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Haldiman v. Continental Casualty Co.

United States District Court, D. Arizona

February 13, 2014

Betty Lou Haldiman, an individual; and John B. Haldiman, Jr., an individual, Plaintiffs,
Continental Casualty Company, an Illinois corporation, Defendant.


G. MURRAY SNOW, District Judge.

Pending before the Court are Defendant Continental Casualty Company's ("CCC") Motion for a Protective Order (Doc. 39) and Motion to Dismiss Counts Three and Five of Plaintiffs' First Amended Complaint (Doc. 33). For the following reasons both motions are granted.


The First Amended Complaint in this case raises claims arising from Defendant's refusal to pay the extent of reimbursement for Plaintiff Betty Lou Haldiman's stay in a long term care facility that Plaintiffs believe is required under the Plaintiff's long-term care insurance policy with Defendant. (Plaintiffs' First Amended Complaint, Doc. 31, at ¶ 3.) The policy provides benefits during an "Eligible Confinement." ( Id. at ¶ 4.) An "Eligible Confinement" is defined as Ms. Haldiman's "confinement for Long-Term Care in a Long-Term Care Facility." Plaintiff John B. Haldiman, Jr. and his wife, Joan Haldiman, submitted a request for benefits to cover services provided to Plaintiff Betty Lou Haldiman by the Assisted Living Center on the Beatitudes Campus. ( Id. at ¶¶ 5, 10, 14.) CCC inquired into the services provided at Ms. Haldiman's facility and determined that they did not meet the specifications required under the definition of "Long-Term Care Facility" under Ms. Haldiman's policy (Doc. 33-1, at 3) nor did they meet the broadened scope of coverage agreed to by CCC under the settlement terms of a class action suit in the United States District Court for the Northern District of Ohio ( Pavlov v. Continental Casualty Company, No. 5:07-cv-2580; Doc. 33 at 3; Doc. 31 at 8-9), in which Ms. Haldiman was a class member.

Plaintiffs filed this suit alleging that Defendant's denial of coverage was a breach of contract and in bad faith. (Doc. 31.) Plaintiffs bring five claims: (1) Breach of Contract; (2) Bad Faith; (3) Unfair Practices and Frauds; (4) Injunctive Relief; and (5) Damages for Exploiting a Vulnerable Adult. (Doc. 31.) Defendant has filed a motion to dismiss counts three and five. (Doc. 33-1.)

Plaintiffs' Third Claim, for Unfair Practices and Frauds, is based upon Arizona's Unfair Insurance Practices statute, Ariz. Rev. Stat. § 20-443. This statute prohibits an insurer from misrepresenting the terms or benefits of an insurance policy. Plaintiffs allege that CCC made "false, misleading and deceptive statements to Plaintiffs and the Beatitudes regarding Plaintiff's eligibility" for coverage under her policy. (Doc. 31, at ¶ 34.) Defendants deny that they made any false statements, and claim that even assuming the truthfulness of all of the allegations against them, that these do not arise to the legal requirements of the A.R.S. § 20-443. Thus, Defendants have moved to dismiss this claim.

Plaintiffs' Fifth Claim, for Damages for Exploiting a Vulnerable Adult, is based on A.R.S. § 46-456, Arizona's Financial Elder Abuse statute. This statute protects vulnerable adults from unlawful actions by persons who are "in a position of trust and confidence" to that vulnerable adult. Id. Defendant claims that CCC did not enter into a special relationship with Plaintiffs as contemplated by this statute, and therefore have moved that this count be dismissed.

During discovery, Plaintiff sought production of CCC documents from a third-party claims administrator, Univita Health, Inc. ("Univita"). (Doc. 39-2 at 5.) This included "all documents relevant to the investigation and evaluation of any claim made by a first party insured against Continental Casualty Company." ( Id. ) CCC objected to this request on the grounds insofar that it sought "protected commercial, confidential, and trade-secret information." ( Id. ) CCC claims it instructed Univita not to produce a CCC Facility Evaluation guideline (the "Guideline"), which CCC claims contains claims-handling guidelines that are trade secrets and should be reasonably protected from discovery by CCC's competitors. (Doc. 39.) However, in response to Plaintiff's production request, Univita produced the Guideline. CCC now has made a motion for a protective order to designate the Guideline as confidential and to require Plaintiffs make reasonable efforts not to disclose the contents of the Guideline during the course of the litigation. (Doc. 39.)


A. Legal Standard

There are two legal standards for protective orders, only one of which is currently applicable here. The first is "a compelling reasons standard, " which "applies to [the sealing of] most judicial records." Pintos v. P. Creditors Ass'n, 504 F.3d 792, 801 (9th Cir.2007) (citing Kamakana v. City & County of Honolulu, 447 F.3d 1172, 1178 (9th Cir.2006); Foltz v. State Farm Mut. Auto. Ins. Co., 331 F.3d 1122, 1135-36 (9th Cir.2003)). Though Plaintiffs reference this standard, it is not yet applicable in this case, because the Facility Evaluation Guideline at issue has not been filed and is not yet part of the public record.

A "good cause" standard applies where, as is the case here, the materials at issue are discovery materials. "Private materials unearthed during discovery' are not part of the judicial record." Id. (quoting Kamakana, 447 F.3d at 1180) (alteration omitted). The "good cause" standard set forth in Rule 26(c) of the Federal Rules of Civil Procedure applies to orders rendering this category of documents confidential. See id.; San Jose Mercury News, Inc. v. U.S. Dist. Ct., 187 F.3d 1096, 1103 (9th Cir.1999). Specifically, under Federal Rule of Civil Procedure 26, the Court may, for good cause, issue an order "requiring that a trade secret or other confidential research, development, or commercial information not be revealed or be revealed only in a specified way." Fed.R.Civ.P. 26(c)(1)(G). "For good cause to exist, the party seeking protection bears the burden of showing specific prejudice or harm will result if no protective order is granted." Phillips ex rel. Estates of Byrd v. Gen. Motors Corp., 307 F.3d 1206, 1210-11 (9th Cir. 2002).[1]

B. Analysis

The Guideline is an internal guideline that CCC considers confidential and which it endeavors to keep confidential. (Affidavit of Christine Michals-Bucher, Doc. 39-1, at ¶ 5.) It was given to Univita to assist it in handling claims on behalf of CCC. ( Id. at ¶ 6.) CCC does not provide the Guideline to policyholders, other insurance carriers, or other unauthorized persons. ( Id. at ¶ 5.) The Guideline was developed by CCC using its own resources. ( Id. at ¶ 4.) CCC asserts that making the Guideline available to its competitors will harm CCC, as CCC's competitors "could ...

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