New Jersey Judge Refuses to Extend Discovery in Hurricane Sandy Coverage Dispute

In a recent Hurricane Sandy case, a federal magistrate judge denied an insured’s motion to extend discovery, noting that the insured’s failure to comply with a Court-ordered Rule 26 initial disclosures deadline was neither substantially justified nor harmless. The insured originally filed suit against his insurer, seeking recovery under his homeowners’ policy after his New Jersey property was damaged, allegedly as a result of wind and wind-driven rain during Hurricane Sandy. In July 2014, the insured served his Rule 26 initial disclosures, in which he stated that he sought to recover wind damage under a wind policy of insurance in the amount of $620,224.46. In November 2014, the insurer requested an extension of discovery deadlines with the consent of the insured, and the Court extended fact discovery until February 2.

In December 2014, the insurer took the deposition of the insured, who noted that his Rule 26 disclosures regarding damages were incorrect and erroneously relied upon an estimate of flood damage. The insured also claimed that there was a possibility of mold damage. The Court extended fact discovery, and the insured was given until February 6 to amend or supplement his Rule 26 disclosures, which the insured did not do by the Court’s deadline. On February 22, the insured notified the insurer that he had retained the services of an expert with regards to Sandy-related mold damage at the insured property, and served the insurer with a report stating that the wind-related damages amounted to $1,062,915.47. The insured moved to extend discovery by 180 days, which the insurer opposed and cross-moved to preclude the insured from claiming any damages in excess of those that the insured disclosed as of February 6, 2015, the deadline set by the Court for the insured to amend or supplement his initial Rule 26 disclosures.

During his subsequent depositions, the insured served expert reports that claimed that a complete rebuilding of the property was required at a cost of $3.9 million, and subsequently sent a letter “amending” and “supplementing” his Rule 26 disclosures to name two experts and add three expert reports. The Court denied the insured’s motion to extend discovery, holding that the insurer would be prejudiced because the insured waited until the last day of fact discovery to claim that a complete rebuilding of the property would be necessary. The Court further reasoned that fact discovery would need to be reopened for a significant period of time, and would still not entirely cure any prejudice to the insurer, as demolition and repair work had been performed on the property since March 2015, which would hamper the insurer’s ability to conduct the necessary investigation. Additionally, the Court acknowledged the insured’s “unwillingness to abide by the Federal Rules and this Court’s Orders,” noting that the insured never undertook to amend or supplement his initial disclosures under Rule 26 notwithstanding a court-ordered deadline to do so.

The case is Zarour v. American Security Insurance Co., Civil Action No. 13-6384 (FLW) (DEA). (D.N.J. 2015).