policy or culture supporting denial; redactions allowed | Irrelevant, burdensome, confidential; general boilerplate objections | Granted; produce four personnel files (dates specified) under protective order |
| Documents about claims-payment goals/targets (RFP 11(d)) | Relevant to corporate policy motivating denial | Initially refused; then searched for responsive documents | Granted; Mid Century to produce responsive documents |
| Address of former employee (Janet Estes) | Needed to subpoena/depose witness with relevant knowledge | Ethical/contact concerns; claimed she might be represented | Granted; Mid Century must disclose Estes' address so Gowan can subpoena her |
| Regulatory proceedings re: failure to pay WC claims (RFP 14) | Discoverable to show similar misconduct or company practice | Overly broad and burdensome | Granted; limited to wrongful failure-to-pay WC claims; produce responsive documents |
| Identification of documents Mid Century relied on to deny benefits (RFPs 34–37) | Must know which claims-file documents formed the basis for denial then and now | Many documents already in claims file; some withheld as privileged (privilege log provided) | Granted; identify (by Bates or identifier) documents relied upon then and now; privilege assertions preserved for withheld items |
| Identity of IT custodian for electronic claims system (Interrog. 3) | IT witness knows what data exists, storage, access — relevant to prove practices/metrics | Irrelevant, costly, unnecessary | Granted; produce identity of person most familiar with electronic claims system |
| Prior IME reports and materials from Dr. Farnham (11 prior IMEs) | Prior reports (redacted) may show boilerplate, bias, pattern and undercut reasonableness of reliance | Not relevant/admissible; privacy/HIPAA concerns; mini-trial; prior confidentiality | Granted; produce redacted IME reports and materials; privacy addressed by redactions and protective order |
Key Cases Cited
- Hickman v. Taylor, 329 U.S. 495 (discovery aims to require parties to disclose relevant facts in possession)
- Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340 (broad relevancy standard for discovery)
- Erie R.R. Co. v. Tompkins, 304 U.S. 64 (federal courts apply state substantive law in diversity cases)
- State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408 (factors for punitive damages review and limits on extraterritorial evidence)
- Sawyer v. Farm Bureau Mut. Ins. Co., 619 N.W.2d 644 (S.D.) (elements of insurer bad-faith under South Dakota law)
- Mudlin v. Hills Materials Co., 742 N.W.2d 49 (S.D.) (bad-faith standard quoting necessity of absence of reasonable basis and knowledge/recklessness)
- Isaac v. State Farm Mut. Auto. Ins. Co., 522 N.W.2d 752 (S.D.) (bad faith is a jury question; focus on insurer’s facts and law available when denial made)