R & R Sails Inc. d/b/a Hobie Cat Co. v. Insurance Company of Pennsylvania, 251 F.R.D. 520 (S.D. Cal. 2008)
A fire destroyed the plaintiff’s manufacturing plant in Australia. The manufacturer sought in discovery “electronic or handwritten daily activity records/logs which are generally kept with an adjuster’s notes and telephone call records.” At a discovery hearing, the insurer's counsel maintained that “no daily logs or telephone records had been produced to Plaintiff because no daily logs or telephone records were maintained by Defendant’s insurance adjusters.” In response, “[t]he Court expressed skepticism about counsel's claim.” The Court ordered that the insurer produce either "all daily activity logs" or an affidavit that it had no such logs.
The insurance company filed an affidavit stating that “[t]here were no daily activity logs or telephone record logs that were created or maintained in connection with plaintiff’s claim.” At his deposition, however, the employee who signed the affidavit “[c]onceded on the record that his declaration . . . was incorrect and that a claim log was maintained electronically by Defendant, separately from the paper-form claim file that had been produced to Plaintiff.”
Plaintiff sought sanctions. The insurer maintained that it “did not associate Plaintiff’s document request with the electronically-stored records which are maintained on . . . computer rather than hard-copy paper form.”
The court in rejecting the insurer's explanation held it could not "find that a reasonable inquiry was made into whether Defendant possessed discovery to Plaintiff's requests, and therefore the Court does not find Defendant's incorrect certifications to be substantially justified.” The court awarded sanction in the amount of $39,900 against the insurer and its attorneys. The court also prohibited use of any testimony relying upon the ESI.
The case is illustrative of the skepticism insurers are likely to face when maintaining certain ESI does not exist.
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By Daniel W. Gerber and Thomas F. Segalla