Unreported / Non-Citable
Background
Desoto Cab Company sued its liability insurers, Onyx Insurance Company, Inc. and its successor Texas Insurance Company (TIC), for breach of contract, breach of the implied covenant of good faith and fair dealing, and fraudulent concealment. The claims arise from a $1 million business-auto policy, a roughly $10.9 million judgment against Desoto in an underlying personal-injury suit, and the insurers' handling of that claim, including their alleged refusal to pay the unpaid balance.
At a September 1, 2026 global mediation, the defendants settled the underlying plaintiff's claims, which they say will result in satisfaction of the judgment and dismissal of that action. Desoto's claims against them did not settle, and the defendants have not shared the settlement terms with Desoto.
Desoto then served interrogatories, some seeking the monetary settlement terms, and document requests that, the defendants say, reach ten categories of internal TIC material, including the underwriting file, claims manuals, reserves, claims assessments, and mediation briefs. Desoto refused any protective order. The defendants answered the interrogatories without the settlement amount and said they would not produce confidential business documents without a protective order; their document responses were not yet due. The parties' meet-and-confer failed, they brought the dispute to the court in a discovery letter brief, and all parties had consented to magistrate-judge jurisdiction.
The Court’s Holding
Magistrate Judge Laurel Beeler granted the defendants' request for a protective order under Federal Rule of Civil Procedure 26(c)(1)(G), which allows an order requiring that confidential commercial information be revealed only in a specified way. Their declarations showed that Desoto's discovery seeks nonpublic, commercially sensitive information, including claims-handling and underwriting processes, guidelines, manuals, and claims analyses, and that TIC would be harmed if competitors or customers had it. The court observed that courts routinely enter such orders in insurance bad-faith cases. It also held that the confidential monetary terms of the underlying settlement independently establish good cause.
The court rejected Desoto's main argument that the defendants had to identify trade secrets with particularity, because Rule 26(c) also protects other confidential commercial information. It distinguished Foltz v. State Farm, where the insurer relied on a blanket order without a particularized showing; here the defendants identified the ten document categories, the settlement-terms interrogatories, and the confidential information they implicate. The court added that a confidentiality designation does not make material a trade secret, and receiving it under a court-entered order does not expose a party or counsel to misappropriation liability.
Desoto's other arguments also failed. Possessing some documents does not negate the confidentiality of others. Production in a separate malpractice action did not forfeit protection, because Desoto identified no document produced there that the defendants now withhold. A privilege-based refusal to answer deposition questions there says nothing about whether confidential information exists here. The order does not bar discovery or either side's use of designated material, and it applies equally to both sides. Within seven days the parties must file the signed Model Stipulated Protective Order, after which the court will enter it. This discovery ruling does not decide the merits or any specific document request.
Key Takeaways
- Rule 26(c) protects confidential commercial information as well as trade secrets, so a movant need not prove trade-secret status to show good cause.
- Declarations tied to identified discovery requests supply the particularized showing that distinguishes this case from reliance on a blanket protective order.
- Confidential settlement terms with a nonparty can independently support a protective order.
- The protective order has not yet been entered; the parties must file the signed model order within seven days, and production of the withheld documents and settlement terms remains pending.
- The model order does not limit use of designated material in the case, and it binds both sides equally.
Why It Matters
The order shows how a Northern District magistrate judge applies Rule 26(c) in an insurance bad-faith dispute. Declarations describing specific harm from disclosing claims-handling and underwriting materials and settlement terms suffice, and a plaintiff's resistance to any confidentiality order, without more, will not defeat the request. It is a case-specific discovery ruling, not a published precedent, so its weight is persuasive only.
Practically, the ruling clears the way for production of the withheld materials under confidentiality designations, while leaving relevance, privilege, and merits questions for later.