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Nautilus Insurance Company v. Benjamin Raatz

January 12, 2011

NAUTILUS INSURANCE COMPANY, PLAINTIFF,
v.
BENJAMIN RAATZ, HAYLEY MULTER RAATZ, KATHLEEN C. CHAVEZ, GABRIEL CHAVEZ, 1034 WEST ALTGELD PROPERTIES, LLC, JEFFREY FUNKE, AND FUNKE DESIGN/BUILD, INC., A/K/A FUNKE DESIGN BUILD, LLC AND/OR FUNKE DESIGN/BUILD, INC., DEFENDANTS.



The opinion of the court was delivered by: Magistrate Judge Susan E. Cox

District Judge Edmond E. Chang

MEMORANDUM OPINION AND ORDER

Susan E. Cox, Magistrate Judge

There are two motions currently pending in this case, both involving the same basic discovery dispute. The first, filed by plaintiff, Nautilus Insurance Company ("Nautilus"), requests the Court limit discovery by specifically precluding a deposition of the company's representative. The second motion, filed by the defendants Gabriel Chavez, Kathleen C. Chavez, and 1034 W. Altgeld LLC, seeks answers to several interrogatories and production requests, also involving essentially the same discovery topic. Nautilus's motion is denied [dkt 110] and defendants' motion is granted in part and denied in part [dkt 112].

I. Plaintiff's Motion for Protective Order Precluding Deposition Under Rule 30(b)(6) of The Federal Rules of Civil Procedure - #110 In this motion, plaintiff, Nautilus Insurance Company ("Nautilus"), claims that this Court

should preclude defendants Benjamin Raatz and Hayley Multer Raatz ("Raatz family") from seeking to depose any Nautilus representative on how a specific claim, in an underlying insurance action, was handled. Specifically, plaintiff claims that because this case is a declaratory judgment action seeking a determination as to whether it has an obligation to defend and indemnify its insured -based only on the known loss doctrine - any issues involving claims handling is irrelevant.

A bit of background is first helpful. The current defendants in this action include: (1) the Raatz family, who purchased a new construction, luxury home, in July 2006 for $2,500,000; (2) 1034 W. Altgeld LLC, Gabriel Chavez, and Kathleen C. Chavez (collectively "sellers"), who sold the home to the Raatz family; and (3) Funke Design-Build, Inc., Funke Architects, Inc., and Jeffrey Funke (collectively "Funke"), who oversaw all aspects of designing and building the home, and acted as the general contractor for the project. The plaintiff in this case, Nautilus, became involved when Funke purchased an insurance policy from it effective from November 2, 2007 to November 2, 2008.

As outlined in the complaint, in October 2006, at the closing, the Raatz family and the sellers entered into an agreement because certain construction was not yet complete on the home. That agreement outlined the work still to be performed, a guarantee that the sellers would satisfactorily complete the work, and included a date by which the work would be done ("warranty agreement"). When the work did not get completed, the Raatz family commissioned expert evaluations on the deficiencies, yet the work still did not get completed. The Raatz family then filed a lawsuit in state court against the sellers and Funke. Thereafter, the sellers filed a counterclaim against Funke alleging that any defects in construction, or property damage that resulted therefrom, was because of the negligent failure of Funke. Funke then tendered the lawsuit to Nautilus for defense and indemnity.

Thereafter, Nautilus filed the present case requesting a declaratory judgment that Nautilus has no duty to defend Funke. Nautilus alleges here - in this declaratory suit - that prior to the insurance policy's inception, Funke had the warranty agreement setting forth all the construction defects that needed to yet be completed on the home. According to Nautilus, this means that Funke knew, or should have know, that a loss would occur with respect to the work on the home. Nautilus thus alleges that the known loss doctrine would preclude any coverage or potential coverage for Funke.

With respect to the present motion, Nautilus opposes the Raatz family's request to depose a representative of Nautilus who has the most knowledge regarding the claim file. Since filing the motion, however, Nautilus has agreed that defendants are entitled to depose a Nautilus underwriting representative. Citing to Outboard Marine Corporation v. Liberty Mutual Insurance Company,*fn1 Nautilus concedes that defendants may inquire whether Nautilus agreed to insure the Raatz family claims, despite Funke's possible knowledge of any potential losses.Specifically, Nautilus agrees to a deposition with the following categories of topics:

- whether Nautilus communicated with an agent of Funke prior to the purchase of the policy;

- What information was exchanged between the agent of Funke and Nautilus;

- What Nautilus knew at the time of the purchase of the policy;

- Foundation for the policy;

- Information relating to the application for the purchase of the policy (when ...


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