MARCH 2007 BAD FAITH CASES COURT ORDERS INSURER TO PRODUCE ALLEGEDLY PRIVILEGED DOCUMENTS FROM LEGAL COUNSEL (Middle District)

In Pengate Handling Systems, Inc. v. Westchester Surplus Lines Insurance, the insured brought suit in the Court of Common Pleas of York County against its insurer alleging bad faith and breach of contract.  The case was removed by the insurer to the United States District Court for the Middle District of Pennsylvania.  The insured moved to compel production of documents which the insurer withheld due to the attorney-client privilege and attorney work product doctrines.  The court framed the issues as:  “whether Defendant may withhold the discovery sought by Plaintiff by asserting the attorney-client and work product privileges. The attorney-client inquiry turns on whether Defendant’s attorney was acting in a legal capacity, while the work product inquiry depends upon whether documents were prepared in anticipation of litigation.” The court allowed considerable discovery, finding the insurance carrier failed to show that “the attorney involved was acting solely in his professional capacity as a lawyer at all times and that a number of the communications at issue are not shielded by the attorney-client privilege. However, because the court cannot discern precisely whether or when he might have been acting as a lawyer versus a claims adjuster with respect to certain communications, an in camera inspection of some documents withheld under the attorney-client privilege is appropriate. With respect to the documents withheld under the work product doctrine, the court finds that Defendant fails to show that it reasonably anticipated litigation prior to the date Plaintiff served the Writ initiating the suit.” 

However, on a subsequent motion for reconsideration, the court did find that some documents were subject to the attorney-client privilege.  This later decision is summarized on this site’s May 2007 archive.

Date of Decision:  February 27, 2007

Pengate Handling Systems, Inc. v.  Westchester Surplus Lines Ins. Co., United States District Court for the Middle District of Pennsylvania, No. 06-00993, 2007 U.S. Dist LEXIS 13303 (M.D. Pa. Feb. 27, 2007) (Rambo, J.)