The opinion of the court was delivered by: John R. Tunheim United States District Judge
MEMORANDUM OPINION AND ORDER REVERSING ORDER OF THE MAGISTRATE JUDGE
Plaintiffs National Union Fire Insurance Company of Pittsburgh, PA ("National Union") and American Home Assurance Company ("American Home") bring this action against their insured, Defendant Donaldson Company, Inc. ("Donaldson"), and Donaldson's excess insurer, Defendant Federal Insurance Company ("Federal"). Plaintiffs seek to recover from Defendants amounts that they contributed to a settlement on behalf of Donaldson. On February 7, 2013, Magistrate Judge Arthur J. Boylan issued an order granting Donaldson's motion to compel the production of documents by Plaintiffs. (Docket No. 160.)*fn1 Plaintiffs objected to this order. (Docket No. 173.) Because Donaldson has failed to make a threshold showing of relevance for the documents it seeks, the Court will reverse the Magistrate Judge's order.
The background for this action is described in detail in the Court's order dated March 30, 2012. See Nat'l Union Fire Ins. Co. of Pittsburgh, PA v. Donaldson Co., No. 10-4948, 2012 WL 1072329, at *1-6 (D. Minn. Mar. 30, 2012). The Court will not repeat that history here. In essence, this case is a dispute regarding the scope of coverage that Plaintiffs must provide to Donaldson for property damage.
The Magistrate Judge ordered the production of underwriting files related to three insurance policies held by Donaldson: the National Union umbrella policy for the 2001-2002 policy period and the American Home primary liability policy for the 2000-2001 and 2001-2002 policy periods. It appears that the National Union umbrella policy for the 2001-2002 policy period lacks a "Batch Clause Endorsement," an endorsement which Donaldson claims it expected to be included in the umbrella policy. This discovery dispute revolves around whether Donaldson can obtain Plaintiffs' underwriting files to show that the parties -- or at least Donaldson -- intended a Batch Clause Endorsement to be included in the National Union umbrella policy for the 2001-2002 policy period.
The standard of review applicable to an appeal of a Magistrate Judge's order on nondispositive pretrial matters is extremely deferential. Roble v. Celestica Corp., 627 F. Supp. 2d 1008, 1014 (D. Minn. 2007). This Court will reverse such an order only if it is clearly erroneous or contrary to law. See 28 U.S.C. § 636(b)(1)(A); Fed. R. Civ. P. 72(a); D. Minn. LR 72.2(a).
II. DISCOVERABILITY OF UNDERWRITING FILES
The Federal Rules of Civil Procedure allow for discovery of "any non-privileged matter that is relevant to any party's claim or defense." Fed. R. Civ. P. 26(b)(1). Information sought in discovery need not be admissible at trial, so long as it "appears reasonably calculated to lead to the discovery of admissible evidence." Id. Courts must interpret rules governing discovery broadly and liberally. See Credit Lyonnais, S.A. v. SGC Int'l, Inc., 160 F.3d 428, 430 (8th Cir. 1998). Information is generally discoverable "unless it is clear that the information sought has no bearing upon the subject matter of the action." See Sinco, Inc. v. B & O Mfg., Inc., Civ. No. 03-5277, 2005 WL 1432202, at *1 (D. Minn. May 23, 2005). "The proponent of discovery must make a threshold showing of relevance before production of information, which does not reasonably bear on the issues in the case, is required." Met-Pro Corp. v. Indus. Air Tech., Corp., No. 8:07CV262, 2009 WL 553017, at *3 (D. Neb. Mar. 4, 2009) (citing Hofer v. Mack Trucks, Inc., 981 F.2d 377, 380 (8th Cir. 1992)).*fn2
The parties dispute the relevance of the underwriting files to this action. Plaintiffs argue that the files are not relevant because the terms of the National Union umbrella policy for the 2001-2002 policy period are unambiguous. When interpreting insurance contracts, the Court's objective is to "ascertain and give effect to the intentions of the parties as reflected in the terms of the insuring contract." Jenoff, Inc. v. N.H. Ins. Co., 558 N.W.2d 260, 262 (Minn. 1997). "The plain and ordinary meaning of the contract language controls, unless the language is ambiguous." Bus. Bank v. Hanson, 769 N.W.2d 285, 288 (Minn. 2009). A contract is ambiguous if its language "is susceptible to two or more reasonable interpretations." Carlson v. Allstate Ins. Co., 749 N.W.2d 41, 45 (Minn. 2008). "Extrinsic evidence of the parties' subjective intent cannot be used to create contractual ambiguity where none exists on the face of the policy." In re SRC Holding Corp., 545 F.3d 661, 666 (8th Cir. 2008) (citing In re Hennepin Cnty. 1986 Recycling Bond Litig., 540 N.W.2d 494, 498 (Minn. 1995)).
Donaldson does not argue that the National Union umbrella policy for the 2001-2002 policy period is ambiguous and that the parties' intent is therefore relevant.*fn3
Instead, Donaldson argues that the underwriting files could be relevant to determining whether the National Union umbrella policy for the 2001-2002 policy period provided illusory coverage. Specifically, Donaldson argues that the policy might be illusory because it does not include a Batch Clause Endorsement.
"The doctrine of illusory coverage qualifies the general rule that insurance contracts will be enforced in accordance with their plain language." Id. at 671. "The doctrine is best applied where part of the premium is specifically allocated to a particular type or period of coverage and that coverage turns out to be functionally nonexistent." Id. (internal quotation marks and alterations omitted). "The fact that an insured's circumstance is outside a policy's realm of coverage does not, without more, render the policy illusory." BancInsure, ...