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Mkb Constructors v. American Zurich Insurance Co.

United States District Court, W.D. Washington, Seattle

September 29, 2014



JAMES L. ROBART, District Judge.


Before the court is Defendant American Zurich Insurance Company's ("American Zurich") Federal Rule of Civil Procedure 37(c)(1) motion for sanctions against Plaintiff MKB Constructors ("MKB") seeking to exclude at trial MKB's supplemental damages computation which MKB disclosed after the discovery cutoff.[1] (Mot. (Dkt. # 115).) The court has considered the motion, all submissions filed in support of or opposition thereto, the balance of the record, and the applicable law. Being fully advised, the court GRANTS American Zurich's motion, STRIKES MKB's supplemental response to American Zurich's Interrogatory 2(a), and further ORDERS the supplemental damages computation contained therein excluded from use at trial.


This case is about an insurance dispute. MKB is a Washington joint venture comprised of Derian, Inc. and R. Scott Constructors, Inc. (Am. Compl. (Dkt. # 35) ¶ 1.) MKB contracted with the Lower Yukon School District ("LYSD") for a project, which included "the procurement, delivery and placement of gravel fill" for a new building pad and driveway upon which a school building would be built. ( Id. ¶ 6.) American Zurich issued MKB a "Builders Risk" policy for the period of June 15, 2012, to October 31, 2012, which provided MKB with insurance coverage related to the LYSD project. ( See id. ¶ 8.) A dispute arose between MKB and LYSD about the volume of fill required to be placed on the building pad. Eventually, LYSD terminated its contract with MKB (7/22/14 Videa Decl. (Dkt. # 94) Ex. 32), and withheld payment of the remaining contract balance of $1, 436, 419.40 ( see id. Ex. 33 at MKB000012). MKB and LYSD entered into arbitration before finally settling their dispute ( see generally id. Ex. 35). As part of their settlement, LYSD paid MKB $1, 436, 419.40. ( Id. at 2.)

MKB notified American Zurich that it was placing a claim under its Builders Risk policy for the damages or losses it had incurred with respect to earth movement beneath the LYSD building pad. ( Id. Ex 39.) On December 28, 2012, MKB sent a letter to American Zurich submitting the "specific monetary damages" that MKB was claiming under the Policy "as a direct result of earth movement." ( Id. Ex. 40 at 2.) The specific items MKB listed in its letter included:

A. Contract Balance: $ 1, 436, 419.40 (Tab A) B. Additional Foundational Materials: $ 669, 508.99 (Tab B) C. Incidental Costs: $ 464, 268.10 (Tab B) Markup & Overhead: $ 208, 880.62 Policy Deductible (Earth Movement): $ -100, 000.00 Legal and Professional Fee: $ TBD _______________ $ 2, 679, 095.11

(7/22/14 Videa Decl. Ex. 40; 7/22/14 Mullenix Decl. Ex. 32.) With respect to the $669, 508.99 claimed for additional foundational materials, MKB originally calculated "that 4, 773 tons of extra [gravel] fill, beyond plan quantities, had cost them that amount of money." ( See 8/27/14 Videa Decl. (Dkt. # 115) Ex. 10 (MKB Supp. Resp. to 1st Int.) at 8.)

Throughout this litigation, MKB has repeatedly affirmed that it is claiming the foregoing specific cost items originally listed in its December 28, 2012, letter to American Zurich. In its May 31, 2013, Initial Disclosures, MKB identified the same costs as those listed in its December 28, 2012, letter.[2] (MKB Initial Disclosures (Dkt. # 115-6) at 5, 8 (Ex. A), 9 (Ex. C).) On August 21, 2013, in response to Interrogatory No. 2 of American Zurich's First Set of Interrogatories, which asked MKB to "[i]dentify with specificity each and every item of cost MKB contends it is owed under the Policy, " MKB again referenced its December 28, 2012, letter to American Zurich and its Initial Disclosures. (MKB Resp. to 1st Int. (Dkt. # 115-6) at 15 ("... MKB has summarized and provided backup documentation for these costs before for American Zurich in MKB's initial disclosures and its December 28, 2012, claim submission....").) Finally, on February 18, 2014, during the course of American Zurich's Rule 30(b)(6) deposition of Mr. Jensen on behalf of MKB, MKB's counsel stated, "Let me just tell you MKB's legal position which is that we're seeking everything in this December 28th letter...." (2/18/14 Jensen Dep. (Dkt. # 115-7) at 35:3-5.)

On June 5, 2014, MKB served a timely answer to a discovery request from American Zurich asking MKB to identify "with specificity the physical loss or damage to the building pad or foundation at the Project as alleged in MKB's response to American Zurich's Interrogatories, Set One, Interrogatory No. 1."[3] (MKB Resp. to 3d Int. (Dkt. # 106-4) at 56.) During the course of its response, MKB told American Zurich that the amount of earth settlement it intended to prove at trial was equivalent to "9, 869 tons of fill." (MKB Resp. to 3d Int. (Dkt. # 106-4) at 61-62.) MKB also told American Zurich that it intended to rely on the following witnesses to prove this amount: "Maria Kampsen, ... Bill Nesheim, Andy Romine, and Tony Wilson." ( Id. at 62.) American Zurich deposed each of these individuals following MKB's June 5, 2014, interrogatory response. ( See MKB SJ Reply (Dkt. # 112) at 5, n.22.) Nowhere in MKB's June 5, 2014, interrogatory response, however, does it indicate that MKB's original damages computation had changed based on the new amount of settling ("9, 869 tons of fill") that MKB now disclosed. ( See generally MKB Resp. to 3d Int.)

Pursuant to the court's November 7, 2013, scheduling order, the discovery period closed on June 23, 2014. (Sched. Ord. (Dkt. # 38) at 1.) On July 17, 2014, more than three weeks following the close of discovery, and just five days before the deadline for dispositive motions, MKB sent via email a Second Supplemental Response to American Zurich's First Set of Interrogatories to American Zurich.[4] (8/27/14 Videa Decl. Ex. 10 (MKB Supp. Resp. to 1st Int.) at 7-9.) MKB's July 17, 2014, supplemental response to Interrogatory No. 2 states for the first time that MKB is entitled to $1, 384, 324.63 in damages for the 9, 869 tons of gravel fill that it first identified in its June 4, 2014, interrogatory response. ( See id. )

It is unclear based on MKB's supplemental discovery response whether the new damages calculation of $1, 384, 324.63 is intended to replace its original claim for $669, 508.99 in additional foundational materials, its original claim for the contract balance of $1, 436, 419.40, both, or neither. Indeed, the court is uncertain if MKB intends to replace its entire previous damages computation, totaling 2, 679, 095.11, with the new computation, or only a portion of it, and if so, which portion.

In its supplemental discovery response, MKB suggests that it is no longer claiming the some of the specific figures it identified in its Rule 26 damages computation, but rather utilizing those figures simply to support its new calculation. For example, MKB states that it "is not claiming that [American] Zurich is required to pay MKB [the Contract Balance' of $1, 436, 419.40] simply because LYSD decided to withhold earned contract proceeds, " but rather that the Contract Balance of $1, 436, 419.40 "demonstrates that MKB had a financial and insurable interest in the covered property... [and] also provides evidence of the price of the fill that was lost due to settlement, as that is the amount that LYSD withheld from MKB on the contract in order to pay for another contractor to finish the Phase One work." ( Id. at 7-8.) MKB also states that "[t]he number for additional foundational materials ($669, 508.99) is... useful for calculating a unit price of the fill that was lost below original ground." ( Id. at 8.) MKB then uses this figure to calculate a unit price of $140.27 per ton. ( Id. ) Multiplying this figure by 9, 869 tons, MKB arrives at its new damages calculation of $1, 384, 324.63. ( See id. at 9.) Yet, during the course of its July 17, 2014, supplemental interrogatory response, MKB never expressly clarifies if its new damages ...

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