Discovery in Bad Faith Cases

Published November 2014 by Ted Babbitt

Boozer v Stalley, 39 Fla. L. Weekly D1907 (Fla. 5th DCA Sept. 5, 2014) was a bad faith case arising out of a $11.1 million dollar verdict in a case with $1.1 million in coverage.

The plaintiffs sought to take the deposition of the attorney representing the original defendant in the underlying case and after the trial judge denied a motion for protective order bottomed on attorney-client privilege, the defendant sought certiorari review.

The trial court relied on Dunn v. National Security Fire & Casualty Co., 631 So. 2d 1103 (Fla. 5th DCA 1993) and Continental Casualty Co. v. Aqua Jet Filter Systems, Inc., 620 So. 2d 1141 (Fla. 3rd DCA 1993).  Both of these cases held that in bad faith cases the underlying claims and litigation file were freely discoverable notwithstanding a claim of work product or attorney-client privilege.

The defendant complained that her interests were not aligned with the plaintiff and that she had not assigned any of her rights to the plaintiff.

In Thompson v Commercial Union Insurance Company of New York, 250 So. 2d 259 (Fla. 1971), the Supreme Court held that in a personal injury action a plaintiff who obtains a judgment against a defendant in excess of the defendant’s insurance coverage can bring an action for bad faith against the defendant’s insurance company without an assignment from the defendant under the theory that the plaintiff is a third party beneficiary to the insurance contract and further held that since the plaintiff stands in the shoes of the defendant as a third party beneficiary, the plaintiff would have the same rights as the original defendant to take discovery including the insurance company’s file and the files of the attorney representing the original defendant.  That case was the basis for the decisions in Continental Casualty Co. v. Aqua Jet Filter Systems, Inc., supra, and Dunn v National Security Fire & Casualty Co., supraThompson was decided in the 1970s.  Since that time, the Supreme Court decided Allstate Indemnity Co. v. Ruiz, 899 So. 2d 1121 (Fla. 2005).  There the Florida Supreme Court held that under Florida Statute 624.155 actions brought by the original defendant, i.e., first party actions and actions brought by the original plaintiff, i.e., third party cases, should be treated the same with respect to the rationale of discoverability of claim file type material.  The Ruiz case was limited to work product objections concerning the claim file and did not discuss the attorney-client privilege.  In West Bend Mutual Insurance Co. v. Higgins, 9 So. 3rd 655 (Fla. 5th DCA 2009), the Fifth District concluded that the Supreme Court’s decision in Ruiz did not extend to attorney-client privilege and that the original insurer and defendant in the bad faith claim still had the right to protect discovery of attorney-client privilege and numerous other state and federal courts held the same.  In Genovese v. Provident Life & Accident Insurance Co., 74 So. 3d 1064 (Fla. 2011), the Florida Supreme agreed and held at 1068-69:

Therefore, although we held in Ruiz that attorney work

product in first-party bad faith actions was discoverable,

this holding does not extend to attorney-client privileged

communications.  Consequently, when an insured party

brings a bad faith claim against its insurer, the insured

may not discover those privileged communications that

occurred between the insurer and its counsel during the

underlying action.

 

Although we conclude that the attorney-client privilege

applies, we recognize that cases may arise where an

insurer has hired an attorney to both investigate the

underlying claim and render legal advice.  Thus, the

materials requested by the opposing party may

implicate both the work product doctrine and the attorney-

client privilege.  Where a claim of privilege is asserted,

the trial court should conduct an in-camera inspection to

determine whether the sought-after materials are truly

protected by the attorney-client privilege.  If the trial

court determines that the investigation performed by the

attorney resulted in the preparation of materials that

are required to be disclosed pursuant to Ruiz and did

not involved the rendering of legal advice, then that

material is discoverable.

 

Moreover, our opinion in this case is not intended

to undermine any statutory or judicially created

waiver or exception to the privilege.  Specifically,

we note that under the ‘at issue’ doctrine, the

discovery of attorney-client privileged communications

between an insurer and its counsel is permitted

where the insurer raises the advice of its counsel

as a defense in the action and the communication

is necessary to establish the defense.  (Cases cited).

 

The opinion in Genovese, supra, was limited to the certified question it addressed in that case.  Nevertheless, Genovese makes a clear distinction between the insurer’s claim file, which is only protected by the work product doctrine, and the communications of the insurer with its counsel protected under attorney-client privilege.  Thus in Boozer, the Fifth District holds at D1910:

Based on the Florida Supreme Court’s language in

Ruiz and the rationale in Genovese, this Court

determines that the holding in Genovese, which

protects attorney-client privileged documents in an

insurer’s claim file in a first-party bad faith action,

should be equally applicable in a third-party bad

faith action.

 

A similar holding exists in Progressive Express Ins. Co. v Scoma, 975 So. 2d 461 (Fla. 2d DCA 2007) and in Maharaj v. GEICO Casualty Co., 289 F.R.D. 666 (S.D. Fla. 2013).  The Fifth District thus receded from its holding in Dunn, supra, and certified a question to the Florida Supreme Court

DID THE DECISIONS IN ALLSTATE INDEMNITY CO.

V. RUIZ, 899 SO. 2D 1121 (FLA. 2005), AND

GENOVESE V. PROVIDENT LIFE & ACCIDENT

INSURANCE CO., 74 SO. 3D 1064 (FLA. 2011),

SHIELD ATTORNEY-CLIENT PRVILEGED

COMMUNICATIONS FROM DISCOVERY IN THIRD-

PARTY BAD FAITH LITIGATION?

 

This opinion holds that discovery in bad faith cases by an original plaintiff who does not have an assignment from the original defendant is limited to the extent that that discovery constitutes attorney-client privileged material.

 

NOTE:  BECAUSE A NUMBER OF PEOPLE HAVE REQUESTED COPIES OF PAST ARTICLES, A COMPILATION OF THESE ARTICLES IS NOW AVAILABLE TO MEMBERS OF THE PALM BEACH COUNTY BAR ASSOCIATION, FREE OF CHARGE, BY CALLING (561) 684-2500 or BY VISITING THE BAR’S WEBSITE AT PALMBEACHBAR.ORG