Opinion
Case No. 5:03-CV-420-OC-10GRJ.
September 10, 2004
ORDER
This cause came before the Court on September 9, 2004, for a telephonic hearing to address the issues raised by Plaintiff's Motion to Compel (Doc. 28), and Defendants' Memorandum in Opposition to the Motion to Compel. (Doc. 31.) For the reasons set forth below, Plaintiff's Motion to Compel (Doc. 28) is due to be GRANTED to the extent of this Order.
I. BACKGROUND FACTS
According to the allegations in the Complaint (Doc. 1), Cutrale owns and operates fruit juice processing facilities. Cutrale also operates tanker cleaning and delivery services. As part of the tanker cleaning operation, a high-pressure rotating device called a "sprayball" is lowered into a tanker's hatch. In a three-phase process, the sprayball delivers hot water to rinse the tanker, sodium hydroxide to clean it, and finishes with an acid sterilizer. Failure to properly sterilize the tanker can lead to the growth of microorganisms.
Plaintiff claims that a malfunctioning sprayball resulted in a production shut-down and recall in mid-February 1999. Due to the recall, Cutrale reimbursed its clients (one of which was Minute Maid Corporation) for losses related to the sprayball failure.
Shortly after these events transpired, Cutrale made "repeated requests" to both Defendants to cover its losses, but Defendants denied the claims on or about November 11, 1999. On November 23, 2003, Plaintiff filed its complaint against Defendants for breach of two insurance contracts.
Defendant Zurich issued to Cutrale a Boiler and Machinery Policy which allegedly covered damage to certain property belonging to Cutrale, and Defendant Northern issued to Cutrale a Policy for Manufacturers Liability which allegedly covered its loss relating to bodily injury and property damage to third parties. See Complaint, Doc. 1 at ¶¶ 22 33.
By Order dated July 30, 2004 (Doc. 25), the Court permitted Plaintiff to serve upon Defendants its request to produce the contents of the claims file created prior to the November 11, 1999 claim denial and to depose Defendants' Rule 30(b)(6) designees as to the basis for Defendants' denial of the subject claims. Defendants were directed to submit a privilege log in the event that any requested documents within the claims file were, in their view, protected under the work product or attorney-client privileges.
Plaintiff filed the instant motion to compel on August 30, 2004, generally arguing that Defendants have "withheld virtually all claims file documents not created by Plaintiff, including the investigative materials created prior to the November 11, 1999 claim denial." As Plaintiff maintains that the withheld documents are necessary for taking effective depositions of Defendants' designees, Plaintiff requested the Court to compel Defendants to produce the documents.
On August 31, 2004, Defendants provided the Court with copies of documents they contend are subject to privilege, and requested the Court to undertake an in camera inspection of the documents in preparation for the September 9, 2004 hearing.
During the course of the hearing, Plaintiff argued that because Northern and Cutrale had a common interest in defending against Minute Maid's claim, no work product immunity can be asserted prior to the November 11, 1999 claim denial. Plaintiff further contended that the withheld documents, if created in the normal course of business, would not fall within the contemplation of F.R. Civ. P. 26(b)(3). Finally, although conceding that the attorney-client privilege would protect communications between Northern and its counsel concerning coverage advice, Plaintiff maintained that the privilege does not extend to communications with attorneys performing claims handling or investigatory functions.
In response to the foregoing, Defendants argued that this litigation not only involves substantive issues of insurance coverage, "but also involves Plaintiff's allegations of statutory bad faith; specifically, Plaintiff's allegation that both insurance carriers violated §§ 624.155(1)(a)-(b) and 626.9541(1)(I) 2 and 3." Therefore, according to Defendants, the contents of the claims file at issue are not discoverable. Further, Defendants claim that Plaintiff can only access the claims file after it has demonstrated that it is unable to obtain the information without undue hardship.
Defendants advise that a Civil Remedy Notice of Insurer Violation was filed by Plaintiff on or about June 26, 2003.
II. DISCUSSION
WORK PRODUCT ANALYSIS
Defendants object to the production of certain documents within the claims file on the grounds that the documents were prepared in anticipation of litigation and, therefore, are protected under the work product doctrine pursuant to Rule 26(b)(3) of the Federal Rules of Civil Procedure.
While F.R. Evid. 501 provides that Florida law of privilege governs in a federal diversity suit, the work product doctrine is governed by federal law in a diversity suit, and provides the primary decisional framework in matters relating to the work product doctrine. Therefore, Defendants' state court cases on discoverability of claims files are irrelevant to the Court's analysis of the current matter.
Hickman v. Taylor, 329 U.S. 495, 512, 67 S. Ct. 385, 394, 91 L. Ed. 451 (1947); Auto Owners Ins. Co. v. Totaltape, Inc., 135 F.R.D. 199, 201 (M.D. Fla 1990).
The work product doctrine protects from disclosure materials prepared in anticipation of litigation by or for a party or that party's representative (including its attorney). The party resisting discovery bears the burden of demonstrating the applicability of the work product doctrine.
Auto Owners at 201 Citing In re Grand Jury Proceedings, 601 F.2d 162, 171 (5th Cir. 1979); F.R. Civ. P. 26(b)(3).
Id. Citing Barclays American Corp. v. Kane, 746 F.2d 653, 656 (10th Cir. 1984)
The work product doctrine was not intended to protect from general discovery materials prepared in the ordinary course of business such as factual investigations prepared by insurance companies. An insured seeking documents and reports in its insurers' claims files presents a special problem for the application of the work product rule because it is the very nature of an insurer's business to investigate and evaluate the merits of claims. In such instances, most courts have held that documents constituting any part of a factual inquiry into or evaluation of a claim, undertaken in order to arrive at a claim decision, are produced in the ordinary course of an insurer's business and, therefore, are not work product.
See Pete Rinaldi's Fast Foods, Inc. v. Great American Ins. Companies, 123 F.R.D. 198, 202 (M.D.N.C. 1988).
See Harper v. Auto Owners Insurance Company, 138 F.R.D. 655, 662 (S.D. Ind. 1991) Citing Schmidt v. California State Automobile Association, 127 F.R.D. at 184; Pete Rinaldi's, 123 F.R.D. at 202;Mission National, 112 F.R.D. at 164 ("The vast majority of the documents submitted under claim of privilege here constitute pure factual investigation of the claim, some of it described as being required by the terms of the policy itself . . . such investigation is the `routine business of an insurance company,'" quoting Tejada Fashions v. Yasuda Fire and Marine Insurance Co., No. 83 Civ. 5512(RO), slip opinion, 1984 WL 500 (S.D.N.Y. June 18, 1984)).
While there is no bright line rule in the insurance context marking the boundary between documents protected under the work product privilege and documents produced in the ordinary course of business, the date coverage is denied by the insurer has been recognized by a number of courts as the proper date after which it is fairly certain there is an anticipation of litigation and thus documents generated after that date would be protected as work product.
See, e.g. Harper at 665 (S.D. In. 1991) (determining that only documents produced after the insurer sent a denial notice were protected under the work product privilege); Ring v. Commercial Union Ins. Co., 159 F.R.D. 653, 656 (M.D.N.C.) (1995) (stating that "in general, only documents accumulated after the claim denial will be prepared in anticipation of litigation").
In this action, Defendants articulated their denial of Plaintiff's claims on November 11, 1999. Accordingly, because the insurers did not make a final decision on the claims until then, any documents responsive to Plaintiff's request for production of documents within the claims file dated before November 11, 1999 would not be protected as work product and must be disclosed.
ATTORNEY-CLIENT PRIVILEGE ANALYSIS
Notwithstanding the Court's determination that documents dated before November 11, 1999 would not be protected by the work product doctrine in the absence of a showing by Defendants that coverage was denied earlier, the Court must still address whether the attorney-client privilege applies to any documents.
Rule 501 of the Federal Rules of Evidence governs the assertion of privileges and states that where state law applies to the substantive issues in the case, then privileges shall also be determined by state law. Therefore, application of the attorney-client privilege in a federal diversity action is governed by Florida law. Fed.R.Evid. 501; Shipes v. BIC Corp., 154 F.R.D. 301, 304 (M.D. Ga. 1994) (stating that "questions concerning the attorney-client privilege will be decided in accordance with Georgia law").
The Florida Supreme Court, in Southern Bell Telephone and Telegraph Co. v. Deason set forth various criteria to determine whether a corporation's communications are protected by the attorney-client privilege. These criteria include: (a) whether "the communication would not have been made but for the contemplation of legal services," and (b) whether the "content of the communication relates to the legal services being rendered. . . ." On the other hand, "where a lawyer is engaged to advise a person as to business matters as opposed to legal matters, or when he is employed to act simply as an agent to perform some non-legal activity for a client . . . there is no privilege."
632 So. 2d 1377, 1383 (Fla. 1994)
Id.
Skorman v. Hovnanian of Florida, Inc., 382 So. 2d 1376, 1378 (4th Dist.Ct.App. 1980).
In the insurance context, "no privilege attaches when an attorney performs investigative work in the capacity of an insurance claims adjuster, rather than as a lawyer, [but] simply because [the attorney's] assigned duties were investigative in nature" does not preclude an assertion of the attorney-client privilege. Therefore, "[t]he relevant question is not whether [the attorney] was retained to conduct an investigation, but rather, whether this investigation was related to the rendition of legal services. If it was . . . the privilege is not waived."
Connecticut Indemnity Co. v. Carrier Haulers, Inc., 197 F.R.D. 564, 572 (W.D.N.C. 2000) ( quoting In re Allen, 106 F.3d 582, 602-03 (4th Cir. 1997)).
Id.
In light of the foregoing, to the extent that an attorney acted as a claims adjuster, claims process supervisor, or claim investigations monitor, and not as a legal adviser for Defendants, the attorney-client privilege would not apply and any documents responsive to Plaintiff's request to produce would have to be disclosed.
Defendants have furnsihed a privilege log containing multiple entries, and Defendants have provided copies of the documents at issue to the Court for in-camera inspection. Having examined the documents in-camera, the Court determines that documents bates stamp numbered 000618, 000620, 000621, 000695, 000736-000738, 000754, 000755, 000757, 000771, and 00793-000803 are protected by the attorney-client privilege and do not have to be produced by Defendants. In general these documents concern legal advice and/or requests for legal advice on coverage issues between in house counsel Lloyd Johnson or Nancy Murray and claims representatives for the Defendants. These documents, therefore, are subject to the attorney-client privilege because they each contain communications which constitutes legal advice or other confidential information otherwise protected by the privilege. Accordingly, with regard to these documents Plaintiff's motion to compel is due to be denied.
Defendant shall produce to Plaintiff copies of all documents previously submitted to the Court for in camera inspection, other than those documents listed above that are protected by the attorney client privilege. So that Plaintiff will have an opportunity to review these documents before the deposition of Defendants' designees are conducted, Defendants shall produce the documents detailed in this Order on or before September 15, 2004.
The Court was advised at the hearing that the first series of depositions of Defendants' designees was to be held on September 16, 2004 in Orlando. Because of the uncertainty of Hurricane Ivan, in the event the September 16, 2004 deposition is rescheduled and Defendants' counsel is unable to access his business office before September 15, 2004, counsel for Defendants shall ensure that the documents are provided to counsel for Plaintiffs sufficiently in advance of any rescheduled deposition.
IT IS SO ORDERED.
DONE AND ORDERED.