IOERGER v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY (2023)

ORDER ON DISCOVERY DISPUTES

This matter is before this court on the discovery disputes briefed at ECF Nos. 32-33 and 35-36. The undersigned Magistrate Judge considers this dispute pursuant to 28 U.S.C. § 636(b)(1)(A), the Order Referring Case dated July 22, 2022 (ECF No. 9), and the case's reassignment to this court on May 2, 2023. ECF No. 22. Having reviewed the briefing and heard argument at a telephonic discovery conference on May 24, 2023 (ECF No. 34, minutes), this court agrees with Defendant State Farm Mutual Automobile Insurance Company (“State Farm”) that it has shown good cause to obtain independent medical examinations (“IMEs”) of Plaintiffs Todd Ioerger and Vicki O'Hagan. The court requires the parties to confer and file a status report with the details of the IMEs required by Federal Rule of Civil Procedure 35. The court also resolves the parties’ disputes for the terms of a protective order governing confidential discovery.

BACKGROUND

This is a case for breach of insurance contract and insurance bad faith. Plaintiffs Todd Ioerger and Vicki O'Hagan filed their complaint in state court on May 2, 2022. ECF No. 6. State Farm removed the case to this court on July 21, 2022.

The court takes the following fact allegations from the Complaint and the Scheduling Order's (ECF No. 19) summary thereof, which Plaintiffs incorporate in their first discovery report. ECF No. 33-1. Plaintiffs allege they were injured in an accident while on Mr. Ioerger's motorcycle. In a hit and run accident, a drunk driver (non-party Billy Johnson) was approaching in the same direction that Plaintiffs were traveling. Mr. Johnson was driving behind another car (of non-party Colton Benson) that was directly behind Plaintiffs. Mr. Johnson failed to slow with traffic and rear-ended Mr. Benson's car, causing him to run into the rear of Plaintiffs’ motorcycle. Plaintiffs were injured in the crash.

Specifically, Plaintiffs allege that as a result of this accident, Ms. O'Hagan was diagnosed with cervical, thoracic and lumbar spine injuries, including a fracture; a concussion; and headaches. Ms. O'Hagan has permanent injuries and has incurred more than $37,000 in medical expenses. Plaintiffs allege that Mr. Ioerger was diagnosed with spine injuries, has incurred more than $10,000 in medical expenses, and his injuries are permanent.

Both Plaintiffs sought bodily injury liability payments from Mr. Johnson's insurer on March 27, 2020, and with Defendant's consent, accepted policy-limit payments of $24,500 each in April 2020. The policy-limit payments were made in June 2020. Those payments were less than the expenses and other damages that Plaintiffs assert they suffered as a result of the accident.

Both Plaintiffs sought underinsured motorist (“UIM”) benefits from State Farm on March 27, 2020. Since June of 2020, Plaintiffs have attempted to receive UIM benefits they believe they are owed. The UIM policy limits from State Farm were $175,000 each. Plaintiffs allege that State Farm would not pay any of the UIM benefits unless they agreed to “settle” with State Farm for the amounts it offered. They allege that despite being represented by an experienced personal-injury lawyer (who is not of record in this case) in negotiating their claims for UIM benefits with State Farm, State Farm refused to pay the amounts that Plaintiff had documented as their expenses and damages from the accident. However, in September 2020, State Farm offered to pay benefits, conditioned upon Plaintiffs agreeing to a “settlement.” ECF No. 6 (Complaint) ¶¶ 46-47 (alleging State Farm offered $56,400 to Ms. O'Hagan and $18,900 to Plaintiffs Mr. Ioerger). Plaintiffs did not agree to those amounts at the time. At some point in 2020, State Farm made written offers to pay $104,496.01 to Ms. O'Hagan and $25,800 to Mr. Ioerger. See ECF No. 32 (State Farm's Discovery Report) at 1 (asserting the settlement offers were made in 2020); ECF No. 33 (Plaintiff's Discovery Report) at 1 (asserting the amounts offered).¹ State Farm did not pay any benefits as the parties continued to negotiate Plaintiffs’ UIM claims through counsel.

During the negotiations, State Farm scheduled independent medical examinations (“IME”) of Plaintiffs for June 1, 2021.² The morning of the scheduled IME, however, Mr. Ioerger had a medical emergency due to a severe infection, and Ms. O'Hagan took him to the emergency room that morning. ECF No. 6 (Complaint) ¶¶ 75, 81. Plaintiffs’ then-counsel notified State Farm the same day of the situation and asked for other dates to reschedule the IMEs. Id. ¶ 76.³ State Farm declined to give new dates for the IMEs until Plaintiffs paid a $7,700 cancellation fee. When Plaintiffs declined to pay that fee, State Farm treated it as a failure to cooperate.⁴

Based in part on the foregoing allegations (among others), Plaintiffs sue State Farm for breach of contract on their uninsured/underinsured motorist coverage of $175,000 for each Plaintiff. They further claim a breach of the duty of good faith and fair dealing and statutory bad faith. State Farm denies liability on all claims.

In discovery in this case, State Farm has requested to obtain IMEs of Plaintiffs under Federal Rule of Civil Procedure 35. Plaintiffs have declined to do so voluntarily. They argue that in January 2023, they accepted State Farm's 2020 offers of UIM benefits. As such, Plaintiffs argue their breach of contract claim has been settled, and medical examinations would be irrelevant to their bad faith claims. State Farm disagrees, arguing that the offers had expired and that the issue of whether the breach of contract claim is settled is not before this Court.

Defendant also raises several issues related to a protective order governing confidential discovery in this case.

This court held an hour-long telephonic discovery conference on May 23, 2023. ECF No. 34 (minutes). After hearing both sides’ arguments, the court instructed the parties to file short, supplemental briefs on the Rule 35 and protective order issues.⁵ Id. The parties have done so, and these disputes are thus ready for resolution.

LEGAL STANDARDS

I. Rule 35 IMEs

Rule 35 provides that “[t]he court where the action is pending may order a party whose ․ physical condition ․ is in controversy to submit to a physical ․ examination by a suitably licensed or certified examiner.” Fed. R. Civ. P. 35(a)(1). “The order ․ may be made only on motion for good cause.” Id., Rule 35(a)(2)(A). “Rule 35 requires an affirmative showing by the moving party that each condition as to which the examination is sought is really and genuinely in controversy and good cause exists for ordering each particular examination.” Anchondo-Galaviz v. State Farm Mut. Auto. Ins. Co., No. 18-cv-01322-JLK-NYW, 2019 WL 11868519, at *10 (D. Colo. July 19, 2019) (citing Schlagenhauf v. Holder, 379 U.S. 104, 118, 85 S.Ct. 234, 13 L.Ed.2d 152 (1964)). In Schlagenhauf, the Court held:

The specific requirement of good cause would be meaningless if good cause could be sufficiently established by merely showing that the desired materials are relevant, for the relevancy standard has already been imposed by Rule 26(b). Thus, by adding the words ‘* * * good cause * * *,’ the Rules indicate that there must be greater showing of need under Rule ․ 35 than under the other discovery rules.

Schlagenhauf, 379 U.S. at 118, 85 S.Ct. 234 (internal quotation marks omitted).

Rule 35’s good cause standard reflects an individual's right to privacy. Id. at 112, 85 S.Ct. 234; see also Schultz v. GEICO Cas. Co., 429 P.3d 844, 847 (Colo. 2018) (“a medical examination against her will ․ implicates her privacy interests in her body and her health.”). “Rule 35, therefore, requires discriminating application by the trial judge, ․ [and] the movant must produce sufficient information, by whatever means, so that the district judge can fulfill his function mandated by the Rule”:

Of course, there are situations where the pleadings alone are sufficient to meet these requirements. A plaintiff in a negligence action who asserts mental or physical injury ․ places that mental or physical injury clearly in controversy and provides the defendant with good cause for an examination to determine the existence and extent of such asserted injury.

Schlagenhauf, 379 U.S. at 119, 85 S.Ct. 234 (internal citation omitted).

II. Rule 26(c) Protective Orders Governing Confidential Discovery

It is well established that the court can enter a protective order under Federal Rule of Civil Procedure 26(c) governing confidential information. See, e.g., Gillard v. Boulder Valley Sch. Dist. RE-2, 196 F.R.D. 382 (D. Colo. 2000). Rule 26 specifically authorizes the court to enter a protective order “requiring that a trade secret or other confidential research, development, or commercial information not be revealed or be revealed in a specified way.” Fed. R. Civ. P. 26(c)(1)(G). “[E]ntry of [such] a protective order [can] facilitate orderly and efficient discovery without any adverse effect on the rights of any party, person, or entity.” Gillard, 196 F.R.D. at 384. The entry of a protective order governing confidential information in discovery “is left to the sound discretion of the district court.” S.E.C. v. Merrill Scott & Assocs., Ltd., 600 F.3d 1262, 1271 (10th Cir. 2010) (internal quotation marks omitted).

ANALYSIS

I. State Farm's Request for Rule 35 IMEs of Plaintiffs

State Farm requests physical IMEs of Plaintiffs because, in their breach of contract claim, they allege they suffered permanent bodily injuries in the accident at issue, for which they seek UIM benefits from State Farm. Plaintiffs do not appear to dispute that if their breach of contract claim is still active, good cause exists for the IMEs that State Farm requests. They plainly allege permanent bodily injuries and seek UIM benefits for both past and future medical expenses related to those injuries. See, e.g., Complaint ¶ 24.⁶

Rather, Plaintiffs resist the IMEs because in their view, State Farm should pay the UIM benefits it offered in 2020 that Plaintiffs argue they accepted in January 2023. Plaintiffs argue that there is now no dispute about the amount of damages on their breach of contract claim because they've accepted the amounts that State Farm had offered in 2020. Yet, State Farm has not paid those amounts to date. State Farm takes the position that Plaintiffs could no longer accept those offers when they purported to do so. Plaintiffs plan to file a motion for partial summary judgment on this issue, after obtaining further discovery.

At present, the breach of contract claim remains in the case. Plaintiffs recognize that they have not yet withdrawn the breach of contract claim and that the docket does not reflect any settlement of the claim. Plaintiffs assert that State Farm never contested their injuries or that those injuries were caused by the collision, but State Farm specifically argues that “the parties disagree about the nature and extent of injuries and damages.” ECF No. 35 at 2; see also ECF No. 12 (Answer) ¶ 116 (“Defendant disputes the nature, cause, and extent of injuries claimed by Plaintiffs”). Much as in Anchondo-Galaviz, Plaintiffs do not cite any legal support for their position that “an insurer waives the right to pursue an independent medical examination in the context of litigation by failing to pursue a medical examination during the adjustment of a claim, when a plaintiff's physical condition remains at issue.” Anchondo-Galaviz, 2019 WL 11868519, at *10. Anchondo-Galaviz in fact expressly rejects that position. Id. (citing Morrison v. Chartis Prop. Cas., Co., No. 13-CV-116-JED-PJC, 2014 WL 1323743, at *2 (N.D. Okla. Apr. 1, 2014); Ligotti v. Provident Life & Cas. Ins. Co., 857 F. Supp. 2d 307, 318–19 (W.D.N.Y. 2011)).⁷

Plaintiffs argue this court should not apply Anchondo-Galaviz here because this case is more like Schultz v. GEICO, 429 P.3d 844, 846 (Colo. 2018), a case which Anchondo-Galaviz distinguished because “the plaintiff's physical condition [in Schultz] was no longer at issue—the only remaining issue was whether the benefits paid ․ were unduly delayed.” Anchondo-Galaviz, 2019 WL 11868519, at *10. Plaintiffs argue this case is nearly the same as Schultz, but this court respectfully disagrees. In the first place, as a state court decision, Schultz is only pertinent here to the extent it decides an issue of substantive law, not procedure. Plaintiffs appear to rely on Schultz for the substantive proposition that an insured's physical condition is not at issue when the insurer has offered to pay the benefit that is at issue. But the case is distinguishable here on the facts. In Schultz, the insurer had already offered to pay the full policy limit before the insured filed suit for bad faith breach of contract and statutory bad faith due to unreasonable delay. 429 P.3d at 846, ¶ 6. Both of the claims in that case alleged unreasonable delay in making that offer of benefits, and because the insurer had already offered to pay the full policy limit, there was no issue for which the insured's current physical health or condition would even be relevant—let alone important enough to show good cause.

Here, in contrast, Plaintiffs’ breach of contract claim remains at issue despite their contention that they effectively took the breach of contract damages question off the table in January 2023. Indeed, unlike in Schultz—which expressly notes that the insurer had offered the full policy limit “without requesting that she undergo an IME,” (429 P.3d at 846), in this case State Farm had scheduled Plaintiffs’ IMEs even before this litigation ensued. When Plaintiffs could not attend those IMEs, their counsel asked to reschedule. The Complaint effectively alleges that Plaintiffs would have submitted to IMEs pre-litigation if State Farm had not acted unreasonably in requiring Plaintiffs to pay a $7,700 cancellation fee before it would reschedule the exams.⁸

Plaintiffs also argue that State Farm “has not shown why it could not obtain any relevant information needed from Plaintiffs’ medical records, through depositions or other discovery.” ECF No. 36 at 4. But again, this argument presumes that the breach of contract claim is out of the case. Depositions (by State Farm's counsel) and review (by State Farm's medical expert(s)) of Plaintiffs’ medical records are likely to give State Farm a part of the picture of Plaintiffs’ physical condition. But they will not substitute for the likely fuller information regarding Plaintiffs’ current condition that medical experts could perceive during an IME of Plaintiffs.

In short, this court concludes that it is unnecessary to decide whether Plaintiffs’ bad faith claims standing alone would support State Farm's request for their IMEs. Plaintiffs’ “physical condition ․ is in controversy” on their breach of contract claim, and State Farm has shown good cause for obtaining the IMEs. Fed. R. Civ. P. 35(a)(1).

However, the parties have not provided the additional details that Rule 35 requires the court to state in its order. See id., Rule 35(a)(2). The parties shall confer and file a status report by July 14, 2023, stating the “time, place, manner, conditions and scope of the examination, as well as the person or persons who will perform it,” as to each Plaintiff. The court will then enter an order containing those details as required by Rule 35.

II. The Disputed Terms of the Protective Order

The parties could not agree on several terms in the protective order that State Farm proposed to govern confidential discovery. ECF No. 32 at 2-3 (State Farm briefed paragraphs 1, 2, 4, 7, and 11); ECF No. 32-1 (State Farm's proposed protective order with highlights to show the terms of disagreement in paragraphs 2, 7 and 11). Plaintiffs respond that State Farm is seeking a “blanket protective order” in which it attempts to foist inappropriate burdens and restrictions on them. ECF No. 33 at 3-4; ECF No. 33-12 (Plaintiffs’ proposed protective order).

At the discovery conference, State Farm argued that, to the contrary, its proposed terms are consistent with many protective orders that this District has entered. The court requested that State Farm include in its supplemental brief a list of cases that have approved its several proposals. State Farm identifies five such cases and attaches the protective orders entered therein. ECF No. 35. Plaintiffs respond that in those cases, the parties had stipulated, so the court had no reason to weigh in on any of the terms to which Plaintiffs object in this case.

The parties’ disputes regarding the protective order terms do not present unique or complex issues. While State Farm appears to be correct that its proposed terms have been adopted in at least five cases in this District, it does appear that in each case, the parties stipulated to those terms. The court finds in its discretion that some, but not all, of each side's proposals are appropriate.

Plaintiffs request that the protective order be specifically titled a “Blanket Protective Order,” to distinguish it from a “particular protective order.” Gillard discusses three types of protective orders: particular, blanket, and umbrella. 196 F.R.D. at 385-86. This court rarely, if ever, specifically labels its protective orders by this taxonomy. Although Plaintiffs’ counsel notes that he has experienced a problem in a past case, with another court's misunderstanding of a blanket protective order as a particular protective order, that does not persuade the court that labelling the protective order is necessary. If the terms of the protective order entered in this case become relevant in a proceeding before another court, the protective order is a public document and can be filed with that court for its review.

Plaintiffs characterize State Farm's proposal as unfairly burdening and restricting Plaintiffs as the party receiving the information. Discovery involving the confidential information of the opposing party always imposes some burden on both sides to ensure the information is adequately protected. However, to address Plaintiffs’ concern, the court makes the protective order apply equally to both sides. This is fair, in that it appears Plaintiffs will (or have already) need to produce at least medical or health information that they would likely consider confidential. See, e.g., United States v. Dillard, 795 F.3d 1191, 1205 (10th Cir. 2015) (referring to “the privacy interest inherent in personal medical information”). Thus, both sides should contemplate being both designating and receiving parties, and both sides should be subject to the same standards.

In addition, to further address Plaintiffs’ concerns that they will be required to perform unduly burdensome reviews of the discovery materials or filings they receive in this case in order to comply with the protective order, the court adds a clause (in paragraph 2) to clarify that counsel must in good faith determine whether information qualifies for protection as confidential or subject to a privacy interest under Rule 26(c)(1)(G), Federal Rule of Civil Procedure 5.2, or other law. This greater clarity should reduce any undue burden from receiving overly voluminous designations. Cf. Gillard, 196 F.R.D. at 386 (designations limited to information that counsel “believes, in good faith, is confidential or otherwise entitled to protection”).

The court agrees with State Farm that the protective order should not permit receiving parties to use designated information in any other cases. Cf. Gillard, 196 F.R.D. at 388 ¶ 4(a)-(h) (authorizing disclosure only to persons in the case at issue); Tbl Collectibles, Inc. v. Owners Ins. Co., No. 16-cv-01788-PAB-KLM, 2017 WL 11546036, at *2 (D. Colo. Feb. 10, 2017) (“[T]he Court is not inclined to determine whether a document that has been designated as ‘confidential’ may be used outside of the litigation at issue until the Court has reviewed the document and either approved or disapproved the ‘confidential’ designation.”). Plaintiffs themselves propose that the protective order should only apply to designated information received in this case, and they have not persuaded the court why that provision should not be mirrored in the scope of use that the order authorizes.

As to the parties’ respective proposals for objecting to a designation (or requesting de-designation), the court retains the twenty-one day window that both sides propose but uses the objection process the court has approved in other cases. Cf. Gillard, 196 F.R.D. at 388-89 (similar objection provision, before the court developed discovery-dispute procedures). This includes that the parties shall comply with the court's discovery dispute process for resolving objections to designations.

In short, the parties should carefully review the bold and strike-through text in the protective order, reflecting the court's resolution of the disputed terms.

CONCLUSION

Accordingly, the court rules in favor of State Farm on its request to obtain Rule 35 IMEs of Plaintiffs; the parties shall confer and file a status report as described above by July 14, 2023. The court will then issue a final Rule 35 order. The court rules partly in favor of State Farm and partly in favor of Plaintiffs on the protective order issues. The court will enter the protective order separately.

FOOTNOTES

1.   It does not appear that either side submitted the 2020 written offers or the Plaintiffs’ purported January 2023 acceptance with their discovery reports. Even if they did, this court still could and would not rule on whether the acceptance was valid, as that would be a dispositive issue that is not referred to this court.

2.   Plaintiffs refer to these as “compulsory medical exam[s].” Id. ¶ 55. For convenience, the court will refer to them as IMEs, consistent with Rule 35’s language.

3.   In their discovery brief, Plaintiffs further assert that the morning of the scheduled exam, Mr. Ioerger was in excruciating pain and could not walk or drive. Mr. Ioerger needed surgery four days later.

4.   In their discovery brief, Plaintiffs state that they have since learned that State Farm had itself challenged the cancellation fee with the provider who had billed State Farm.

5.   Plaintiffs also raised issues of written discovery and a privilege issue in their brief. It appeared the parties had not fully conferred on those issues, and the court required the parties to further confer on those issues.

6.   “As a direct and proximate result of the collision, Plaintiffs sustained and will continue to sustain in the future, serious and permanent injuries to their body and mind, have expended significant sums for medical care, have lost earnings and earning capacity, have suffered scarring and disfigurement, and all of the aforesaid expenses and losses are permanent and will continue into the future.” Complaint ¶ 24.

7.   State Farm quotes and cites several other unpublished cases from this District that likewise distinguish Schultz because a breach of insurance contract claim was still at issue. ECF No. 35 at 2-3. However, this court finds Anchondo-Galaviz suffices for the proposition and therefore does not evaluate the other authorities State Farm cites.

8.   Plaintiffs also do not appear to contend that the court should postpone deciding the IME issue until after their planned dispositive motion on the breach of contract claim is resolved. Even if Plaintiffs had made such a request, this court would not postpone or bifurcate discovery for this issue.

Susan Prose, United States Magistrate Judge