In Lane v. State Farm Mutual Automobile Insurance Company, the court provided a detailed discussion of the work product doctrine, in the context of a UM-bad faith claim against the insurer. The court addressed three sets of materials on the insured’s motion to compel:
(1) whether the mental impressions of insurers employees recorded after the filing of the Complaint constitute protected work product;
(2) whether the reserve history for plaintiff’s claim and the procedures for setting reserves are irrelevant, confidential and privileged; and
(3) whether portions of the insurer’s “Auto Injury Evaluation” containing the mental impressions of defense counsel are protected by attorney-client privilege and attorney work product doctrine.
WORK PRODUCT AND ATTORNEY CLIENT PRIVILEGE
The court first addressed the work product issues, under Federal Rule of Civil Procedure 26(b)(3), and questions of attorney client privilege.
Redactions and Attorney Client Privilege
The court rejected plaintiff’s efforts to have the judge review redacted documents in camera. Contrary to plaintiff’s assertions, the insurer’s privilege log adequately described the nature of the information being redacted, so that it could be addressed on the discovery motion.
Moreover, the vast majority of redactions were on billing invoices for legal services or correspondence between the insurer and privately-retained or in-house counsel, which the court concluded “very clearly involve classic cases of attorney-client privilege.”
The court was vehement in its response to plaintiff’s arguments that the insurer’s counsel may not have been forthcoming in claiming the redacted materials were what was purported: “But the hypothetical possibility that representations made by a duly licensed attorney and officer of this court could be found to be utter fabrications is insufficient to carry Plaintiff’s burden in overcoming the privilege. Nor does this Court believe it is appropriate to order the Defendant to submit these redacted materials for in camera inspection simply because the Plaintiff does not trust counsel’s representations. In the absence of any evidence that the statements made before this Court are fraudulent, we shall accept them as true.”
Claims File and Privilege Logs
As to the claims file, the insured sought production of items recorded after the complaint was filed, which the insurer redacted as containing protected mental impressions of its employees, mental impressions of defense counsel or other attorney client privileged information or attorney work product. The insurer’s privilege log also included items created before suit was filed against the insurer, on the same bases.
A party claiming that documents were created in anticipation of litigation and are thus protected, may carry its initial burden by submitting a properly documented privilege log. Such a privilege log “should identify each document and the individuals who were parties to the communications, providing sufficient detail to permit a judgment as to whether the document is at least potentially protected from disclosure.” (internal quotations omitted). In this case, the privilege log was “just barely sufficient to meet Defendant’s initial burden that a privilege potentially applies[, because] [t]he Log identifies the documents, states that they were created by [the insurer’s] employees (albeit without naming those employees), and states that these documents were created as to Plaintiff’s claim file after the date on which a civil Complaint on this very matter was filed. While these representations do not contain detailed factual support, they are enough to carry the burden of proof that the documents were work product created in anticipation of (then-ongoing) litigation.”
Bad Faith Claims Alone Do Not Pierce Privilege
The insured argued it was still entitled to the discovery because post complaint mental impressions are necessarily relevant to the bad faith case. This argument was based on the theory that the “insurer had a continuing duty to investigate the insured’s [UM] claim even after suit was filed.” The court rejected this argument for a number of reasons: (1) the insured did not provide any plausible justifications as to how the post-Complaint mental impressions could actually be relevant to the facts of his specific bad faith claim, as opposed to asserted an abstract proposition; (2) “the mere fact that Plaintiff has asserted a bad faith claim does not by itself overturn the work-product privilege” (no advice of counsel defense had been asserted); and (3) independently, the insured never addressed how he could not obtain the substantial equivalent by other means without undue hardship, as required under Rule 26(b)(3). Moreover, this plaintiff did have the opportunity to take bad faith discovery, which would include deposing claims adjusters.
This involved attorney client communications and attorney work product, and the court was not going to pierce these privileges under the circumstances. The insured argued that the attorney materials can be discovered when they are placed at issue, but the court found they were not placed in issue, i.e., no advice of counsel defense was being asserted. Further, “the mere fact that attorney-client communications may relate to the lawsuit does not expose them to discovery. Quite the contrary: it is in exactly these situations where attorney-client privilege is most properly invoked.”
The insurer redacted reserve amounts, and refused to produce manuals and procedures for setting reserves. The court observed that: “Pennsylvania law requires casualty insurance companies to ‘maintain a claim reserve for incurred but unpaid claims and an active life reserve which shall place a sound value on its liabilities and be not less than the reserve according to appropriate standards set forth in regulations issued by the Insurance Commissioner.’”
The insured argued reserve information was relevant regarding the value of the claim and how it was being processed. However, the court found that “[t]he mere fact that Plaintiff’s Complaint alleges a bad faith refusal to pay his policy proceeds does not by itself indicate relevance, because the reserve history and procedures do not ipso facto have any necessary connection to the alleged bad faith.” The court did not reject the notion that reserve information could be discoverable upon a showing of good cause, but this was a case specific matter; and here, the plaintiff provided “no explanation for how the reserve history is relevant or reasonably calculated to lead to the discovery of admissible evidence in connection with the issues presently before” the court.
Date of Decision: May 18, 2015
Lane v. State Farm Mut. Auto. Ins. Co., 3:14-CV-O1045, 2015 U.S. Dist. LEXIS 64679 (M.D. Pa. May 18, 2015) (Mariani, J.)