DISCOVERY IN BAD FAITH CASE: (1) RESERVES DISCOVERABLE; (2) MENTAL IMPRESSIONS NOT DISCOVERABLE; (3) TRADE SECRET OBJECTIONS CANNOT STAND ABSENT APPROPRIATE MOTION FOR PROTECTIVE ORDER (Philadelphia Federal)

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In this bad faith action, Eastern District Judge Slomsky addressed three disputed discovery issues: (1) reserves; (2) claim adjuster work product; and (3) trade secrets.

Reserves are Discoverable

District courts within the Third Circuit are split on whether reserves are discoverable in bad faith cases. In this action, Judge Slomsky stood with those judges who find reserves relevant and discoverable.

Work Product Privilege not Eviscerated Simply by Bringing a Bad Faith Action

On the other hand, he refused to require production of a claim adjuster’s mental impressions simply because it was a bad faith case. As the court states: “In essence, Plaintiff’s sole argument to compel production of [the adjuster’s] mental impressions is that [the mental impressions] are relevant merely because this case contains a bad faith claim. It is well-settled that this argument is insufficient to disregard the work-product privilege set forth in Rule 26.”

Trade Secret Objections Fail When (1) Insurer Does not Move for Protective Order, and (2) Does not Lay Out Nature of Trade Secrets in Opposing Motion to Compel

The insurer made redactions to document production based on trade secret objections. The court first observed that Pennsylvania Civil Rule 4012 governed this trade secrets issue, rather than the Federal Rules. The interpreted Pa.R.C.P. 4012 to require a party objecting on this basis to bring a motion for a protective order in the first instance, which the insurer did not do in this case. The court then observed that the insurer failed to address the insured’s arguments against the presence of trade secret protections, which could have been done without revealing any trade secrets. Still, after granting the motion to compel on this issue, the court gave leave for the insurer to file an “appropriate” motion for a protective order.

Date of Decision: July 16, 2019

Penn-Dion Corp. v. Great American Insurance Co. of N.Y., U. S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 17-4634, 2019 U.S. Dist. LEXIS 117635, 2019 WL 3202503 (E.D. Pa. July 16, 2019) (Slomsky, J.)

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