On September 12, 2011, in Customary Discovery Practices May Vary Greatly Between Federal And State Courts, I discussed how the Federal Middle District Court of Florida resolved a discovery dispute between Nationwide and Pepperwood of Naples Condominium Association. Recently, the Court decided another discovery dispute between the parties. This one involved Nationwide’s claim of attorney-client privilege and work product protection to some document requests. Such claims of privilege are common in litigation. The resolution of these disputes can play a very important role in the information that the policyholder can obtain to support its claims, especially in a bad faith case.
In Pepperwood of Naples Condominium Association, Inc. v. Nationwide Mutual Fire Insurance Company, the condominium association filed a motion asking the Court to order Nationwide to provide better responses to its request for document production in the bad faith case. No. 2:10–cv–753 (M.D. Fla. October 3, 2011). The Pepperwood case involves a situation where the condominium association sued Nationwide for bad faith damages for not promptly paying all insurance proceeds from the 2004 and 2005 hurricane damages and forcing it to incur additional expenses in the claim presentation through an appraisal process. Since the last discovery order from the Court, Nationwide sent a response to the condominium association request for production of documents, but also objected and claimed privilege to some of the requests.
Of particular importance, is Nationwide’s claim of attorney-client privilege and work product protection to one of the requests.
Request for Production No. 4 states: Copies of all correspondence, notices, reports or other communications between you and your representatives and PEPPERWOOD or its representatives regarding the hurricane damage at PEPPERWOOD’S insured property located at 4955 Pepper Circle B, 4693 Rattlesnake Hammock Road D, 4967 Rattlesnake Hammock Road E, 4957 Pepper Circle C, and 4973 Pepper Circle F, Naples, Collier County, Florida.
Response: Please see the documents produced in response to Request # 1.
Nationwide’s response to Request No. 1 was:
The claim files (excluding privileged and protected documents) are being scanned and Bates Numbered, and upon return from the undersigned’s vendor will be forwarded under separate cover along with a Privilege Log identifying any redactions.
Nationwide withheld approximately 24 categories of documents under claims of attorney-client privilege and work product protection. The Court discussed the elements of the attorney-client privilege: (1) Where legal service advice of any kind is sought, (2) from a professional legal advisor in his capacity as such, (3) the communications relating to that purpose, (4) made in confidence, (5) by the client, (6) are at his instance permanently protected, (7) from disclosure by himself or by the legal advisor, (8) except the protection may be waived.
Nationwide argued that none of the allegedly privileged items involve communication between Nationwide and Pepperwood. The items Nationwide claimed privilege to were communications between Nationwide and its defense counsel or notes regarding defense strategy.
The Middle District Court analyzed the Florida Supreme Court’s holding in Allstate Indem. Co. v. Ruiz, 899 So.2d 1121 (Fla. 2005), which some believe to have eliminated the attorney client privilege as a discovery shield in bad faith litigation with respect to all materials generated prior to resolution of the underlying coverage dispute. The Middle District Court noted the importance of the entire claim file, including the impressions and advice of counsel in discovery during bad faith cases.
The Court noted that even though there was no lawsuit filed related to any coverage dispute over Pepperwood’s claims, there was a period of time during which coverage was disputed by Nationwide. The Court overruled Nationwide’s claims of attorney-client privilege and work product protection with regard to documents generated prior to the filing of the bad faith lawsuit—the period during which coverage was disputed. The Court ordered Nationwide to produce those documents to Pepperwood. The Court further held that it would conduct an in camera review of documents generated after the bad faith lawsuit was filed to determine whether the objections are proper.
The rationale behind this case and Ruiz is that insurers should not be allowed to shield documents and information from discovery in bad faith cases by asserting expansive claims of privilege where insurers’ claims handling decisions are at issue.