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White Mountain Communities Hospital Inc. v. Hartford Casualty Insurance Co.

United States District Court, D. Arizona

December 9, 2015

White Mountain Communities Hospital Incorporated, Plaintiff,
Hartford Casualty Insurance Company, Defendant.




At docket 166, Plaintiff/Counter-defendant White Mountain Communities Hospital Incorporated (“White Mountain”) filed a motion to compel depositions of three Hartford Casualty Insurance Company (“Hartford”) employees. Defendant/Counter-claimant Hartford responded at docket 173. White Mountain’s reply is at docket 179. Hartford requested oral argument, but an argument would not be of additional assistance to the court.

At docket 167 Hartford filed a motion to compel three depositions and discovery responses. White Mountain responds at docket 175. Hartford replies at docket 177. Oral argument was not requested and would not assist the court.


Hartford issued a commercial property insurance policy to White Mountain covering the period from April 1, 2011 thru April 1, 2012. The policy provided insurance coverage against business income losses as well as property losses. White Mountain’s hospital located near Springerville was affected by the Wallow Fire, which began burning on May 29, 2011, and which led to the temporary evacuation of Springerville through June 13, 2011. White Mountain sought payment under the policy for business income losses and property damage. Originally, Hartford processed the business income loss claim pursuant to the “Civil Authority” provision of the policy, which insures against business income loss in the event access to the property is prohibited by order of a civil authority.[1] Hartford paid $433, 520 based on the provision. Later, in November, after a new adjuster was appointed to the file, Hartford decided that there could be coverage under the “Business Income Coverage” provision in the policy[2]based on reported smoke damage, but it determined that a reasonable period for repairs would have been 60 days. It then paid another $250, 000 to White Mountain for business income lost during the additional 60 days. In total, Hartford paid White Mountain $723, 548 on the claims, consisting of a little over $40, 000 for property damage claims and $683, 520 for business interruption through August 6, 2011.

White Mountain filed suit, alleging it is entitled to be paid more money on its business income loss claim. It brought a breach of contract claim, an insurance bad faith claim, and a punitive damages claim against Hartford based upon Hartford’s denial of additional payments and upon allegations of inadequate investigation and delayed payments. The court granted summary judgment in favor of Hartford on all of White Mountain’s claims, and it allowed Hartford to file a counterclaim for breach of contract and bad faith and to seek recoupment based on information discovered during the litigation process. The remaining issue in the case, therefore, is whether Hartford overpaid White Mountain business interruption losses based on its alleged misrepresentations regarding damage to the hospital. The primary basis for Hartford’s counterclaim is based on the allegation that White Mountain led Hartford’s adjuster to believe that the hospital was only partially operational because of smoke damage.[3]


Federal Rule of Civil Procedure 26(b)(1) provides for liberal discovery: “Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party’s claim or defense.”[4] However, the requested discovery must also be proportionate to the needs of the case considering 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.[5] Relevance for purposes of discovery is defined broadly; “[r]elevant information need not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence.”[6]

The court must limit the requested discovery if it is shown to be “unreasonably cumulative or duplicative;” if “the party seeking the discovery has had ample opportunity to obtain the information;” or if the requested discovery is not proportional to the needs of the case as discussed above.[7] Additionally, the court may, with good cause, limit discovery in order “to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense.”[8]


A. Hartford’s motion to compel

Hartford seeks to depose three individuals associated with White Mountain. The first is Suzanna Bueno. Bueno was White Mountain’s director of accounting at the time White Mountain submitted its insurance claim. White Mountain objects to Hartford’s deposition request on the basis that Bueno has no relevant information. It argues that she only handled the financial aspects of White Mountain’s claim and has no knowledge about the alleged misrepresentations made to Hartford. The record cited supports Hartford’s request. White Mountain disclosed Bueno as a witness and anticipated that she would testify “regarding her conversations with Hartford and review and preparation of the updated claims.”[9] Thus, White Mountain acknowledges that she communicated with Hartford representatives about the insurance claim. Also, Jerry Campeau, White Mountain’s CEO during the claim process, testified that she may have told Hartford that White Mountain was in danger of shutting down.[10] She was also present during a November 2011 meeting where Hartford alleges White Mountain made specific misrepresentations. The court finds that she could have personal knowledge regarding the allegations in Hartford’s counterclaim, and therefore, Hartford’s request to depose her is warranted.

Hartford also seeks to depose Rick Jackson. Jackson was White Mountain’s certified public accountant at the time of the insurance claim. Again, the record cited by Hartford demonstrates that Jackson was involved in the efforts to negotiate with Hartford about White Mountain’s insurance claim. It also appears that he may have been at the November 2011 meeting, which is the primary basis for Hartford’s counterclaim.[11] Therefore, the court concludes that ...

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