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Anticipation Of Litigation Protection For Claim Files

January 01, 2012 BY Karen Karabinos

       Once litigation is filed, insured's attorneys regularly serve requests for production of documents seeking the insurance company's entire file regarding the insured's claim.  The claim file contains a plethora of rich information, which if fully disclosed, could provide the insured's attorney with a road map of the various steps, interviews, and decisions taken by the adjuster and investigators during the claim process.  While some of that information is certainly discoverable, in claims involving issues of fraud or arson, the Federal Courts have supported the insurer's refusal to produce some of the claim documentation based on its position that files generated following its anticipation of litigation is privileged material and immune to discovery requests.

          Rule 26(b)(3) of the Federal Rules of Civil Procedure allows parties to obtain discovery of documents and tangible things prepared in anticipation of litigation only upon a showing that the party seeking discovery has a substantial need of the materials in its preparation of the case and that the party is unable without undue hardship to obtain the substantial equivalent by other means.  In determining whether an insured is entitled to the claim file maintained by the insurance company in an arson case, district courts here in Georgia have developed and utilized a two-pronged approach.  See North Georgia Lumber & Hardware v. Home Insurance Company, 82 F.R.D. 678 (N.D. Ga. 1979); Carver v. Allstate Insurance Company, 94 F.R.D. 131 (S.D. Ga. 1982); Joyner v. Continental Insurance Companies, 101 F.R.D. 414 (S.D. Ga. 1983); Lett v. State Farm Fire & Casualty Company, 115 F.R.D. 501 (N.D. Ga. 1987).  The approach requires the court to ascertain the point at which the insurer anticipated litigating the claim. Following this determination, the court then must evaluate whether the plaintiff made a showing of substantial need and undue hardship in obtaining the substantial equivalent by other means. 

          United States District Court Judge Charles A. Pannell, Jr. in Donna J. Paige v. The Charter Oak Insurance Company (USDC, ND Ga, 1:11-CV-659-CAP) recently applied the two prong test in assessing the merits of the insured's motion to compel the insurer's claim file based on the adjuster's deposition testimony that the claim was investigated in the normal course of business until the claim was denied.    Judge Pannell recognized that the similarity of the facts in Carver v. Allstate Insurance Company, supra, to the facts at issue, and noted that the Court in Carver held that "the date the defendant insurer could be said to anticipating litigation was the claim for losses sustained in a fire was referred to a senior claims representative. (Citation omitted)" 

          In Paige, Judge Pannell found that the insured's claim was investigated by at least three representatives of the insurance company: the claims adjuster, the fire investigator, and a member of the insurer's Special Investigation Unit.  The evidence showed that on March 2, 2010, the claim was assigned to the investigator based on preliminary determinations that the fire was of incendiary origin and the insured admitted that she was the only person present on the date of the fire.  The SIU investigator was asked to investigate whether the insured had a motive and opportunity to either set the fire or direct someone else to do so.  Applying the two prong test set forth in Carver, Judge Pannell held that when the claim was assigned to SIU the insurer's investigation of the claim "shifted from mere claims evaluation and the prospect of litigation became substantial and imminent . . . ."

          Judge Pannell then considered the second prong of the analysis, which required production of the documents only if the party has demonstrated a substantial need for the documents and an undue hardship in obtaining the substantial equivalent of the information contained therein.  Plaintiff had sought the investigator's reports and notes regarding his interviews of various witnesses.  While the insurer had objected to producing the investigator's reports, the insurer had provided Plaintiff's counsel with the names and contact information for the witnesses.  Because that information was produced to Plaintiff's counsel, Judge Pannell held that Plaintiff could ascertain information in the reports by other means, including deposing the witnesses themselves.  Accordingly, Judge Pannell denied Plaintiff's motion to compel the production of the insurer's claim notes prepared after the claim was assigned to the member of the Special Investigation Unit.

          As the court stated in Carver, "the decision whether insurance company investigatory documents were 'prepared in anticipation of litigation' turns, therefore, on the facts of each case."  94 F.R.D. at 134.  Insurance companies in Georgia responding to discovery requests thus should be mindful of the date and circumstances that the claims investigation shifted from duties performed in the ordinary course of business with regard to any insurance claim to duties after the prospect of litigation became substantial and imminent.

The Journal is a publication for the clients of Drew Eckl & Farnham, LLP. It is written in a general format and is not intended to be legal advice to any specific circumstance. Legal Opinions may vary when based upon subtle factual differences. All rights reserved. 

Editorial Board:

H. Michael Bagley