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G&S M Consultants Inc. v. Continental Casualty Co.

United States District Court, Northern District of Indiana, South Bend Division

September 8, 2014




This matter is before the Court on Defendant’s Motion to Strike Expert Report of Jim Leatzow [DE 199], filed by Defendant Continental Casualty Company (“Continental”) on July 16, 2014. Plaintiff G&S M Consultants, Inc. (“G&S”) filed a response on August 14, 2014, and Continental filed a reply on August 28, 2014.


G&S was in the business of processing aluminum scrap at facilities located in Indiana and Georgia. In the Complaint, G&S alleges that a November 29, 2007 steam explosion at its Georgia facility “shut the plant down and caused severe property damage and business interruption losses” that went unreimbursed by Continental under a property insurance policy issued to G&S. The claims alleged are breach of contract, promissory estoppel, and bad faith claims handling. The claim of bad faith claims handling is based on an allegation that “[a]fter making the initial payments under the Policy for the large property damage and business interruption loss caused by the Manchester explosion, [Continental] delayed further investigation and settlement of a claim for which liability has been clear and undisputed.” (Compl. ¶ 24). G&S alleges this was done in bad faith.

On April 1, 2010, the Court entered a scheduling order, setting a deadline for G&S to serve its expert disclosures on or before January 31, 2011, a deadline for Continental’s expert disclosures of February 23, 2011, and a deadline for the close of all discovery of April 22, 2011. On January 28, 2011, the Court extended the deadlines to March 17, 2011, April 18, 2011, and May 23, 2011, respectively. On March 21, 2011, G&S disclosed seven potential experts, all of whom were disclosed as witnesses who would potentially provide testimony concerning G&S’s alleged damages and only one of whom was a retained expert, who was to give an opinion regarding G&S’s business interruption and extra expense claim. G&S did not disclose or identify an expert regarding G&S’s claims regarding Continental’s claim handling or alleged bad faith. In April 2011, Continental made its expert disclosures.

In December 2011, the Court granted a Motion to Compel filed by Continental. As a result, from January 2012 through October 2012, G&S disclosed approximately 300, 000 documents dating back to 2003 that had not been previously provided to Continental. Based on those documents, Continental filed a motion seeking leave to file an Amended Answer to assert additional affirmative defenses and Counterclaims based on alleged misconduct by G&S during the claims process. The Court granted the motion.

On November 12, 2013, Continental filed the Amended Answer, pleading four additional affirmative defenses. The Fourth Affirmative Defense of “Violation of Loss Conditions – Inspection and Copying of Books and Records” alleges that G&S violated its duty by failing to provide Continental with its books and records upon reasonable request and by refusing to permit Continental to copy its books and records.

The Fifth Affirmative Defense is “Violation of Loss Conditions – Concealment, Misrepresentation or Fraud” and alleges that G&S violated this clause by committing fraud and by intentionally concealing or misrepresenting material facts concerning the covered property.

The Sixth Affirmative Defense of “Unclean Hands” alleges that G&S intentionally concealed or misrepresented material facts in connection with the insurance claim.

The Seventh Affirmative Defense of “Set-off” alleges that Continental justifiably relied on G&S’s misrepresentations and intentional omissions, resulting in a disbursement of funds to G&S in an amount greater than the covered sum to which G&S was entitled.

Continental also asserts Counterclaims for “Breach of Contract” and “Unjust Enrichment.” Continental alleges “that G&S prepared and presented its claim to Continental based on fraud, intentional misrepresentations, and concealment of significant facts.” (Counterclaim ¶ 5). More specifically, Continental alleges that G&S intentionally concealed the existence of customer contracts “in order to hide evidence that would demonstrate the extent of the inflation of G&S’s claim under the Policy, ” that G&S intentionally concealed information about the melt loss as a result of the explosion and damage to the Manchester plant “in order to artificially inflate the amount of its recovery under the Policy, ” that G&S “fraudulently tie[d] the shutdown” of the Manchester facility to the loss by claiming that the shutdown was the result of damage to the roof and leaking rainwater as opposed to “poor financial performance” separate from the loss, and that “G&S similarly attempted to defraud Continental” by submitting a “grossly inflated estimate for the cost of repairs” prepared by public adjuster WorldClaim. (Counterclaim ¶¶ 11, 22, 26-27, 28).

Although fact discovery closed on February 1, 2013, on November 15, 2013, the Court ordered discovery reopened for (1) additional discovery by Continental related to G&S’s 2012 discovery disclosures, (2) discovery by both parties related to Continental’s First Amended Answer and Counterclaim, and (3) expert and fact discovery resulting from the disclosure of an expert report by G&S. On November 21, 2013, the Court held a scheduling conference to set dates related to that ruling, at which the following exchange occurred:

The Court: Before I decide this, I think maybe I should also discuss the request that G&S has to hire or retain an expert to defend against the fraud counterclaim.
Mr. Claflin: Yes, Your Honor.
The Court: I’ll come back to the number of depositions, but do you want to speak to that, please?
Mr. Claflin: Well, essentially we’re looking at a brand-new claim, and, Your Honor, we’re getting it under our belt. But, frankly – The Court: Are you able to say in just a sentence or two what the ...

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