MEMORANDUM OPINION

JAMES H. HANCOCK. Senior District Judge.

I. Introduction

This case is before the court on Plaintiffs' Motion To Compel Liberty To Respond To Bad Faith Discovery (Doc. # 38), filed August 31, 2015. The Motion is fully briefed. (Docs. # 38, 42, 46). For the following reasons, the Motion is due to be denied in part and granted in part with modifications to discovery requests, and is moot in part.

II. Background Facts and Procedural History

Plaintiffs assert claims for insurance recovery and bad faith arising from Defendant's denial of coverage for an electrical loss at one of Plaintiffs' coastal properties, 550 Water Street. (Doc. # 1). In their Complaint, Plaintiffs contend that they thereafter learned that all nine of their coastal properties were erroneously omitted from the first-party insurance policy issued by Defendant1 (the "Policy") during the underwriting process. (Id.). Thus, Plaintiffs sought coverage for their coastal properties under the Policy's Errors and Omissions Insuring Clause (the "E&O Clause"), which they argue is intended to cover an "error or unintentional omissions" resulting in a "failure through error to include any premises owned or operated" by Plaintiffs. (See id.). Defendant concluded that there was no failure through error to schedule 550 Water Street on the Policy, and, even if there was such a failure through error, that an exception to the E&O Clause applies (that is, a failure by Plaintiffs "to report values"). (Id.). Plaintiffs allege that Defendant's analyst, Dwight Hinton, failed to conduct a good faith investigation of the claim under the E&O Clause, "and improperly coordinated with the Liberty underwriter to manufacture a bogus reason for its denial."2 (Docs. # 1, 38). And, Plaintiffs aver that Defendant erroneously concluded that the E&O Clause does not apply. (Doc. # 1).

On February 5, 2015, Plaintiffs served Defendant written discovery concerning the bad faith claim. (Doc. # 38). Defendant timely responded with objections to many of Plaintiffs' requests. (See id.). This Motion followed. (Id.).

III. Legal Standards

Pursuant to the Federal Rules of Civil Procedure, a party may obtain discovery "regarding any non-privileged matter that is relevant to any party's claim or defense. . . ." Fed. R. Civ. P. 26(b)(1).3 Information sought in discovery does not need to be admissible at trial "if the discovery appears reasonably calculated to lead to the discovery of admissible evidence." Id.; see also Adkins v. Christie, 488 F.3d 1324, 1330 (11th Cir. 2007). "The party resisting discovery has a heavy burden of showing why the requested discovery should not be permitted . . . [with] `[t]he onus [] on the party resisting discovery to demonstrate specifically how the objected-to information is unnecessary, unreasonable or otherwise unduly burdensome." Rosen v. Provident Life & Accident Ins. Co., 308 F.R.D. 670, 678 (N.D. Ala. 2015) (quoting Henderson v. Holiday CVS, L.L.C., 269 F.R.D. 682, 686 (S.D. Fla. 2010)) (changes in Rosen).

District courts may limit discovery when "the burden or expense of the proposed discovery outweighs its likely benefit. . . ." Fed. R. Civ. P. 26(b)(2)(c)(iii). But, courts must "accord discovery a broad and liberal scope in order to provide parties with information essential to the proper litigation of all relevant facts, to eliminate surprise, and to promote settlement." Giraldo v. Drummond Co., Inc., No. 09-cv-01041, 2012 WL 2358297, at *1 (N.D. Ala. June 15, 2012) (citing Hickman v. Taylor, 329 U.S. 495 (1947)). Stated otherwise:

Adkins, 488 F.3d at 1331.

A party may seek an order to compel discovery if an opposing party fails to respond to discovery requests or has an evasive or incomplete response. Fed. R. Civ. P. 37(a)(3)(A), (B). "In ruling on a discovery motion, courts consider the totality of the circumstances, weighing the value of material sought against the burden of providing it, and taking into account society's interest in furthering the truth-seeking function in a particular case before the court." Giraldo, 2012 WL 2358297, at *2 (citing Patterson v. Avery Dominion Corp., 281 F.3d 676, 681 (7th Cir. 2002)).

Further, a district court should consider the proportionality test inherent in Rule 26. See Maxtena, Inc. v. Marks, 289 F.R.D. 427, 435 (D. Md. 2012). That test

Id. at 434 (quoting Fed. R. Civ. P. 26(b)(2)(C)(i)-(iii) (internal quotation marks omitted). "[C]ounsel (and ultimately the court) first must consider whether the desired information is relevant to the claims and defenses in the action, and then ask whether the proposed discovery is proportional to the needs of the case or unduly burdensome or expensive based upon an assessment of various factors" not limited to those listed in Rule 26. Witt v. GC Servs. Ltd. Partnership, 307 F.R.D. 554, 569 (D. Colo. 2014). "Any application of the proportionality factors must start with the actual claims and defenses in the case, and a consideration of how and to what degree the requested discovery bears on those claims and defenses." Id.

IV. Analysis

In their Motion, Plaintiffs set forth five categories of discovery requests (to which Defendant objected) relating to the bad faith cause of action: (1) discovery related to prior bad faith claims against Defendant; (2) discovery concerning defendant's adjustment of the claim; (3) discovery related to performance goals and evaluations of Defendant's claims department; (4) discovery regarding quality assurance and claim dispute resolution; and (5) discovery concerning the E&O Clause.4 (Doc. # 38). Additionally, Defendant requested attorney's fees if it prevails in opposition.

A. Discovery Related to Prior Bad Faith Claims against Defendant

Plaintiffs submitted for the court's consideration one interrogatory and four document requests under the "prior bad faith claims" category. (See Doc. # 38). These discovery requests, and Defendant's corresponding objections, are:

(Id.).

Plaintiffs' discovery requests on this topic are plainly overbroad and place a burden on Defendant that outweighs the likely need for such a broad scope of information. This case involves the denial of a single insurance claim in the state of Alabama. (Doc. # 1). It is not a nationwide class action, nor do the events giving rise to Defendant's liability occur before 2010. (See id.). While Plaintiffs have a right to discovery on their bad faith claim, that right is not unlimited. See, e.g., Fed. R. Civ. P. 26(b)(2)(c)(iii). The court will not compel Defendant to respond to the requests as written.5

To be sure, Plaintiffs have a right under Alabama law to conduct discovery concerning aspects of past bad faith lawsuits filed against Defendant. See Ex parte Finkbohner, 682 So.2d 413 (Ala. 1996). With regards to Interrogatory 9, those aspects are limited to case name and CV number, the court and jurisdiction in which the cases were filed, and the present status and disposition of those cases. However, Plaintiffs must further narrow the scope of the information sought, at the least, by specifying the meaning of "bad faith," limiting the jurisdictional geography to the state of Alabama, limiting the meaning of "companywide" to the actual Defendant only (that is, Liberty Mutual Fire Insurance Company) and its affiliated entity or entities handling underwriting, tailoring the bad faith suits to first-party policies only, and shortening the temporal scope. (A four-year time range has been accepted by Alabama courts, and this court accepts it now as a guideline. See id. (citing Ex parte Rowland, 669 So.2d 125, 127-28 (Ala. 1995))). Plaintiffs will be equipped with that information to uncover from court filings the other information desired, such as the names and addresses of attorneys and the parties in those cases. Likewise, Plaintiffs can recover the pleadings from those cases (which they asked for in Request 16). But, whenever Plaintiffs are unable to locate pleadings (for whatever reason), or the difficulty and expense for Plaintiffs to (possibly) travel across Alabama in search of court filings outweighs the ease of Defendant to pull those filings from its records, Defendants should supply Plaintiffs with these materials. Accordingly, the court will grant these modified and narrowly tailored aspects of Plaintiffs' discovery requests.

Other aspects of the requests are due to be denied.6 The Alabama Supreme Court, while allowing discovery of bad faith lawsuits, upheld the denial of discovery of so-called "bad faith claims." Finkbohner, 682 So.2d at 413. That court reasoned as follows:

Id. (citing Ala. R. Civ. P. 26(b)(1)). This court agrees. Thus, Request 43 is due to be denied. And, for the same reasons, Request 19 is due to be denied. Correspondence involving allegations of bad faith claims does not mean that those claims resulted in legal action. Likewise, the requests for claims files will not stand. The search for and through them would be unduly burdensome, not only because many files may contain privileged information or protected work product, but they may also have the private information of Defendant's customers. Even if these determinations cannot be made until the files are reviewed, the burden and expense of that review outweighs the reasonable calculation of the request. Regardless, and in any event, if certain of the claims files relate to discoverable bad faith lawsuits, they are still not discoverable due to the foregoing reasons.7 Accordingly, Request 16 is due to be denied in part insofar as it relates to claims files, and Request 47 is due to be denied entirely. Also, Part (f) of Interrogatory 9 is due to be denied. Locating that information would cause an undue burden and expense outweighing the likelihood of discovery relevant information, and is not reasonably calculated to lead to the discovery of admissible evidence.

B. Discovery Related to Defendant's Adjustment of the Claim

Plaintiffs request the court to compel Defendant's response to one interrogatory and one document request (to which Defendant objected), which are related to Defendant's adjustment of the claim.8 The interrogatory and objection to it are:

(Doc. # 38). The bad-faith claim at issue in this case arises from a first-party insurance policy. (See Doc. # 1-1). The court was unable to locate case law from Alabama state courts or federal courts employing Alabama law concerning first-party claims and loss reserves; thus, it will look to law from other states. And, in this regard, although Plaintiffs cite a number of bad-faith cases based on other states' laws, which allowed discovery of first-party loss reserve information, this court is not persuaded by them. (See Docs. # 38 at 14, 46 at 6). Instead, this court joins with the majority view in first-party claims "that reserve information is outside the scope of discovery because the information is not relevant as to what an insurer thought of the merits of a claim. . . ."9 Ann F. Ketchen, Reserve and Reinsurance Information: Is It Discoverable?, 38-SPG Brief 40, 41 (2009); see also, e.g., Safeguard Lighting Sys, Inc. v. N. Am. Specialty Ins. Co., 2004 WL 3037947, at *3 (E.D. Pa. Dec. 30, 2004) (reiterating that "there is a `tenuous link between reserves and actual liability given that numerous considerations factor into' the calculation of reserves in accordance with statutory requirements" (citations omitted)). Accordingly, Plaintiffs' request as to Interrogatory 19 is due to be denied.

Plaintiffs' document request and Defendant's objection concerning claim adjustment are:

(Doc. # 38). Plaintiffs have reason to believe Dwight Hinton made the decision on their claim, and his investigation into the facts of the claim under the policy would accordingly be relevant. (See id.). However, discovery must be proportional to the likelihood of discovering relevant evidence. See Fed. R. Civ. P. 26(b)(2)(c)(iii). Request 18 is overbroad and probable to lead to undue expense. Defendant is thus entitled to a narrowed scope on Request 18. Therefore, similar to the narrow tailoring discussed in Part A above, Plaintiffs should restrict the year range on this document request and keep it to claims in the state of Alabama for policies like the one at issue in this case.

C. Discovery Related to Performance Goals and Evaluations of Claims Department

Plaintiffs move the court to compel a response to seven document requests related to performance goals and evaluations of the claims department, to which Defendant objected. Two of the requests (and objections) are as follows:

(Doc. # 38). Although there is a strong public policy against the discovery of personnel files,

Coker v. Duke & Co., Inc., 177 F.R.D. 682, 685 (M.D. Ala. 1998), the court does not view these requests as asking for information strictly on personnel files. To the contrary, these requests seek information on financial (and similar) incentives for employees. Such employee incentives are indeed relevant or reasonably calculated lead to the discovery of admissible evidence in a bad faith case such as this one. See Royal Bahamian Assn., Inc. v. QBE Ins. Corp., 268 F.R.D. 692, 694 (S.D. Fla. 2010) (citing Buckley Towers Condo., Inc. v. QBE Ins. Corp., 2008 WL 2645680, at *3-5 (S.D. Fla. June 26, 2008)) ("In general, such evidence is only relevant to a bad faith case, not a first party coverage case."). Nonetheless, the requests as worded are too overbroad and must be narrowed, at the least, in temporal scope, to the individuals who worked on the claim at issue, and to the claims department as a whole (i.e., not individuals unrelated to the claim in this case) if such department-wide incentives exist.

Plaintiffs also requested materials related to, and including, personnel files:

(Doc. # 38).

Unlike Requests 20 and 21, these requests are due to be denied entirely for impermissibly seeking discovery of personnel files. Because public policy strongly disfavors the discovery of personnel files, they are discoverable "only if `(1) the material sought is clearly relevant and (2) the need for discovery is compelling because the information sought is not otherwise readily obtainable.'" Coker, 177 F.R.D. at 685 (quoting Cooperman v. One Bancorp, 134 F.R.D. 4 (D. Me. 1991)). Here, these materials are not clearly relevant, and are not as reasonably calculated to lead to admissible evidence as financial-type incentives. And, in any event, the fact that some information concerning an individual employee might be recorded in personnel files is not enough to usurp the public policy against disclosing those files. Plaintiffs have "not shown that any information in any particular employee's personnel file is directly relevant for any other reason, such as impeachment," and that it cannot be obtained in other ways (such as at deposition). Royal Bahamian, 268 F.R.D. at 694; see also Tolz v. Gieco Gen. Ins. Co., 2010 WL 298397, at *3-4 (S.D. Fla. Jan. 19, 2010) (finding production of personnel file improper in bad-faith action where no evidence it is necessary for a specific purpose, such as impeachment). It is not enough that Defendant holds the files; Plaintiffs can seek the information they want via other means allowed under the Federal Rules of Civil Procedure.

Plaintiffs also requested the following materials concerning Defendant's legal relationship with individuals who handled Plaintiffs' claim:

(Doc. # 38). In its response brief, Defendant reported that, before the agreed upon date for it to respond to Plaintiffs' Rule 37 letter and the day after Plaintiffs filed the subject Motion, it supplemented its response to Request 31. (Doc. # 42 at 42). Plaintiffs did not raise any issues with this supplementation in their reply, and so the court concludes that the request is moot.

Finally, as follows, Plaintiffs requested materials related to Defendant's corporate values:

(Doc. # 38). However, Plaintiffs offer no discussion concerning this request in their Motion and reply. (Id., Doc. # 46). In its opposition brief, Defendant writes that it does not know what is actually being requested, and that Plaintiffs have not articulated what information they seek. (Doc. # 42 at 42). Nonetheless, Defendant offers (in an attempt to comply with the request) the creed located on the wall at the entrance of its headquarters. (Id. at 43). Thus, the court considers this request resolved and therefore moot.

D. Discovery Related to Quality Assurance and Claim Dispute Resolution

Plaintiffs wish the court to compel a response to their proffered and objected to document request concerning quality assurance:10

(Doc. # 38). Plaintiffs argue that courts routinely support the discoverability of these types of materials and cite to cases holding that training policies and manuals are discoverable. (Id. at 21-22). Defendant responds that Plaintiffs provide no legal basis for the discoverability of the requested quality assurance information, but instead discuss claims manuals and training materials, which Defendant already agreed to produce. (Doc. # 42 at 43). In their reply brief, Plaintiffs specify that "quality assurance" means materials reflecting Defendant's efforts to ensure its employees adjust claims in compliance with the claims manuals and training materials Defendant is producing. (Doc. # 46 at 8). They also contend that it logically follows the cited case law that materials reflecting enforcement would be discoverable. (Id.). The court agrees. Because Plaintiffs allege a bad faith cause of action, materials related to training policies and manuals may be relevant or lead to the discovery of admissible evidence. But, as with many of the other request the court is allowing, Plaintiffs must narrow the scope of the request to a set, short timeframe, and to any relevant materials connected to the claims handlers who worked on Plaintiffs' claim.

E. Discovery Related to the E&O Clause

Plaintiffs additionally move this court to compel Defendant's response to interrogatories and document requests regarding the E & O Clause to which Defendant objected:

(Doc. # 38). Even though it validly objected to, among other things, the overbreadth of these discovery requests, Defendant indicated it would continue to search and supplement its production if it finds anything, and stated its willingness to confer in good faith as to what exactly Plaintiffs seek. (See Doc. # 42 at 46). Plaintiffs, in their reply brief, state that Defendant "has indicated that it will search for this information, but to date [October 13, 2015] has not supplemented its responses." (Doc. # 46 at 8). Because of the amount of time that has passed since the briefing cycle, and in light of the parties' statements, the court will defer a ruling on these discovery requests. Instead, it will order the parties to confer in good faith and file a joint report concerning the status of these (and any other outstanding) discovery requests. There is no reason the parties cannot act as the professionals they are and, without the court's assistance, work out these (and any other remaining) discovery issues.11

F. Costs and Fees are Due to be Denied

Defendant requests prevailing party fees pursuant to Federal Rule of Civil Procedure 37(a)(5)(B). To be sure, while Defendant has prevailed in some part, it has not in others. Moreover, and in any event, although the court believes the parties could have (likely) reached a mutual outcome prior to filing the subject Motion, Plaintiffs are not unjustified in filing it. Accordingly, no fees or costs are due to be awarded. Likewise, the court defers to the parties to work out payment of complying with discovery costs. With sufficiently narrowed requests, many of Defendant's cost concerns should be satisfied.12

V. Conclusion

For the reasons set out above, Plaintiffs' Motion To Compel Liberty To Respond to Bad Faith Discovery (Doc. # 38) is due to be granted in part with narrowed tailoring, denied in part, and is moot in part. A separate order will be entered.

Done and ordered.