COURT PERMITS DISCOVERY OF DOCUMENTS AND EMAILS THAT WERE NOT ACTUALLY PRIVILEGED SIMPLY BECAUSE THEY MENTION LEGAL COUNSEL; LIMITS CLAIMS REP DISCOVERY TO MENTAL IMPRESSIONS NOT PREPARED IN ANTICIPATION OF LITIGATION; AND ALLOWS DISCOVERY OF RESERVES IN VALUATION BAD FAITH CASE (Middle District)
This Pennsylvania federal opinion addresses bad faith discovery disputes. The case involved first party fire damage losses. Plaintiffs sought various claims file documents, and the insurer produced a privilege log in connection with its objections and redactions. Magistrate Judge Saporito reviewed the documents in camera before ruling.
He identified four areas at issue: “(1) communications regarding expenses incurred and paid by the defendant; (2) communications with counsel; (3) mental impressions; and (4) other financial information.”
Approvals of Legal Fees and Expenses Discoverable
“In general, the mere facts of legal consultation or employment, client identities, attorney’s fees and the scope and nature of employment are not privileged.” Further, “[a]ttorney billing records may be privileged if they reveal the nature of the services rendered.”
Here, documents reflecting only that legal fees and expenses were approved, without any reference to attorney-client communications or the nature of the work performed, are not privileged. Rather, they are administrative in nature, whether involving pre or post-litigation approvals.
Emails strings at issue were not privileged
Under Pennsylvania law, a party seeking the protection of the attorney-client privilege must show there was “’(1) a communication (2) made between privileged persons (3) in confidence (4) for the purpose of obtaining or providing legal assistance for the client.’”
Here, the court had to review a number of email strings. Judge Saporito observed that “’each version of an email string (i.e. a forward or reply of a previous email message) must be considered as a separate, unique document.’” Further, in preparing a privilege log, “’each message of the string which is privileged must be separately logged in order to claim privilege in that particular document.’” In practice, this “’simply requires that Defendants ensure that each withheld email within a string be logged in some fashion at least once.’”
The emails at issue all referenced legal counsel in some way, but were not themselves communications with counsel. Nor did they disclosure any attorney-client communications. Thus, the attorney-client privilege did not apply.
Claims representatives’ mental impressions prepared in anticipation of litigation were protected as work-product
“Mental impressions and opinions of a party and its agents are not generally protected by the work product doctrine unless they are prepared in anticipation of litigation.” “To that end, ‘work product prepared in the ordinary course of business is not immune from discovery.’”
Here, the insurer redacted documents in the claims file that included its claims representatives’ impressions, conclusions, and opinions. Judge Saporito had to make the fact-specific inquiry into when these representatives anticipated litigation. He recognized that prudence requires parties to anticipate litigation, and to start preparing themselves for litigation at some time before the litigation is actually instituted.
Judge Saporito found a number of redactions warranted because the claims representatives anticipated litigation. On the other hand, he ordered other redactions eliminated, and documents produced, where: (1) there wasn’t actually any work product, (2) the materials only involved an analysis of general business practices concerning “the investigation and evaluation of future, notional property claims involving suspicious circumstances,” and (3) the representative’s notations were made on an insurance application, which was clearly not done at a time when litigation would be anticipated.
Reserves discoverable in bad faith action over valuation
Judge Saporito observed that courts in the Third Circuit are split over whether reserves are discoverable in bad faith cases. He followed Middle District Magistrate Judge Carlson’s Barnard decision, summarized here, for the proposition that the prevailing position favors discoverability if the bad faith claim at issue “relates to an insurer’s failure to settle or where there is a discrepancy regarding the value of the claim.” By contrast, if the bad faith claim does not involve valuation or liability estimates, reserve information is irrelevant.
The present case involved a valuation dispute, and Judge Saporito ordered production of reserve information.
Finally, Judge Saporito ordered production of certain information concerning the agent who sold plaintiffs the policy at issue. He qualified this order by stating he was not ruling on whether this information could ultimately be admissible at trial.