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In Berry v. Ohio Casualty Insurance Company, the court addressed a dispute over whether certain notes in the claims files were protected from production. The court had received the unredacted notes for in camera review, prior to ruling.

This was a UIM case where the tortfeasor’s insurer paid its full policy limits, and the insured brought a UIM claim against her own insurer for her $100,000 in coverage.  After two and one-half years, the UIM claim settled at policy limits.  The insured then brought a bad faith claim.

The insured alleged failure to conduct a prompt and thorough investigation,  continually requested medical records after being provided with them, lying about a pre-existing condition, making “unreasonable ‘low-ball’ offers”, increasing offers with no material changes in circumstances, “misleading or misrepresenting the amount of UIM benefits available”, “sending a release for the ‘policy limits’ when the release was for a sum that was less than the actual policy limits”, “retracting a ‘policy limits’ offer”, “attempting to leverage a potential bad faith claim as part of the UIM claim”, and “attempting to get plaintiff to release defendant insurance companies from a bad faith claim as part of the settlement of the UIM claim.”

The insurer asserted the attorney client privilege and the work product defense, claiming it anticipated litigation when it was planning to make the settlement offer of full policy limits.  The insured argued that anticipation of litigation only arose at the actual time of settlement.

The court described the claim file as “a collection of documents along with notes from the adjustors who handled plaintiff’s UIM claim. The notes include discussions and offers of settlement, along with determinations of defendants’ representatives as to what they believed was a fair value for the plaintiff’s injuries.”

The court observed that institution of a bad faith claim does not work to automatically waive the attorney client privilege or work product doctrine, that “communications between [an] in-house counsel and claims adjustor are generally privileged”, and that “only when a defendant affirmatively pleads reliance on counsel’s advice is such a privilege waived as to the communications between the specific counsel and the client.” There was no such defense asserted in this case.

The court added, in comparing the attorney client privilege and attorney work product doctrine, that it “is the communications and not the underlying facts that are privileged. … Plaintiffs are entitled to discovery regarding the underlying facts of the investigation. It should be further noted, however, that: The protective cloak of [attorney-client] privilege does not extend to information which an attorney secures from a witness while acting for his client in anticipation of litigation. Nor does this privilege concern the memoranda, briefs, communications and other writings prepared by counsel for his own use in prosecuting his client’s case; and it is equally unrelated to writings which reflect an attorney’s mental impressions, conclusions, opinions or legal theories. … Such communications are generally protected by the work-product privilege instead.”

Further, “documents prepared in the regular course of business rather than for purpose of the litigation are not eligible for work-product protection, even if the prospect of litigation exists.” This raises the often difficult question of when a document is prepared in anticipation of litigation.

“A document is prepared in anticipation of litigation when, ‘in light of the nature of the document and the factual situation in the particular case, the document can fairly be said to have been prepared or obtained because of the prospect of litigation.’” Thus, courts “should determine ‘the state of mind of the party preparing the document or … the party ordering preparation of the document.’” “This inquiry is limited by the requirement that the party’s anticipation of litigation be objectively reasonable.”

In this case, the court agreed with the insurer that litigation was anticipated at the time the policy limits settlement offer was contemplated, and that both the privilege and work product doctrine applied to the insurer’s claims files after that date. “Based on the court’s in camera line-by-line review of defendants’ redacted claim notes, these lines clearly contain notes of conversations with counsel, mental impressions, opinions, conclusions and strategy, as well as communications regarding defense costs….”

Thus, the insurer’s representatives’ state of mind fell reasonably within the anticipation of litigation. Further, the claims note themselves showed redactions of material prepared anticipating litigation, as there was information exchanged with outside counsel in the nature of an attorney client communication regarding potential legal proceedings.

The court also found the presence of attorney opinion work product in the claims notes. In addition, the insurer’s documents containing case valuation, negotiation plans, and evaluations of the case’s strengths and weaknesses were not discoverable as “mental impressions, opinions, conclusions and strategy prepared in anticipation of litigation.”

The insured argued she should still be permitted discovery under the substantial need exception to the work product doctrine because the subjects “in the claim notes concern material issues and speak to the mental state and decision-making of defendants’ agents at a critical time during the negotiations where several acts of bad faith were allegedly committed.”

The court rejected this argument because there was not a sufficient showing by the party seeking discovery of work product of a substantial need to (1) obtain these notes to prepare the case, and (2) that the information could not be obtained from another source.  The court specifically observed that no depositions had been attempted of the claims personnel.

The court concluded that “the plaintiff should be able to obtain much of the information in the claim notes from other means, including her own investigations and interviews with witnesses, and the depositions of the claims personnel who handled her UIM claim.”

Thus, the motion to compel production of the redacted material was denied in its entirety.

Date of Decision: July 2, 2015

Berry v. Ohio Cas. Ins. Co., CIVIL ACTION NO. 3:14-1262, 2015 U.S. Dist. LEXIS 86053 (M.D. Pa. July 2, 2015) (Mannion, J.)