For The Defense, July 2010 - DRI Today

P R O F E S S I O N A L L I A B I L I T YMartin v. Bally’s Park Place Hotel & Casino,983 F.2d 1252, 1260 (3d Cir. 1993). Aswith the attorney- client privilege, the partyasserting the work product doctrine bearsthe burden of establishing that the documentshe or she seeks to protect were prepared“in anticipation of litigation.” In rePowerhouse Licensing, LLC, 441 F. 3d 467(6th Cir. 2006).Courts follow differentstandards for determiningwhether a document is“prepared in anticipationof litigation.”Courts follow different standards fordetermining whether a document is “preparedin anticipation of litigation.” Somecourts follow a “because of” test, findingthat a document is protected if it was“prepared or obtained because of the prospectof litigation.” United States v. Adlman(Adlman II), 134 F.3d 1194, 1202 (2dCir. 1998); Binks Mfg. Co. v. Nat’l PrestonIndus., Inc., 709 F.2d 1109, 1119 (7th Cir.1983); In re Grand Jury Proceedings, 604F.2d 798, 803 (3d Cir. 1979). Other courtsfollow a narrower, “primary motivation,”or “primary purpose,” test for determiningthe applicability of work product protection,under which documents are deemedto have been prepared in anticipation of litigationwhen the “primary motivating purposebehind the creation of the documentwas to aid in possible future litigation.”United States v. El Paso Co., 682 F.2d 530,542 (5th Cir. 1982). In October, 2009, theUnited States Court of Appeals for the FirstCircuit applied an alternate test. Applyingthis test, only documents “prepared for”litigation would have work product protection.United States v. Textron, Inc., 577 F.3d21 (1st Cir. 2009).Broad Discovery Scope andPrivilege ApplicationFederal Rule of Civil Procedure 26(b)(1)sets forth a very broad scope of discovery:66 n For The Defense n July 2010any matter, not privileged, which is relevantto the subject matter involved inthe pending action…. The informationneed not be admissible at the trial if theinformation sought appears reasonablycalculated to lead to the discovery ofadmissible evidence.It is a well- settled principle that courtswill accord broad and liberal treatmentto the discovery rules in accordance withtheir purpose. Hickman v. Taylor, 329 U.S.495, 501, 507 (1947). Under the federalrules, discovery is meant to enable litigantsto obtain the fullest possible knowledge ofthe issues and facts before trial. Id. at 500.However, the attorney- client privilegeand work product doctrine do limit thedisclosure Fed. R. Civ. P. 26(b)(1) parameters.Courts have recognized that the assertionof a privilege obstructs the search forthe truth and must be “strictly confinedwithin the narrowest possible limits.” In reGrand Jury Investigation, 599 F.2d at 1235(quoting 8 Wigmore on Evidence §2291 at545 (1961)). Consequently, the party claimingthe privilege bears the burden of provingthat it applies to the communicationat issue. Hickman v. Taylor, 329 U.S. 295,506 (1947); United States v. Landorg, 591F.2d 36, 38 (9th Cir. 1978); Hodges Grant &Kauffmann v. U.S. Gov., 768 F.2d 719 (5thCir. 1985).Application of the Attorney-Client Privilege and Work ProductDoctrine to Outside CounselBased on the general rules discussed above,in most cases, communications between alawyer and a client are protected from disclosure.There are, of course, exceptions toevery rule. How the attorney- client privilegeand work product doctrine apply tocommunications between an insurer andoutside counsel retained by the insureroffer good examples.Documents prepared in the ordinarycourse of business are generally not consideredto have been created in anticipationof litigation and are not covered bythe work product doctrine. Further, a documentproduced in the ordinary course ofbusiness is not protected from disclosuremerely because it was sent to an attorney.Simon v. G.D. Searle & Co., 816 F.2d 397,403 (8th Cir. 1987). Crucially, as discussedin greater detail below, these general principlesare especially relevant in the insurancecontext. As one court put it:Application of the work product rule toinsurer investigative documents is one ofthe most difficult and often- litigated discoveryissues because it is the very natureof an insurer’s business to investigateevents which, either directly or indirectly,or as a consequence of the insurers’decisions, often result in litigation.Stout v. Illinois Farmers Ins. Co., 150 F.R.D.594, 597, (1993).Typically, after an insurance companyhires outside counsel but before coveragelitigation begins, the attorney’s role is similarto that of a claims adjuster. He or shewill investigate and analyze claims and determinewhether the insurance companyshould make a payment. Courts routinelycategorize this work as an insurance company’sordinary business functions, as opposedto legal work. Harper v. Auto- Owners,Inc. Co., 138 F.R.D. 655 (S.D. Ind. 1991). Similarly,courts have rejected an insurer’s argumentsthat communications from an outsidelawyer should have protection because theoutside lawyer performed an “enhanced”investigation or handled the claim in anonroutine manner that differed from theinsurer’s normal claims- handling process.Further, many courts have held that aninsurance company may not insulate itselffrom discovery by hiring an attorney to conductordinary claims investigations. To theextent that an attorney acts as a claims adjuster,claims process supervisor, or claimsinvestigation monitor, and not as a legal advisor,the attorney- client privilege does notapply. Mission National Ins. Co. v. Lilly, 112F.R.D. 160, 163 (D. Minn. 1986); First AviationServices Inc. v. Gulf Ins. Co., 205 F.R.D.65 (Conn. 2001). The majority of courts haveheld that if a layman could have just as easilyhandled a matter as a lawyer, the privilegewould not apply to that matter. MerrinJewelry Co v. St. Paul Fire & Marine Ins. Co.,49 F.R.D. 54 (S.D.N.Y. 1970).Illustrative CasesIn First Aviation, the plaintiffs, two aviationcompanies and two individuals,sought damages under a directors’ & officers’liability and company reimbursementinsurance policy issued by Gulf. First AviationServices Inc. v. Gulf Ins. Co., 205 F.R.D.65 (Conn. 2001). In particular, they sought