Duett v. State Farm Mutual Automobile Insurance Company

Opinion

1 2 3 WESTERN DISTRICT OF WASHINGTON 7 Plaintiff, CASE NO. 2:19-cv-01917-LK 8 v. ORDER GRANTING IN PART AND DEFERRING IN PART, INSURANCE COMPANY, COMPEL 10 Defendant. 11 This case involves a first-party insurance dispute between Plaintiff Mary Duett and 12 Defendant State Farm Mutual Automobile Insurance Company (“State Farm”). Plaintiff’s 13 Motion to Compel and Alternative Motion in Limine (Dkt. 23) has been referred to the 14 undersigned Magistrate Judge pursuant to Rule 72(a) and 28 U.S.C. § 686(b)(1)(A).1 The Court 15 concludes that the motion should be granted in part and deferred in part. 16 BACKGROUND 17 A. Plaintiff’s Allegations 18 In 2009, Plaintiff was struck by a pick-up truck as she was crossing a street. Plaintiff 19 sustained several injuries which caused permanent damages. Dkt. 1-1 ¶ 3.3.2 The driver, Yuri 20 21

22 1Defendant State Farm’s separate Motion to Compel (Dkt. 27) has also been referred to the undersigned and is the subject of a separate order. 23 2 For purposes of these motions the Court assumes that the allegations of Plaintiff’s Complaint are true. 1 DiBello, was insured only up to $100,000. Id. ¶¶ 3.3-3.4. Plaintiff made a policy limit demand on 2 Mr. DiBello and later settled her claims against him for $100,000. Id. ¶ 3.5. Plaintiff’s treatment 3 for her injuries continued. Id. 4 About nine years later, her treatment complete, Plaintiff turned to her own insurer, State

5 Farm under her underinsured motor vehicle (“UIM”) coverage. Id. ¶ 3.6. Under that policy, State 6 Farm agreed to pay “compensatory damages for bodily injury [that] an insured is legally entitled 7 to recover from the owner of an underinsured motor vehicle.” Id. ¶ 5.3. Given her medical 8 expenses, pain and suffering, loss of ability and capacity to enjoy life, and permanent disabilities, 9 Plaintiff asserted a total damage of $221,543.79. Id. ¶ 3.6. Because this amount exceeded the 10 $100,000 that she received from her settlement with Mr. DiBello, Plaintiff sought UIM benefits 11 from State Farm in the amount of $121,543.79. See id. ¶¶ 3.5-3.6. 12 On April 18, 2018, State Farm denied Plaintiff’s claim, stating “Our evaluation would 13 indicate Ms. Duett was made whole by [the at fault carrier’s insurance provider], therefore, State 14 Farm is unable to consider further payment under the underinsured motorist coverage.” Id. 3.7;

15 Dkt. 14, Declaration of David B. Richardson, Exhibit 5.3 16 On May 10, 2018, Plaintiff asked State Farm to identify and list the medical and other 17 records reviewed by State Farm; a list of the injuries State Farm accepted as causally related to 18 the accident; a list of the injuries State Farm did not accept as causally related; medical recording 19 supporting State Farm’s position; total general and special damages accepted on the claim; an 20 accounting of how State Farm determined that her damages came to exactly $100,000; and a list 21

22 3 Plaintiff’s current counsel, Randall Johnson, filed his declaration in support of this motion to compel (Dkt. 24) and within that declaration, cites to the previously filed Declaration of David 23 Richardson, Plaintiff’s former counsel (Dkt. 14). To avoid confusion and for ease of reference, the Court cites directly to each declaration and attached exhibits where appropriate. 1 of any other recoveries State Farm felt were applicable to the calculation of Plaintiff’s UIM 2 claim. Dkt. 14, Richardson Decl., Exhibit 6. 3 On June 8, 2018, State Farm responded that it was “in the process of addressing the 4 information you have requested.” Dkt. 14, Richardson Decl., Exhibit 7. On July 11, 2018, State

5 Farm again advised that it was “still in the process of addressing the information you have 6 requested.” Id., Johnson Decl. Exhibit 1, ¶12. State Farm never provided the information 7 requested by Plaintiff’s May 10, 2018 letter. Dkt. 1-1 ¶¶ 3.8-3.12. Instead, on July 19, 2018, 8 Shawna M. Lydon, counsel for State Farm, sent a letter to Plaintiff’s counsel stating that “State 9 Farm’s evaluation is its own work product to which your client is not entitled to learn its bases.” 10 Dkt. 14, Richardson Decl., Exhibit 9. 11 On October 28, 2019, Plaintiff sued State Farm in King County Superior Court, and later 12 State Farm removed to this Court. Dkt. 1. 13 B. Facts Relating to Plaintiff’s Motion to Compel 14 1. Interrogatories and Requests for Production

15 On February 3, 2021, Plaintiff served State Farm with interrogatories and requests for 16 production. Dkt. 24, Johnson Decl., pp. 102-122. The discovery sought, among other things, a 17 detailed explanation of the steps taken by State Farm to investigate Plaintiff’s UIM claim, the 18 evidence it reviewed in connection with the UIM claim, the injuries State Farm accepted as 19 causally related to the accident, and the general and special damages it accepted as related to the 20 accident. Id., Interrogatories 1, 2, 3, 4 and 5. State Farm objected, asserting that the information 21 sought is protected under the work product doctrine: 22 [S]eek disclosure of immunized work product. Due to the adversity between a UIM claimant and her UIM insurer, the insurer is not obligated to disclose its 23 internal evaluation processes. See, e.g., Hanson v. State Farm Mut. Auto. Ins. Co., 261 F. Supp. 2d [sic] 1110, 1118 (W.D. Wash. 2017). 1 See Dkt. 24, pp. 109-112; Dkt. 24, p. 124 (Privilege Log – Claim File). 2 State Farm also responded that it “did not retain any health care provider to review 3 plaintiff’s medical records during the claims handling process” (Response to Interrogatory 6) and 4 that State Farm did not use any computer programs or software to establish ranges of variables 5 on damages or recovery times. (Response to Interrogatory 8). 6 The discovery in dispute includes redactions to the Claim File based on work product and 7 attorney client privilege. See Dkt. 23 (Chart Identifying SFCLAIM000045-000047 (“Log Notes” 8 “IFCA Notice” dated 5/16/18 through 6/25/18); SFCLAIM000100-SFCLAIM000105 (“Log 9 Notes” “Injury Claim Evaluation” dated March 9, 2018 or March 13, 2018); SFCLAIM000144- 10 SFCLAIM000155 (“Log Notes” “Injury Claim Evaluation” undated or dated “3/2018”); 11 SFCLAIM000258-SFCLAIM000266 (“Correspondence” “Injury Claim Evaluation” dated 12 6/25/2018). 13 In sum, Plaintiff seeks to compel production of sixteen redactions to the Claim File where 14 State Farm claims a work product exemption for data entries made by a claims representative in 15 March of 2018 (or undated entries). Plaintiff also seeks to compel production of five redactions 16 to the Claim File, where State Farm is claiming both work product and attorney client privilege, 17 and a single document where State Farm claimed only attorney client privilege. All the 18 documents and/or log entries sought by Plaintiff were submitted before July 1, 2018, and predate 19 the filing of Plaintiff’s IFCA notice, which was filed on July 10, 2019. See Dkt. 26, Declaration 20 of Joseph D. Hampton, Exhibit 2. 21 2. Deposition of Claims Representative 22 On August 4, 2021, Plaintiff took the deposition of Kandi Albers, State Farm’s claims 23 representative. Ms. Albers claimed that she did not recall what information she relied upon to 1 determine if Plaintiff had been made whole, and because of redactions to the Claim File, could 2 not offer any testimony regarding the details of her claim handling. Dkt. 24, Johnson Decl., Ex. 3 4, Kandi Albers Deposition, pp. 55; 79.4 Questions posed as to what specific numbers Ms. 4 Albers used in her evaluation of the claim were objected to as work product, and the witness was

5 instructed not to answer. Id., pp. 103-104. 7 “Parties may obtain discovery regarding any nonprivileged matter that is relevant to any 8 party’s claim or defense....” Fed. R. Civ. P. 26(b)(1). Information is relevant if it is “reasonably 9 calculated to lead to the discovery of admissible evidence.” Surfvivor Media, Inc. v. Survivor 10 Prods., 406 F.3d 625, 635 (9th Cir. 2005) (quoting Brown Bag Software v. Symantec Corp., 960 11 F.2d 1465, 1470 (9th Cir. 1992)). In addition to relevance, the Court must determine whether 12 discovery is proportional, “considering the importance of the issues at stake in the action, the 13 amount in controversy, the parties’ relative access to relevant information, the parties’ resources, 14 the importance of the discovery in resolving the issues, and whether the burden or expense of the

15 proposed discovery outweighs its likely benefit.” Fed. R. Civ. P. 26(b)(1). 16 The Court has broad discretion to compel disclosure of discovery. Phillips ex rel. Estates 17 of Byrd v. Gen. Motors Corp., 307 F.3d 1206, 1211 (9th Cir. 2002). “The party who resists 18 discovery has the burden to show that discovery should not be allowed, and has the burden of 19 clarifying, explaining, and supporting its objections.” Cable & Computer Tech., Inc. v. Lockheed 20 Sanders, Inc., 175 F.R.D. 646, 650 (C.D. Cal. 1997). Pursuant to Fed. R. Civ. P. 37(a)(4), an 21 evasive answer is treated as a failure to respond. 22

23 4 The deposition is found at Dkt. 24, pp. 129-174 – the citations above are to the deposition transcript numbering. 1 Here, there is no question that the discovery sought is relevant to Plaintiff’s claims and 2 State Farm’s defenses in this UIM action. There is no dispute as to the importance of the issues 3 at stake in the action, the amount in controversy, the parties’ relative access to relevant 4 information, the parties’ resources, the importance of the discovery in resolving the issues, or

5 whether the burden or expense of the proposed discovery outweighs its likely benefit. The 6 objections to this evidence are based solely on the work product doctrine and attorney-client 7 privilege. 8 A. Work Product Doctrine 9 The work product doctrine is governed by federal law. Lexington Ins. Co. v. Swanson, 10 240 F.R.D. 662, 666 (W.D. Wash. 2007). “To qualify for work-product protection, documents 11 must: (1) be prepared in anticipation of litigation or for trial and (2) be prepared by or for another 12 party or by or for that other party’s representative.” United States v. Richey, 632 F.3d 559, 567- 13 68 (9th Cir. 2011) (internal quotation marks omitted). If a document serves a dual purpose and 14 was not prepared exclusively for litigation, the “because of” test applies, and “courts must

15 consider the totality of the circumstances and determine whether the document was created 16 because of anticipated litigation[ ] and would not have been created in substantially similar form 17 but for the prospect of litigation.” Gamble v. State Farm Mutual Auto. Ins. Co., No. C19- 18 5956RJB, 2020 WL 4193217, at *3 (W.D. Wash. July 20, 2020) (citing Richey, 632 F.3d at 567- 19 68). 20 Opinion work product “is virtually undiscoverable.” Republic of Ecuador v. Mackay, 742 21 F.3d 860, 870 n.3 (9th Cir. 2014). However, the Ninth Circuit has found that, on a case-by-case 22 basis, an insured may be able to obtain opinion work product. Holmgren v. State Farm Mut. 23 Auto. Ins. Co., 976 F.2d 573, 577 (9th Cir. 1992). In contrast, materials prepared in the ordinary 1 course of business are not protected. Fed. F. Civ. P. 26(b)(3), 1970 Advisory Committee Notes. 2 “[A]n insurer cannot delegate its obligation to make a coverage determination, which is after all 3 its business, to an attorney and then, claim ‘work product privilege.’” Gamble at *3. 4 State Farm relies on Hanson v. State Farm Mut. Auto. Ins. Co., 261 F. Supp. 3d 1110,

5 1118 (W.D. Wash. 2017); Schrieb v. A. Family Mut. Ins. Co., 304 F.R.D. 282, 288 (W.D. Wash. 6 2014); and Fed. R. Civ. P 26(b)(3)(B) for the proposition that the discovery sought is protected 7 by the work product doctrine – “due to the adversity between a UIM claimant and her UIM 8 insurer, the insurer is not obligated to disclose its internal evaluation processes.” However, there 9 is nothing in these cases indicating that ‘because UIM claims are inherently adversarial’ they are 10 treated differently than an ordinary claim of work product or that the ‘the mental impressions, 11 conclusions, or opinions of an insurance company’ documented in the claim files notes cannot be 12 disclosed. As previously explained by this Court: 13 Notwithstanding the adversarial roles in which Plaintiff and State Farm find themselves in as a function of the UIM insured and insurer relationship, State 14 Farm must demonstrate that the claims notes and injury evaluations it withholds were created because of litigation. 15 Hews v. State Farm Mut. Auto. Ins. Co., Case 2:15-cv-00834-RAJ Dkt. 31 (W.D. Wash. Feb 16 24, 2016 (emphasis added).

17 State Farm continues to advance this “adversarial” argument even though it has been 18 repeatedly rejected by this Court. See Hews, supra; Gamble, 2020 WL 4193217 (W.D. Wash. 19 July 21, 2020) (UIM case involving State Farm; materials at issue related to claim investigation 20 in the ordinary course of business where State Farm’s law firm was hired at least in part to 21 engage in the claims investigation process) and Barge v. State Farm, 2016 WL 6601643 at *6 22 (W.D. WA Nov. 8, 2016) (another UIM case involving State Farm, where documents pre-dating 23 1 IFCA claim notices were in the ordinary course of business and not protected by the work 2 product doctrine). 3 Here, work product protection does not appear applicable to the materials at issue. Courts 4 have typically found it is reasonable for an insurance carrier to anticipate litigation once it

5 receives notice of an IFCA claim. Schrieb, 304 F.R.D. at 286; Johnson v. Allstate Prop. & Cas. 6 Ins. Co., 2014 WL 4293967 (W.D. Wash. Aug. 29, 2014). In this case, Plaintiff’s IFCA notice is 7 dated July 10, 2019. Dkt. 26-2. The documents Plaintiff seeks were created before July 1, 2018 8 by a claims representative investigating Plaintiff’s UIM claim. 9 B. Attorney-Client Privilege 10 Under Washington law, attorney-client privilege is presumptively inapplicable in a first- 11 party insurance bad faith action. Cedell v. Farmers Ins. Co. of Wash., 176 Wn.2d 686, 697 12 (2013). Cedell creates a presumption that there is no attorney-client privilege between the 13 insured and the insurer in the claims adjustment process. Id. However, “in the UIM context, the 14 insurance company is entitled to counsel’s advice in strategizing the same defenses that the

15 tortfeasor could have asserted.” Id. An insurer may therefore, overcome Cedell’s “presumption 16 of discoverability by showing its attorney was not engaged in the quasi-fiduciary tasks of 17 investigation and evaluating or processing the claim, but instead in providing the insurer with 18 counsel as to its own liability: for example, whether or not coverage exists under the law.” Id. at 19 699. “Upon such a showing, the insurance company is entitled to an in camera review of the 20 claims file, and to the redaction of communications from counsel that reflected the mental 21 impressions of the attorney to the insurance company, unless those mental impressions are 22 directly at issue in its quasi-fiduciary responsibilities to its insured.” Id. 23 1 State Farm has redacted SFCLAIM000045-47 (Log Notes Re: IFCA Notice) based on 2 “Work Product; Attorney Client” and SFCLAIM000258-266 (Correspondence) based on 3 Attorney Client. See Dkt. 23, p. 7. The Court has previously held that the log entries (dated 4 between 5/16/2018 and 6/25/2018), which were made prior to Plaintiff’s IFCA Notice, are

5 considered to have been created in the ordinary course of business, i.e., during State Farm’s 6 evaluation and processing of the claim and therefore, are not protected by the work product 7 doctrine. 8 As to the assertion of the attorney client privilege, an insurer can only overcome Cedell’s 9 “presumption that there is no attorney-client privilege relevant” if it shows that its attorney was 10 not engaged in the quasi-fiduciary task of investigating and evaluating or processing a claim, but 11 instead in providing the insurer with counsel as to its own liability. See e.g., Barge, 2016 WL 12 6601643 at *3. 13 State Farm asserts that Ms. Lydon was not engaged in the quasi-fiduciary task of 14 investigation of evaluating Plaintiff’s UIM claim because it had already completed that

15 investigation and evaluation. Dkt. 25, p. 6. However, State Farm never responded to Plaintiff’s 16 requests for information regarding State Farm’s investigation of its claim. Instead, State Farm 17 responded on at least two occasions in June and July of 2018, that it was “still processing” her 18 claim. Dkt. 14, Richardson Decl., Exhibits 7 and 8. Then, a week later Ms. Lydon wrote to 19 Plaintiff’s counsel stating State Farm was not legally obligated to provide the basis for its 20 evaluation of Plaintiff’s claim. Id., Ex. 9. 21 Based on the record, the Court cannot determine if Ms. Lydon was acting in a quasi- 22 fiduciary capacity or advising State Farm regarding its exposure to liability. Without review of 23 the materials redacted under the attorney-client privilege, the Court cannot determine whether 1 the materials pertain to a claim investigation (and are not privileged) or provide counsel as to 2 liability (and are privileged). 4 Accordingly, it is ORDERED:

5 1) Plaintiff’s motion to compel production of unredacted portions of the Claim File 6 presently marked as “work product” (see Dkt. 24, pp. 3-4 Chart of Redacted/Withheld 7 Documents), answers to Interrogatories 1, 2, 3, 4 and 5; and to compel deposition answers 8 regarding State Farm’s investigation and analysis of Plaintiff’s UIM claim prior to the IFCA 9 notice is GRANTED; 10 2) State Farm shall produce to the Court for in camera review all materials that were 11 redacted or withheld under the attorney-client privilege no later than February 18, 2022. The 12 Court reserves ruling as to whether the materials are privileged attorney-client communications 13 until after it conducts its review. The Court also reserves ruling on Plaintiff’s motion for 14 sanctions. The Clerk is directed to re-note these issues for consideration on February 25, 2022.

15 DATED this 11th day of February, 2022. 16 A 17 BRIAN A. TSUCHIDA United States Magistrate Judge 18 19 20 21 22 23