A. Morgan Bldg. Group, L.L.C. v. Owners Ins. Co.

2023 Ohio 3133, 224 N.E.3d 150

• Court: Ohio Court of Appeals
• Decided: September 6, 2023
• Docket: 30482
• Status: Published

Opinion

[Cite as A. Morgan Bldg. Group, L.L.C. v. Owners Ins. Co., 2023-Ohio-3133.]

STATE OF OHIO ) IN THE COURT OF APPEALS )ss: NINTH JUDICIAL DISTRICT COUNTY OF SUMMIT )

THE A MORGAN BUILDING GROUP, C.A. No. 30482 LLC

Appellee APPEAL FROM JUDGMENT v. ENTERED IN THE COURT OF COMMON PLEAS OWNERS INSURANCE CO. COUNTY OF SUMMIT, OHIO CASE No. CV-2019-07-2432 Appellant

DECISION AND JOURNAL ENTRY

Dated: September 6, 2023

HENSAL, Presiding Judge.

{¶1} Owners Insurance Co. (“Owners”) appeals an order of the Summit County Court

of Common Pleas that granted The A. Morgan Building Group, LLC’s (“A. Morgan”) motion to

unseal claims notes. For the following reasons, this Court affirms.

I.

{¶2} A. Morgan purchased a building that it brought into an insurance policy it had

previously obtained from Owners. Within a month, the building was vandalized, leading A.

Morgan to submit an insurance claim. Before Owners was able to inspect the damage, there was

a fire at the building that caused substantial additional damage. A. Morgan, therefore, filed a

second insurance claim.

{¶3} Although advancing some initial remediation funds to A. Morgan, Owners did not

tell A. Morgan whether it was accepting or rejecting the claims for many months. A. Morgan

eventually filed a lawsuit against Owners in federal court. After that case was dismissed, A. 2

Morgan filed this action against Owners, alleging breach of contract, unjust enrichment, breach of

fiduciary duty, and bad faith in handling its claims. After Owners formally denied A. Morgan’s

claims, A. Morgan filed an amended complaint. Owners counterclaimed, seeking a declaration

that A. Morgan did not comply with the insurance policy, that A. Morgan misrepresented the value

of the building, and that A. Morgan unjustly received benefits based on the misrepresented value.

Owners also sought to recoup the amount it had advanced for remediation.

{¶4} Owners sought to bifurcate A. Morgan’s bad faith claim from the other claims. It

also sought a protection order concerning any discovery related to the bad faith claim. The trial

court ordered Owners to submit the documents it believed were privileged for an in camera review.

After reviewing them, the court determined that Owners had properly redacted its claims file notes

and determined that Owners did not have to provide them at that stage in the litigation. Later,

following the final pretrial conference, A. Morgan moved to unseal the claims notes. The trial

court reviewed the record and determined that Owners’ legal counsel had been significantly

involved in its decision to deny A. Morgan’s insurance claim. After reviewing the unredacted

claims file again, it ordered Owners to produce the unredacted version of many sections of the

notes. Owners has appealed, assigning as error that the trial court incorrectly granted A. Morgan’s

motion to unseal.

II.

ASSIGNMENT OF ERROR

THE TRIAL COURT ERRED WHEN IT GRANTED THE A. MORGAN BUILDING GROUP’S MOTION TO UNSEAL CLAIMS NOTES.

{¶5} Owners argues that the trial court should not have unsealed parts of its claims file

notes. “An order compelling the production of materials alleged to be protected by the attorney-

client privilege is a final, appealable order under R.C. 2505.02(B)(4).” State Auto. Mut. Ins. Co. 3

v. Rowe, 9th Dist. Lorain No. 21CA011799, 2022-Ohio-4443, ¶ 12, quoting In re Grand Jury

Proceeding of John Doe, 150 Ohio St.3d 398, 2016-Ohio-8001, ¶ 21. “Generally, this Court

applies an abuse of discretion standard when reviewing discovery orders.” Jacobs v. Equity Trust

Co., 9th Dist. Lorain No. 20CA011621, 2020-Ohio-6882, ¶ 7. If “information sought in discovery

is alleged to be confidential and privileged,” however, “it is a question of law that is reviewed de

novo.” Id. “A de novo review requires an independent review of the trial court’s decision without

any deference to the trial court’s determination.” State v. Consilio, 9th Dist. Summit No. 22761,

2006-Ohio-649, ¶ 4.

{¶6} Owners argues that its claims file notes contain confidential attorney-client

communications that are privileged. It agrees that privileged communications may be subject to

discovery if they “may cast light on bad faith on the part of the insurer.” Stewart v. Siciliano,

11th Dist. Ashtabula No. 2011-A-0042, 2012-Ohio-6123, ¶ 55, quoting Unklesbay v. Fenwick, 167

Ohio App.3d 408, 2006-Ohio-2630, ¶ 21. Owners argues that its claims file notes are not

discoverable, however, because the documents do not show any bad faith by Owners.

{¶7} In Boone v. Vanliner Ins. Co., 91 Ohio St.3d 209 (2001), the Ohio Supreme Court

held that, “[i]n an action alleging bad faith denial of insurance coverage, the insured is entitled to

discover claims file materials containing attorney-client communications related to the issue of

coverage that were created prior to the denial of coverage.” Id. at syllabus. The Supreme Court

reasoned that “claims file materials that show an insurer’s lack of good faith in denying coverage

are unworthy of protection” by attorney-client privilege. Id. at 213. It distinguished Revised Code

Section 2317.02(A), explaining that, whereas Section 2317.02 “provides the exclusive means by

which privileged attorney-client communications can be waived by the client[,]” attorney-client 4

communications showing a lack of good faith are “undeserving of protection” in the first place.

Id. at 212-213.

{¶8} Two years after Boone, the Second District Court of Appeals addressed “which

claims-file materials are discoverable with regard to a bad-faith claim under Boone,” and

concluded “that the critical issue in evaluating the discoverability of otherwise privileged materials

is not whether the attorney-client communications related to the existence of coverage but, rather,

whether they may cast light on bad faith on the part of the insurer.” Garg v. State Auto. Mut. Ins.

Co., 155 Ohio App.3d 258, 2003-Ohio-5960, ¶ 20, 21 (2d Dist.). The court reviewed the

documents at issue and determined that the trial court had properly compelled their production

because they “may cast light on whether the insurer acted in bad faith in handling an insured’s

claim.” Id. at ¶ 24.

{¶9} The Second District Court of Appeals addressed the issue again in Unklesbay. It

noted the Ohio Supreme Court’s explanation in Boone that “materials in a claims file ‘that show

an insurer’s lack of good faith in denying coverage are unworthy of protection.” Unklesbay, 167

Ohio App.3d 408, 2006-Ohio-2630, at ¶ 21, quoting Boone, 91 Ohio St.3d 209 at 213. The court

also noted that, in Garg, it had identified the “critical issue” as whether the materials “may cast

light on bad faith on the part of the insurer.” Id., quoting Garg at ¶ 24. The court concluded that

the trial court did not err when it identified which claims-file materials were subject to discovery

under the facts of that case.

{¶10} In Stewart, the Eleventh District Court of Appeals also addressed the

discoverability of an insurance company’s claims file. Stewart, 2012-Ohio-6123, at ¶ 41.

Although noting that Unklesbay had stated that the critical issue was whether otherwise privileged

materials may cast light on bad faith on the part of the insurer, it wrote that the Second District 5

had “cautioned that the attorney-client communications that were ‘relevant to the insurance

company’s defense of [the] bad-faith claim but which did not themselves show any bad faith’ in

the insurance company’s handling of the claim were not discoverable.” (Alterations in original)

Id. at ¶ 55, quoting Unklesbay at ¶ 22.

{¶11} This Court has not addressed whether a court must determine that claims-file

materials “may cast light on bad faith on the part of the insurer” for them to be “related to the issue

of coverage” under Boone. Garg at ¶ 19, 20, quoting Boone at syllabus. It also has not addressed

whether attorney-client communications relevant to the issue of bad faith must “show” bad faith

to be discoverable. See Stewart at ¶ 55. It is unnecessary, however, to resolve those issues in this

case. In reviewing Owners’ motion, the trial court stated that, “[i]n evaluating the discoverability

of otherwise privileged materials in a claims file, the critical issue is ‘whether they may cast light

on bad faith on the part of the insurer.’” It also wrote that “attorney-client communications that

are relevant to the insurer’s defense of the bad-faith claim but which do not themselves show any

bad faith are not discoverable.”

{¶12} Owners argues that, although the trial court included the applicable law in its

decision, it did not apply all of it when determining whether its claims-file materials are

discoverable. Owners points to the fact that the court wrote that the materials were discoverable

“because they may cast light on bad faith on the part of the insurer” but did not include a specific

finding addressing whether any of the documents “do not themselves show any bad faith.”

{¶13} Under Stewart’s framework, the initial question for a court is whether otherwise

privileged materials may cast light on bad faith on the part of the insurer. Stewart at ¶ 55. The

court then excludes any attorney-client communications that may be relevant to the defense of the

bad-faith claim but which do not themselves show any bad faith. Id. If there are no documents to 6

exclude under the second step, however, there is no need for a court to include that fact in its

decision. A court would only need to explain why it had determined that certain materials are not

discoverable, even though they may cast light on bad faith on the part of the insurer.

{¶14} Upon review of the record, we conclude Owners has not established the trial court

erred when it failed to make a finding that any of its claims-file materials constituted attorney-

client communications that were relevant to its defense of the bad-faith claim but did not

themselves show any bad faith. As the party seeking protection under a privilege, Owners had the

burden of demonstrating that a privilege exists. Owens v. ACS Hotels, L.L.C., 9th Dist. Summit

No. 27787, 2016-Ohio-5506, ¶ 9. It has not identified any documents in the claims file that may

be relevant to its defense of the bad-faith claim but which do not show any bad faith. It is also

Owners’ burden on appeal to affirmatively demonstrate error by the trial court. Simon v. Simon,

9th Dist. Summit 29615, 2021-Ohio-1387, ¶ 9. This Court will not presume that the trial court

erred just because it did not find during its in camera review that any communications were not

discoverable under the second step of the Stewart analysis.

{¶15} Owners next argues that the trial court did not base its decision on a vigilant in

camera review of the claims file but, instead, on the deposition testimony of one of Owners’ claims

adjusters. Owners notes that the court mentioned the claims adjuster’s testimony in determining

whether Owners should produce the claim file. The trial court wrote in its decision, however, that

“[h]aving reviewed the unredacted claims file, the court finds that [the] * * * materials * * * are

discoverable because they may cast light on bad faith on the part of the insurer.” The testimony

of the claims adjuster may have provided context to the concise statements contained within the

claims file and, in doing so, helped the court determine whether the redacted entries should be 7

disclosed. There is no indication in the record, however, that the trial court failed to base its

decision on an in camera review of the claims file.

{¶16} Owners next argues that ordering the production of the unredacted claims file notes

so close to the date of trial will hinder its defense against A. Morgan’s bad faith claim. According

to Owners, the production of the documents may also lead to its primary counsel being called as a

witness and may alter its legal strategy.

{¶17} A. Morgan notes that, because of Owners’ appeal, the trial date has been vacated

and will not be reset until after the appeal is decided, giving Owners ample time to adjust its trial

strategy. We agree with A. Morgan that Owners has not established that it has been prejudiced by

the timing of the trial court’s decision.

{¶18} Owners also argues that production of the claims file is not proper under Section

2317.02(A). It argues that, although the section specifically provides a testimonial privilege, the

Ohio Supreme Court held in Squire, Sanders & Dempsey, L.L.P. v. Givaudan Flavors Corp., 127

Ohio St.3d 161, 2010-Ohio-4469, that the privilege also protects “sought-after communications

during the discovery process.” Id. at ¶ 18, quoting Jackson v. Greger, 110 Ohio St.3d 488, 2006-

Ohio-4968, ¶ 7 fn. 1.

{¶19} In Givaudan Flavors, a law firm brought an action against a former client, alleging

breach of contract and money due on an account. Id. at ¶ 7. The client counterclaimed for breach

of contract, malpractice, breach of fiduciary duty, fraud, and unjust enrichment. Id. In discovery,

the law firm sought production of documents related to its representation of the client. The client

objected, arguing that the documents were protected by attorney-client privilege and the work-

product doctrine. At issue was “whether Ohio recognizes the self-protection exception to the

attorney-client privilege * * *.” Id. at ¶ 15. The Ohio Supreme Court noted that Section 8

2317.02(A) had codified the attorney-client privilege and explained that it applied not only to

testimony at trial, “but also to protect the sought-after communications during the discovery

process.” Id. at ¶ 18, quoting Jackson at ¶ 7, fn. 1. The Court affirmed that Ohio “recognizes the

common-law self-protection exception to the attorney-client privilege * * *.” Id. at paragraph one

of the syllabus.

{¶20} Boone also acknowledged Section 2317.02 but explained that allegations of bad

faith present an exception to attorney-client privilege because “claims file materials that show an

insurer’s lack of good faith in denying coverage are unworthy of protection.” Boone, 91 Ohio

St.3d at 213. Givaudan Flavors did not concern the bad-faith-denial-of-insurance-coverage

exception to the doctrine of attorney-client privilege and did not modify or overrule Boone.

{¶21} Owners also argues that the Ohio Supreme Court’s decision in State v. Brunson, __

Ohio St.3d __, 2022-Ohio-4299 controls. In Brunson, the Supreme Court addressed whether a

criminal defendant waived his attorney-client privilege. Like Givaudan Flavors, the Supreme

Court noted that the attorney-client privilege is governed by Section 2317.02. Id. at ¶ 28. It also

noted that it had held in Jackson that the statute provides the exclusive means by which the

privilege can be waived. Id. at ¶ 29, quoting Jackson at paragraph one of the syllabus. Like

Givaudan Flavors, Brunson did not discuss Boone or the bad-faith-denial-of-insurance-coverage

exception to the doctrine of attorney-client privilege. The circumstances under which the attorney-

client privilege may be waived, as discussed in Givaudan Flavors and Brunson, are inapplicable

if, because of an exception, the privilege does not attach in the first place.

{¶22} At oral argument, Owners argued for the first time that Section 2317.02(A)(2) sets

out a test that the trial court failed to apply when determining whether the claims file notes should

be produced. Because Owners did not make this argument in its merit brief, we decline to address 9

it. Windward Ents., Inc. v. Valley City Dev. Group LLC, 9th Dist. Medina No. 18CA0001-M,

2019-Ohio-3419, ¶ 39 (citing App.R. 12(A)(2)); Collette v. Baxter, 9th Dist. Summit No. 23195,

2006-Ohio-6555, ¶ 23 fn. 1. See Lone Star Steakhouse & Saloon of Ohio, Inc. v. Franklin Cty.

Bd. of Revision, 153 Ohio St.3d 34, 2018-Ohio-1612, ¶ 20 (explaining that Board forfeited

argument that it did not assert until oral argument).

{¶23} Upon review of the record, we conclude that Owners has not established that the

trial court erred when it ordered the production of parts of the unredacted claims file notes. Owners

has not established that any of those parts are not “related to the issue of coverage” or were created

after the denial of coverage. Boone. 91 Ohio St.3d 209, at syllabus. Owners’ assignment of error

is overruled.

III.

{¶24} Owners’ assignment of error is overruled. The judgment of the Summit County

Court of Common Pleas is affirmed.

Judgment affirmed.

There were reasonable grounds for this appeal.

We order that a special mandate issue out of this Court, directing the Court of Common

Pleas, County of Summit, State of Ohio, to carry this judgment into execution. A certified copy

of this journal entry shall constitute the mandate, pursuant to App.R. 27.

Immediately upon the filing hereof, this document shall constitute the journal entry of

judgment, and it shall be file stamped by the Clerk of the Court of Appeals at which time the period 10

for review shall begin to run. App.R. 22(C). The Clerk of the Court of Appeals is instructed to

mail a notice of entry of this judgment to the parties and to make a notation of the mailing in the

docket, pursuant to App.R. 30.

Costs taxed to Appellant.

JENNIFER HENSAL FOR THE COURT

STEVENSON, J. CONCURS.

FLAGG LANZINGER, J. DISSENTING.

{¶25} I respectfully dissent from the majority opinion. I would reverse the trial court’s

decision and remand the matter to allow the trial court to review each attorney client

communication under the State v. Boone, 91 Ohio St.3d 209 (2001), standard. The trial court’s

order cited Boone in its opinion but ultimately concluded that claims file materials documenting

legal counsel’s communications are “discoverable because they may cast light on bad faith on the

part of the insurer.” Although this standard is quoted in Stewart, an Eleventh District case that

followed Boone, it is a less stringent standard than the law allows for reviewing attorney client

communications. See Stewart v. Siciliano, 11th Dist. Ashtabula No. 2011-A-0042, 2012-Ohio-

6123, ¶ 55. Boone provides that claims file materials are “unworthy of protection” if they “show

an insurer’s lack of good faith in denying coverage * * *.” Boone at 213. That is not the standard

the trial court applied. 11

{¶26} “A de novo review requires an independent review of the trial court’s decision

without any deference to the trial court.” State v. McConville, 182 Ohio App.3d 99, 2009-Ohio-

1713, ¶ 5 (9th Dist.2009). Under de novo review, this Court is charged with reviewing whether

the trial judge applied the correct law. Applying the correct law when deciding if attorney client

communications are discoverable is especially important given the sanctity of those

communications. This Court, however, cannot apply the correct law in the first instance, even on

de novo review. See Bevelacqua v. Tancak, 9th Dist. Lorain No. 21CA011797, 2022-Ohio-4442,

¶ 32. That is the role of the trial court. I, therefore, would reverse the trial court’s decision and

remand the matter for the trial court to apply the correct law to each attorney client communication

in the first instance. Accordingly, I respectfully dissent.

APPEARANCES:

BRIAN T. WINCHESTER and CHAD A. SCHMITT, Attorneys at Law, for Appellant.

KENNETH D. MYERS, Attorney at Law, for Appellee.

JUSTIN M. ALABURDA, Attorney at Law, for Appellee.