NOVEMBER 2015 BAD FAITH CASES: COURT ORDERS INSURER TO PRODUCE (1) RESERVE INFORMATION (2) CLAIMS FILES FOR IN CAMERA REVIEW AND (3) PROPRIETARY INFORMATION SUBJECT TO CONFIDENTIALITY ORDER (Western District)

In Smith v. Progressive Specialty Insurance Company, the court granted in part the insured’s motion to compel discovery after finding that redacted information provided by the insurer was discoverable and relevant to the determination of whether the insurer acted in bad faith.

The insured originally filed a complaint against her automobile insurer, alleging state law claims for breach of contract and bad faith relative to an underinsured motorist (“UIM”) claim. The insured served discovery requests on the insurer, and the insurer provided the insured with non-privileged portions of UIM claim notes along with a privilege log.

Upon receipt of the requested documents, the insured filed a motion to compel in which she argued that the redactions related to the insurer’s valuation of her UIM claim and reserves are “relevant to [her] bad faith claim, as it has been alleged that [the insurer] failed to properly investigate and evaluate her case in accordance with the duty of good faith and fair dealing.” The insurer opposed the motion and argued that its UIM claim notes and reserve information were protected from discovery as opinion work product. Alternatively, the insurer urged the court to conduct an in camera review of the documents before ordering the production of same.

The court acknowledged that there is “competing treatment of whether reserve information is discoverable in a bad faith lawsuit,” but ultimately determined that the amount set aside for reserves is germane to any analysis that the insurer made of the claim’s value and relevant to the determination of whether the insurer acted in bad faith in processing the claim. Accordingly, the court ordered the insurer to produce any previously redacted reserve information in the claim file.

The court next pointed to Pennsylvania case law for the proposition that an insurer’s “claims file is discoverable in a bad-faith case like this one, as information in that file on [the insurer’s] decision to deny the claim is relevant or could lead to potentially relevant information.” Thus, the insurer was ordered to produce to the court all entries it had previously redacted in the UIM claim notes based upon the work product doctrine in order for the court to conduct an in camera review.

Finally, the court ordered the insurer to produce to the insured any information it had previously redacted pursuant to its so-called “confidential and proprietary” privilege, finding that disclosure of this information appeared adequately protected by the parties’ confidentiality agreement.

Date of Decision:  November 4, 2015

Smith v. Progressive Specialty Ins. Co., CIVIL ACTION NO. 2:15-cv-528, 2015 U.S. Dist. LEXIS 149835 (W.D. Pa. November 4, 2015) (McVerry, J.)

The court denied a subsequent motion for reconsideration on the reserve issue.