Archive for the 'NJ – Work Product' Category

SEPTMEBER 2017 BAD FAITH CASES: COURT ANALYZES ATTORNEY-CLIENT PRIVILEGE AND WORK PRODUCT AS TO BOTH INSURER’S AND INSURED’S COUNSEL; DISCOVERY OF REGULATORY COMPLAINT DEPENDENT ON WHETHER THERE IS A PENDING INVESTIGATION (New Jersey Federal)

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Following in today’s discovery theme, this opinion addresses application of the attorney-client privilege and the work product doctrine in the context of making or investigating an insurance claim. It has the unusual aspect that it includes not only an analysis of the insurer’s attorney, but the conduct and communications of the insured’s attorney.

The court found that the insurer’s communications with its counsel were in the nature of legal advice. Thus, virtually all communications were subject to the attorney client privilege. However, as to the insured’s counsel, the court concluded that some of the attorney’s functions did not include rendering legal advice. Thus, some communications between the insured’s counsel and the insured were not protected by attorney client privilege.

As to the work-product doctrine, the key issue is when litigation was reasonably anticipated. As to the insurer’s counsel, litigation was not reasonably anticipated until approximately one month from retention, so the doctrine did not apply to counsel’s work prior to that time. Certain investigative reports had to be produced.

Similarly, the court found that the insureds could not have reasonably anticipated litigation until over one year after they hired counsel. The court found that there were documents “prepared in the ordinary course of [counsel’s] claims investigation … and cannot now be protected as work product because they are useful in this case. While they may contain [counsel’s] mental impressions and opinions, they were not created in anticipation of litigation, and the work product doctrine does not apply.”

Finally, the insureds sought “production of a letter and claim fraud referral forms [the insurer] submitted to New Jersey’s Office of Insurance Fraud Prosecutor (‘OIFP’).” The insurer was withholding these documents “pursuant to statutory authority, N.J.S.A. 17:33A-11; regulatory authority, N.J.A.C. 11:16-6.11, and the State Deputy Attorney Gener[al]’s non-disclosure request applicable to insurance companies.” Whether production could be required depended upon the existence of a pending investigation. If OIFP “is conducting an investigation … ordering disclosure via [the insurer] would ‘circumvent and nullify the statute’ and could further taint or prejudice the investigation.” Thus, the court ordered the insurer to “submit an affidavit from the OFIP as to whether an investigation is open or not….”

Subsequent to the Court’s original August 22, 2017 opinion, there was a supplemental decision issued on September 22, 2017.  This opinion does not materially alter the points discussed above.

Subsequent to the September 22, 2017 opinion, the Court issued two additional opinions.  The first (issued on September 26, 2017) severed and stayed the bad faith claim. Next, on October 13, 2017, the Court issued another opinion on discovery, which did not address the bad faith discovery because that had been stayed, but went on to address more definitively issues concerning the attorney-client privilege and work product doctrine.

Of additional note is the Court’s October 13th ruling that the insurer did not have to produce its attorney invoices at this time during litigation on its insurance fraud claim against the insured.  The Court concluded that such documentation would only have to be produced if and after the insurer prevailed on this claim, as the invoices themselves are not necessary to resolve the issue of whether the insured caused any damages through insurance fraud.

Date of Decision: August 22, 2017, September 22, 2017, October 13, 2017.

Legends Management Co., LLC v. Affiliated Insurance Co., Civil Action No. 2:16-CV-01608-SDW-SCM, 2017 U.S. Dist. LEXIS 134020 (D.N.J. Aug. 22, 2017) (Mannion, M.J.)

Legends Management Co. v. Affiliated Insurance Co., Civil Action No. 2:16-CV-01608-SDW-SCM, 2017 U.S. Dist. LEXIS 154773 (D.N.J. Sept. 22, 2017) (Mannion, M.J.)

Legends Mgmt. Co., LLC v. Affiliated Ins. Co., Civil Action No. 2:16-CV-01608-SDW-SCM, 2017 U.S. Dist. LEXIS 170326 (D.N.J. Oct. 13, 2017) (Mannion, J.)

DECEMBER 2013 BAD FAITH CASES: NEW JERSEY SUPERIOR COURT HOLDS SIMULTANEOUS BREACH OF CONTRACT AND BAD FAITH CLAIMS MUST BE BIFURCATED, WITH THE BAD FAITH CLAIM, INCLUDING DISCOVERY, STAYED PENDING RESOLUTION OF THE BREACH OF CONTRACT CLAIM (New Jersey Appellate Division)

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The Appellate Division reversed an order from the Law Division bifurcating and staying plaintiff’s bad faith claim from his UIM claim for trial purposes, but allowing discovery to advance simultaneously on the two claims. Although the trial court judge allowed that any discovery requests implicating privileged materials would be subject to a motion for a protective order and that he would not permit discover into a privileged area, the insurer maintained the trial court abused its discretion by compelling discovery on the bad faith claim prior to resolution of the UIM claim.

Based on New Jersey case law, the Appellate Division found an insured cannot obtain complete discovery of an insurance company’s claim file simply by bringing simultaneous breach of contract and bad faith claims, but rather must wait until the insured establishes an entitlement on the underlying contract claim.

Essentially, a plaintiff must first show that he or she is entitled to recover on the contract before he or she can prove the insurer dealt with him or her in bad faith. Furthermore, in instances such as plaintiff’s, the appropriate practice is to sever the bad faith claim, and stay the claim, including discovery, pending resolution of the underlying contract claim to protect against prejudices such as the discovery issue presented by the Law Division’s order.

Thus, the Appellate Division reversed and remanded, finding whatever benefits might be gained by simultaneous discovery were substantially outweighed by the adverse impacts on the parties, making the order an erroneous exercise of discretion by the Law Division.

Date of Decision: November 21, 2013

Procopio v. Gov’t Emples. Ins. Co., Civil Action No. A-2313-12T2, 2013 N.J. Super. LEXIS 167 (NJ Sup. Ct. App. Div. Nov. 21, 2013) (Parrillo, Harris, Guadagno, JJ.).

OCTOBER 2013 BAD FAITH CASES: COURT QUASHED SUBPOENA DIRECTED TO ATTORNEY OF THIRD PARTY AS IT SOUGHT INFORMATION IRRELEVANT TO THE CARRIER’S CLAIMS HANDLING ON AN IRRELEVANT CONTRACT, AND WOULD VIOLATE THE ATTORNEY CLIENT PRIVILEGE AND WORK PRODUCT DOCTRINE (New Jersey Federal)

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In Kull v. Arrowood Indemnity Company, the court addressed a motion to quash a subpoena issued in connection with an underlying case in federal district court in Ohio.  At the time of the subpoena, the only litigation issue in Ohio was a bad faith insurance claim by an insured corporation against one of its insurers.  That insured originally had disputes with two insurers, with which it signed releases in connection with a settlement.

The subpoena was directed at the attorney for the second insurer, not a party in the Ohio litigation, who was involved with the litigation and the release of his client, which was putatively similar or identical to the release provided to the insurer in the bad faith case.

The court quashed the subpoena.

First, the information requested was not relevant. The non-party insurer’s release did not have any relevance to the way insurer defendant handled the claim.  The other insurer’s release was not even at issue in that case.  Even  if certain provisions of the agreements are “substantively identical”, since they were two separate contracts, any information that the other insurer’s attorney could provide about the party insurer’s release is not likely to lead to relevant evidence in the Ohio matter.

Second, the information requested is protected by the attorney-client privilege and the work product doctrine.  The court agreed that the requested deposition would require the attorney to divulge his own mental impressions and opinions regarding the development and/or preparation of his client’s release and thus, violate the work product doctrine.

Date of Decision October 11, 2013

Kull v. Arrowood Indemnity Co., Civil Action No. 13-4343 (FLW), 2013 U.S. Dist. LEXIS 147271 (D.N.J. October 11, 2013) (Bongiovanni, U.S.M.J.)

 

DECEMBER 2012 BAD FAITH CASES: COURT GRANTS INSURED’S MOTION TO AMEND COMPLAINT WITH BAD FAITH COUNT, BUT GRANTS PARTIAL PROTECTIVE ORDER TO CARRIER, SHIELDING IT FROM DISCOVERY ON RELATED BAD FAITH CLAIMS (New Jersey Federal)

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In Raritan Bay Fed. Credit Union v. CUMIS Ins. Soc’y, Inc., the insured sought discovery and to amend its complaint after its bad faith claims were initially dismissed without prejudice in 2009. (See this case). The carrier objected on several grounds, seeking to: (1) preclude the insured from conducting discovery on the sales and marketing of the bond it purchased, along with “best practices” advice offered by the carrier to its customers; (2) preclude depositions of present and former employees of the carrier; (3) limit depositions and quash subpoenas seeking information from the carrier’s investigator.

First, the court found that the insured should be entitled to amend its complaint with respect to claims that the carrier engaged in a sham investigation after deciding to deny coverage, for the sole purpose of obtaining information against the insured for future litigation. The court also permitted the insured to amend its complaint with a claim that the carrier failed, in bad faith, to advise the insured as to the basis for its denial. However, the court found that the carrier did not act in bad faith by citing vagueness in the insured’s loan policies as a reason to deny coverage.

Second, the court refused to permit discovery on the carrier’s marketing of its bonds and its “best practices” advice because this information was outside the scope of the insured’s amended claims. The court also denied the insured’s request to depose the carrier’s present and former employees, as well as the subpoenas sought by the insured. The court did permit the insured to seek information relating to the carrier’s investigators, finding that such information was not privileged or attorney work product.

Date of Decision: October 21, 2010

Raritan Bay Fed. Credit Union v. CUMIS Ins. Soc’y, Inc., No. 09-1512, 2010 U.S. Dist. LEXIS 112640, U.S. District for the District of New Jersey (D.N.J. Oct. 21, 2010) (Bongiovanni, J.)