MAY 2011 BAD FAITH CASES PENNSYLVANIA SUPERIOR COURT REVERSES ORDER COMPELLING INSURED TO PRODUCE ATTORNEY FILES UNDER THE WORK-PRODUCT DOCTRINE (Pennsylvania Superior Court)

In Rhodes v. USAA Casualty Insurance Company, the insured was riding his brother’s motorcycle when another vehicle collided with him, causing serious injuries and leaving him in the hospital for days.  He recovered the $50,000 liability limit from the tortfeasor’s insurer, but his injuries caused damages totaling an amount greater than $50,000.  He then pursued an underinsured motorist claim with his insurer, and he provided medical records and other documents that led him to value his claim at $235,000.

The insurer’s claims examiner offered the insured only $5,000 after questioning the causes of one of the insured’s major injuries, and the insured was not satisfied.  A regional manager for the insurer took over the case, and after his evaluation, he realized that the insured’s claim was worth more than the initial $5,000 offer.  The insurer made a series of additional offers, including a final “bottom line” offer of $100,000, but the insured rejected all offers and instead proposed a settlement for $175,000.  The insurer eventually accepted the $175,000 offer after the threat of arbitration was imminent.

The insured filed a Complaint after the settlement, alleging that the insurer acted in bad faith throughout the process.  The trial court granted the insurer’s motion for summary judgment, but the Superior Court reversed that decision after determining that the insured raised a question of material fact to be resolved by the fact-finder at trial.

In the midst of those decisions, the insurer had filed a motion to compel the insured to respond to its interrogatories and request for production of documents.  The trial court granted this motion, and the insured appealed, which was before the court in this opinion.  The insured raised two issues on appeal:  1) whether the trial court committed an error of law when it directed the insureds to produce the work product of their attorneys, who were non-parties over whom they have no control, and 2) whether the trial court abused its discretion by ordering the insureds to produce their attorney’s entire work product, without identifying, performing a relevancy analysis, or examining any protected records.

The court determined that the first issue was outside the scope of its review, but it agreed with the insured that the motion violated the work product doctrine.  The insurer alleged that certain bad faith actions of the insured contributed to the insurer’s actions, but the court noted that “the outcome of a bad faith action is dependent on the conduct of the insurer, not its insured.”  The insurer could not find any case in Pennsylvania where the court ordered the insured’s attorney’s files to be discovered, and the court refused to make this the first case to do so.  It therefore reversed the trial court’s order and did not compel the disclosure of the insured’s attorney’s files to the insurer.

Date of Decision:  May 17, 2011

Rhodes v. USAA Cas. Ins. Co., No. 1861 WDA 2009, Superior Court of Pennsylvania, 2011 PA Super 105, 21 A.3d 1253, 2011 Pa. Super. LEXIS 612 (May 17, 2011) (Elliot, J.)