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Gowan v. Mid Century Insurance Co.

United States District Court, D. South Dakota, Western Division

November 16, 2015

STEPHEN M. GOWAN, Plaintiff,




This diversity matter is pending before the court on plaintiff Stephen M. Gowan’s amended complaint alleging defendant Mid Century Insurance Company denied his worker’s compensation claim in bad faith. See Docket No. 49. Mr. Gowan has filed a motion for sanctions [Docket No. 54], which was referred to this magistrate judge for decision pursuant to 28 U.S.C. § 636(b)(1)(A). See Docket No. 59.


A. Background Facts

These background facts are drawn from the parties’ briefs and Mr. Gowan’s amended complaint. The court’s recitation of the facts thus gleaned does not represent any imprimatur of the court as to their veracity.

Stephen Gowan injured his knee at work; his employer had a worker’s compensation insurance policy with Mid Century. Mr. Gowan and Mid Century settled Mr. Gowan’s worker’s compensation claim under terms that did not impact Mr. Gowan’s right to future medical treatment for his injury. Mid Century continued to provide medical treatment for Mr. Gowan until his treating physician recommended he undergo knee replacement surgery. At this time, Mid Century denied coverage for the surgery as well as for pain control injections to Mr. Gowan’s knee that he had previously been receiving.

Mid Century hired Richard Farnham, M.D. to conduct an independent medical exam (IME) on Mr. Gowan. From 2000 to 2001, Mid Century had hired Dr. Farnham on 11 occasions to provide it with IMEs on claimants. Mr. Gowan alleges that Dr. Farnham is biased in favor of insurance companies and that Mid Century expected Dr. Farnham to render an opinion favorable to Mid Century.

Dr. Farnham issued an opinion that Mr. Gowan did need a total knee replacement and that the surgery was related to Mr. Gowan’s 2000 work-related injury. However, he opined only 25% of the surgery was occasioned by the work injury, while 75% was non-work related. Accordingly, Mid Century agreed only to pay only 25% of the cost of the anticipated surgery. Mr. Gowan’s doctor then refused to perform the surgery. Mid Century discontinued payments for Mr. Gowan’s knee injections, a matter not touched upon by Dr. Farnham.

On February 10, 2009, a file note in Mid Century’s file regarding Mr. Gowan states, “FILE STRATEGY** **GOAL** DENY FURTHER.” Discovery in this matter uncovered facts showing that the author of this file note was Janet Estes, the supervisor of Michael Shoback, who was the claims handler assigned to Mr. Gowan’s claim.

Mr. Gowan consulted the attorney who originally represented him in his worker’s compensation injury, but the attorney declined to represent Mr. Gowan as to his knee surgery. Mr. Gowan was able to find another attorney to file a petition for a hearing with the South Dakota Department of Labor on the knee surgery issue. Mid Century answered the petition by denying Mr. Gowan was entitled to surgery or pain injections and asking that Mr. Gowan’s petition be dismissed with prejudice.

At some point while the petition was pending, Mid Century reversed course and granted Mr. Gowan’s request for payment of the knee replacement surgery. The surgery was performed in February, 2014. Mr. Gowan filed the instant lawsuit two months later.

B. Mr. Gowan’s Three Prior Motions to Compel

Mr. Gowan filed three separate motions to compel discovery. See Docket Nos. 21, 30 and 43. Mid Century resisted these motions. See Docket Nos. 26, 34, and 51. This court issued a single opinion deciding all three motions in Mr. Gowan’s favor. See Docket No. 53. Neither party filed objections with the district court regarding this opinion.

One of the discovery issues addressed in Mr. Gowan’s motions to compel were four personnel files he had requested copies of: (1) Michael Shoback’s file (the employee of defendant who denied Mr. Gowan’s claim); (2) Janet Estes’ file (Mr. Shoback’s supervisor and author of the “File Strategy” note); and (3) and (4) the two supervisors up the chain of command from Ms. Estes.

Mr. Gowan informed Mid Century that social security numbers and medical information in the requested files could be redacted. In addition, the district court entered a protective order. See Docket No. 25. That order allowed a party producing sensitive documents to designate them as “confidential.” The order contemplated personnel files as among those documents the parties may appropriately designate as “confidential.” Id. Once a document is produced in discovery and is designated as “confidential, ” several prophylactic measures apply. “Confidential” documents may only be filed with the court under seal. Id. Portions of deposition transcripts may be themselves designated “confidential” if “confidential” documents are discussed therein. Id. Third parties to whom “confidential” documents must be disclosed during the course of litigation must be told of the terms of the protective order ...

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