Irving Oil Limited v. Ace INA Insurance

Opinion

MAINE BUSINESS AND CONSUMER COURT CUMBERLAND, ss Location: Portland Docket No.: BCD-CV-09-35

)

IRVING OIL LIMITED and ) HIGHLANDS FUEL DELIVERY, LLC )

)

Plaintiffs, )

)

V. ) ORDER ON DEFENDANT'S MOTION ) FOR ISSUANCE OF LETTERS ACE INA INSURANCE, ) ROGATORY )

Defendant. )

I. INTRODUCTION

Before the Court is Defendant ACE INA Insurance's ("ACE") Motion for Issuance of Letters Rogatory. In said Motion, ACE requests this Court to ask the Ontario Superior Court of Justice to order certain discovery from Royal & Sun Alliance Insurance Company of Canada ("Royal"), its employee, Gillian Moorcroft, and Marsh Canada Limited ("Marsh"), the Irving Plaintiffs' insurance broker. Specifically, ACE's Letters Rogatory seek the assistance of the Canadian Courts in obtaining deposition testimony and documents that ACE needs to defend against the Irving Plaintiffs' claims. ACE contends that the requested discovery is relevant to: which underlying primary policies and coverage must be exhausted in order to trigger ACE's excess coverage; the scope, types, and limits of primary liability coverage; and whether the Irving Plaintiffs have established the necessary exhaustion to trigger ACE's excess coverage. For the reasons discussed below the Court denies the Defendant's motion as to Royal and Ms. Moorcroft and denies the motion without prejudice as to Marsh.

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II. DISCUSSION

A. Royal On June 25, 2015, this Court granted a Second Stipulated Order Amending Case Management Conference Scheduling Order No. 4. 1 Pursuant to the joint request of the Parties, ACE agreed that the deadline for completion of all fact and merit discovery would be August 28, 2015. At the time ACE agreed to the August 28, 2015 deadline, ACE was surely aware of the breadth of documents it requested from Royal its motion was filed with the Court on May 20, 2015. Because ACE's request will entail a process that cannot be expected to be completed within the latest facts/merits discovery deadline in this case, the Court denies ACE's motion as it relates to Royal Canada.

B. Gillian Moorcroft ACE's request for documents and the deposition of Royal Canada employee, Gillian Moorcroft, is also untimely as the August 28, 2015 discovery deadline is fast approaching. ACE knew of Ms. Moorecroft's proffered testimony as of October 2014 when she submitted her first affidavit, and counsel for Ace admitted that it was aware of her testimony by December of2014. However, Ace's counsel argues that it was not until it received the voluminous February 2015 discovery submitted by the Plaintiffs how significant her role would be. However, ACE failed to timely act and waited until May

1 On June 24, 2014 the Court entered Case Management Order No.4. This followed a conference of June 12, 2014 which had been set after the Supreme Judicial Court dismissed Plaintiffs appeal and Defendant's cross appeal. The June 24, 2014 order made it clear that any party initiating discovery had to do so sufficiently in advance of the pertinent discovery deadline to enable any party responding to the request to respond within that deadline. The order also set March 7, 2015 as the facts/merits discovery deadline. That order was amended by agreement on March 4, 2015 and the facts/merits discovery deadline was extended to June 26, 2015. The most recent amendment, as noted, extended that deadline to August 28, 2015.

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20, 2015 to file this motion, and did so approximately a month before the (now-prior) discovery deadline expired.

As the Court stated at the hearing on this motion, based on the pendency of this case, absent unforeseen circumstances, the Court is unwilling to further extend the discovery deadline to accommodate this late request. The Court therefore denies ACE's motion in regard to documents and depositions requested from Gillian Moorecroft.

C. Marsh ACE has also requested a large number of documents as well as a deposition from Marsh. It is the Court's understanding that the Plaintiffs are still in the process of proffering a significant number of Marsh-related documents to ACE. Because ACE will receive those documents this week, the Court fmds that ACE should, in fairness, have an appropriate period of time for adequate review. Thus, ACE shall complete its document review by close of business on July 17,2015. On July 20,2015 at 10:00 AM the Court will convene a telephonic conference with counsel for Marsh and counsel for the parties to this action. In said conference, Ace is expected to convey to the Court whether the documents provided by Irving were responsive to its requests and whether there is a substantial, good faith basis to request more discovery from Marsh directly through the letters rogatory process. ACE's motion as it pertains to Marsh is therefore denied without prejudice.

III. CONCLUSION

Based on the foregoing the entry shall be:

ACE's Motion for the Issuance of Letters Rogatory as to Royal and Ms.

Moorcroft. ACE shall complete its document review in relation to Marsh

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on or before close of business July 17, 2015. The Court will convene a telephonic conference with Marsh and counsel for the parties on July 20, 2015 at 10 AM.

Pursuant to M.R. Civ. P. 79(a), the Clerk is herby directed to incorporate the Order by reference in the docket.

Dated: July 8, 2015 Is M. Michaela Murphy, Justice Business and Consumer Court

Irving Oil Limited, and Highlands Fuel Delivery, LLC v. Ace INA Insurance BCD-CV-2009-35

Irving Oil Limited and Highland Fuel Delivery, LLC Plaintiff

Counsel: John Ciraldo, Esq.

David McConnell, Esq.

Jennifer Pincus, Esq.

One Canal Plaza, Suite 900 PO Box 426

Portland, ME 04112-0426

Ace INA Insurance Defendant

Counsel: Harold Friedman, Esq.

Brett Leland, Esq.

One Portland Square

PO Box 586

Portland, ME 04112-0586

AND

Laurence Leavitt, Esq.

25 Pearl Street

PO Box 4726

Portland, ME 04112-4726

STATE OF MAINE BUSINESS AND CONSUlviER COURT CUMBERLAND, ss BCD-CV-09-35 /

)

ffi. VING OIL LINflTED and ) HIGHLANDS FUEL DELIVERY; LLC )

)

Plaintiffs, )

)

v. ) ORDER ON PLAINTIFFS' MOTION TO ) COMPEL PRODUCTION

ACE INA INSURANCE, )

)

Defendant. )

)

I. INTRODUCTION

Before the court is Plaintiffs', Irving Oil Limited (11 IOL"), and Highlands Fuel Delivery, LLC ("HigWands") (collectively, the ulrving Entities" or "Plaintiffs") Motion to Compel the Production of certain claim and tmdelWriting files maintl\ined by Defendant ACE INA, Insurance C'ACE"). Through tllis motion, Plaintiffs seek an order- compelling ACE to conduct a reasonably diligent search for and to produce all non- privileged documents responsive to Plaintiffs' Second Request for Production of Documents. Pmsuant to the Febn.1ary 12, 2015 hearing on the matter, the court has conducted in camerct review of the disputed documents submitted by ACE.

II. FACTS

Since 2003, over sixty (60) lawsuits have been flied against the Irving Entities based on the presence of methyl tertimy butyl ether ("MTBE") in Plnintiffs' refined

gasoline products. As a result of the various lawsuits, the Plaintiffs incurred significant

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unreimbursed expenses in connection with the investigation, defense, and settlement.

The Pl11intiffs nnticipate that even more expenses will be incurred ns a result of the Vermont MTBE Lawsuit. (Pis. 's Sec. Amd. Compl. ~ 15.)

In response to the various lawsuits, the Pl11intiffs cont11cted ACE alleging thnt the applicable product hazard limits of liability of Plaintiffs' primary insurance policies underlying the ACE umbrella policies had been exhausted. (Pis.' Sec. Amd. Compl. ~ 16.) The Plaintiffs requested that ACE provide 11 defense to the Vermont MTBE Lawsuit I'Uld agree to indemnify them under the applicable ACE umbrella policies for any ndversc

jud~meut that may be entered. The Plaintiffs further infonned ACE of the settlement of the MTBE suiis and requested that ACE contribute. Id. ACE denies that the u11derlying primary policies have been exhausted. Plaintiffs brought the underlying action seeking declaratory relief nnd damages for breach of contract nnd unfair claims settlement pmctices arising from the Defendant's alleged willful 11nd bad"faith refusal to defend or indemnify the Plaintiffs under umbrella liability insurance policies in numerous underlying product liability actions brought against the Plaintiffs. (Pis.' Sec. Amd. Compl. ~ 1.)

Plaintiffs now seek to compel ACE to produce its entire claim fiJcs for the MTBE Lawsuits against the Irving Entities, comnnmications with other insurers about MTBE Lawsuits against the Irving Entities, numerous documents maintained in ACE's uuderwriting files, standard fonn policies, and re-insurance related documents. The court hos reviewed the necessary documents in camera and has made n detennination as to discovery below.

ill.STANDARD OF REVIEW

A. Work-Product Doctrine The purvose of the work-product doctrine and associated nale is to "pi'Omote the adversary system by protecting the confidentiality of papers prepared by or on behRlf of attorneys in anticipation of litigation." Springfield Terminal Ry. Co. v. Dep't ojTmnsp., 2000 IVIE 126, ~ 19,754 A.2d 353. Pursuant to M.R. Civ. P. 26(b)(3):

(A) pnrty may obtain discovery of documents and tangible things ... prepared in anticipation of litigation or for trial by or for another party or by or for tbat other party's representative (including the other party's attorney, consultant, surety, indemnitor, insurer, or agent) only upon a showing that the party seeking discovery has substantial need of the materials in the preparation of the party's case nnd thHt the party is unHble without undue hnrdship to obtain the subst11nti11l equivalent of the matednls by other means. In ordering discovery of such materials when the required showing has been made, the court shall protect against disclosure of the mental impressions, conclusions, opinions, or legal theories of an attorney or other representative ofa party concerning the litigation.

(Emphasis added). Because the work-product privilege applies only to documents and tangible things, "discovery of work product will be denied if the party seek.ing discovery can obtain the desired information by taking the deposition of witnesses." Wright and Miller, 8 Federal Prnctice and Procedure§ 2025 at 538 (3d ed. 2010); accord Eoppolo v. Nat'! R. Passenger C01p., 108 F.R.D. 292, 294 (E.D. Pa. 1985).

In Maine, the party seeking protection from the work product doctrine "must show that the documents were prepAred principally or exclusively to assist in anticipated or ongoing litig11tion." Sprtngjleld Terminal, 2000 1\tffi 126, ~ 17, 754 A.2d 353 (citing United States v. Consh·. Prods. Research, Inc., 73 F.3d 464, 473 (2d Cir. 1996) (emphasis added)). "[T]he test should be whether, in light of the nature of the document and the factual situation in the particular cf\se, the document can be fairly snid to have been prep11red or obtained because of the prospect of litig11tion." ld. ~ 17 (citing In re Grcmd

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lilly Proceedings, 604 F.2d 798,803 (3d Cir. 1979)). Moreover, it is not just the work of the attorney that is protected. Also protected are documents created by the party or the party's representatives, as long as they are created in anticipation of litigation. !d. ~ 18; see also M.R. Civ. P. 26(b)(3). "A remote possibility of litigation is insufficient," however, "nnd some courts even have found the likelihood of litigation to be n deficient showing, requiring a substantial probability with commencement imminent." Springfield Terminal, 2000 IviE 126, ~ 19, 754 A.2d 353 (internal citations omitted).

"Rule 26(b)(3) . . . contemplates a preliminary analysis by the tJinl court to detem1ine whether the party seeking to protect the material from disclosure has met its burden of establishing thnt the document is work product." See M.R. Civ. P. 26(b)(3). '1f that burden is met, the burden then shifts to the party seeking disclosure to demonstrate tlult it has substantial need of the materials 11nd cannot obtain the document othenvise without undue hardship." Springfield Terminal, 2000 ME 126, ,I 14, 754 A.2d 353 (citing M.R. Civ. P. 26(b){3))." Finally, even if the party seeking disclosure can establish substnntinl need and undue hardship, documents or parts of documents, containing "mental impressions, conclusions, opinions, or legal theories of an attorney" shall not be disclosed. See id.

B. Attorney-Client Privilege "The purpose of the attorney-client privilege is to encoumge clients to make f1.11l disclosure to their attorneys 11nd to protect not only the giving of professional advice to those who cnn act on it but also the giving of information to the lawyer to enable him to give sound nnd informed advice." Corey l'. Norman, Hansou & DeTroy, 1999 ME 196, ~

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18, 742 A.2d 933 (quotation marks and internal citntions omitted). Pursuant to M.R.

Evid. 502 (b):

A client has a privilege to reft1se to disclose and to prevent any other person from disclosing confidential communications made for the purpose of facilitating the rendi lion of professional legal services to the client ( 1) between the client or the client's representative and the client's lawyer or the lawyers representative, or (2)

between the lnwyer and the lawyer's representative, or (3) by the client or the client's representative or the lawyer or a representative of the lawyer to a lawyer or n representfltive of a lawyer representing another party in a pending nclion and concerning a matter of common interest therein, or (4) between representatives of the client or between the client and a representative of the client, or (5) among lawyers and their representatives representh'tg the same client. 1

The "burden of establishing the existence of privilege is on [the) party objecting to (its] discovery." Pierce v. Grove lvfjg. Co., 576 A.2d 196, 199 (Me. 1990). Nevertheless, the privilege belongs to the client nnd "[o]nce it is waived, it Cfllmot be later revived." Field & Murray, Maine Evidence § 502.5 at 220 (6th ed. 2007); Kohl's Dept. Stores, Inc. v. LibertyMut.lns. Co, BCD-CV-12-13 (Bus. & Consumer Ct. Oct. 11, 2012, Humphrey, C.J.).

IV. DISCUSSION

A. Documents Protected from Discovery by the Work-Product Docttine Under the stnndard set forth in Springfield Terminal, the party seeking protection from the work product doctrine must demonstnlte that the documents were prepared exclusively to assist in aoticipatcd or ongoing litigation. 2000 IviE 126, 1f 16, 754 A.2d 353. Based on the court's In camem review of the subject documents, the court finds that the following are protected by the work product doctline:

1 A "client" is o person, public officer, or corporotion, nssocintion, or other orgnnizntion or eutily, either public or privnte, who is rendered professionnllegnl services by n lawyer, or who consults n lnwyer witu n ''iew to obtaining professional lcgnl services from the lnwyer. M.R. Evid. 502(n)( 1).

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November 21, 2005 ACE lumdwritten notes regarding conference call with Stuart Rogers (of Marsh, Irving's insmance broker) and Ralph Mlloio (of Covington & Burling) regarding MTBE suits. 2

ACE IHmdwritten notes regt~rding status of MTBE suits and Irving's suit ag11inst its primary insurers pending in the Stnte of New Hampshire Superior Court. 3

• ACE handwritten notes concerning discussions with counsel for insurers and/or insurers' representatives regarding action captioned 1J11ing Oil. Limited, et al. v.

Nat'! Union Fire Ins. Co. of Pittsburgh. PA, et al., State of New Hmnpshire Superior Court. '1

At the time these documents were created, ACE was aware of Irving's lawsuit ag11inst its underlying primary insurers in Now Hampshire Superior Court. By November of 2005, counsel for Irving had contacted ACE in attempt to resolve Irving's dernnnd for excess coverage from ACE. In light of the nature of the documents nnd the factual sit1.mtion of this particular case, the documents can reasonably be said to have been prepared or obtained beccwse of the prospect of litigation. Springfield Terminal, 2000 "NfE 126, ~ 17, 754 A.2d 353. Plaintiffs must now satisfy the burden of estnblishing thnt n substt~ntial need for the above documents exists. 5 ld. ~ 15.

1. Irving Entities' Substantial Need Under M.R. Civ. P. 26(b)(3) a party seeking discovery of materials protected by the work product privilege must demonstrate a substantial need for the materials exists and that "the pnrty is unnble without undue hardship to obtain the substantial equivalent

2 Sea (Def. 's Amd. Priv. Log. 8.) .ISee (Def. 's Amd. Priv. Log. 22.) ~See ld. 5 The Irving Entities contend thol ACE hos uot come tbrwnrd with ndmissible evidence thnt the ln•ing-reloled clnim fJ.!es were prcpnred principolly or C;'\Clusively in onlicipntion of litigntion. PlointiiTs further question the Yolidity of stntements mndc by ACE's in-house counsel John Roth. Plaintiffs co111end thnt Mr. Roth is not personally fnmilior with ACE's hnndling of the Irving Entities' insuronce clnims nnd nbsent such knowledge, Mr. Roth is merely speculoting nbout U1e documents. However, the court tmds tho! this nrgumeut is vitinted l>y the court's ill camera review of the subjec"t documents.

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of the materials by other means." !d. ''[T]he clearest basis for 1)roduction is when crucial information is in the. exclusive control of the opposing party." Ban:v P. USAA, 989 P.2d 1172, 1177 (1999).

The court agrees that it is particularly difficult to demonstrate a violation of the Unfair Claims Settlement Practices Act 6 when one party is in exclusive control of the only evidence on the matter. Some jurisdictions allow a per se finding of substantial need where a bad faith allegation has been made. Inre Sec1/ed Case, 676 F.2d 793, 807 (D.C. Cir. 1982); Duplan Co11J. v. Deering Milliken, Inc .. 540 F.2d 1215, 1219-20 (4th Cir. 1976)).

However, in Gagne v. Ralph Pill Electl'lc Supply Company, the United States District Court for the District of Maine adopted the view of the Second Circuit which requires "one who seeks to override the [work product] docuine to present sufficient facts to establish probable cause to believe that a crime or fraud was committed and that the documents were prepared nnd \ISCd ns part of 1111 ongoing scheme of crime or fraud." 114 F.R.D. 22, 27-28 (D. Me. 1987) (citing In re John Doe C01p., 675 F.2d 482 (2<1 .Cir.

1982)). AJthough no allegations of crime or fraud are made here, the Court will require Plnintiff.<; to present the court with probable cause to believe that ACE acted in bad faith 11nd violated the Unfair Claims Settlement Practices Act.

In this case, the gnwamen of Plaintiffs' Complaint seeks to determine whether ACE conducted a good-faith investigation of Plainliffs' claims and what steps ACE took to investigate. Plaintiffs contend that ACE has viol11ted the Unfair Cl11ims Settlement Practices Act by knowingly misrepresenting terms and effects of certain coverage and

repeatedly failing to determine its defense responsibilities to the Plaintiffs in active 6 2<1-A M.R.S.A § 2436-A.

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IviTBE lawsuits. Plftintiffs argue that ACE's claim files nre necessary 11s contemporaneous documentary record of ACE's investigation. See Gould v. Trawlers, fnc., 1991 Me. Super. LEXIS 214 (Me. Super. Ct. Sept. 27, 1991) (finding substantial need where bad fnith claim was alleged).

It is established law in Maine that "the analysis of an insurer's duty to defend involves solely a comparison of the allegations in the underlying complaint with the provisions of the insurance policy." Mitchell v. Allstate Ins. Co., 2011 ME ·133, ~ 8, 36 A.3d 876. "Under the comparison test ... no investigation of the insured's clnim is required to determine whether a duty to defend exists." Anderson v. VIrginia Sur. Co. Inc., 985 F. Supp 182, 192 (D. Me. 1998). In this cnse, ACE WHited five yenrs to deny coverage for the MTBE Lawsuits based 011 information apparent from the face of the policies And the underlying complaints.

The court finds that the Pl"nintiffs have presented the requisite probable cause to overcome the work product doctrine and to compel discovery of the above-mentioned documents. The court believes thAt access to snid documents might provide the Plaintiffs with the infonnatior1 they need to evaluate ACE's handling of the i'viTBE claims nnd detennine if there wns a violation of the Unfair Claims Settlement Practices Act. However, notwithstanding the Plaintiffs' substantinl need for the protected documents, the couri hns redacted language containing "mental impressions, conclusions, opinions, or legal theories." Springfield Terminal Ry. Co. v. Dep't ofTmnsp., 2000 ME 126, ~ 14, 754 A.2d 353, 357.

Further, Plnintiffs contend that they need certain documents to refresh the recollection of former ACE employees such as Anne Grny and Kara Fag11n. , Both are no

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longer employed by ACE and Plaintiff's contend that it is likely that that they will need to refresh the witness' memory. ACE relies on Davis v. Eme1yAir Freight C01p., for the assertion that speculative and unsubstantiated assertions of alleged faulty memory of a witness do not suffice to establish substantial need. 212 F.R.D. 432, 436-37 (D. Me. 2003).

The court agrees that broad unsubstantiated assertions of utuwailability or faulty memory are insufficient to alise to a substantial need. However, in this case, the Plnintiffs have sought production of documents to refresh the recollection of witnesses who are no longer employed in their relevant positions with ACE. Thus, it is reasonnble to conclude that these witnesses may be unable to remember facts relevant to the Plaintiffs' deposition. Further, the Plaintiffs have indicated that the depositions will take place in Canada. To promote efficiency, and prevent repeated depositions, the court finds that the Plaintiffs have presented more than a mere unsubstantiated assertion of faulty memory. Thus, the Plaintiffs have a substantial need for said documents.

B. Documents Subject to the Attorney-Client Privilege The Plaintiffs have requested numerous documents that ACE claims are protected by the attorney-client privilege. These documents include joint defense/common interest conununicntion between Anne Gray of ACE and counsel for Plaintiffs' primary insurers, ns well as e-mails between Kara Fagnn of ACE and outside counsel Michael Goodhue. The court nddresses each in turn.

1. Joint Delense Communiccrfion The specific joint defense communication documents ACE claims are protected by the attomey-client privilege include the following documents:

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February 6, 2006, joint defense communication between Anne Gray of ACE and counsel for insurers' nnd/ or insurers' representatives regarding action captioned Irving Oil Limited, eta/. v. Ncr!'! union Fh·e Ins. Co. ql Pittsburgh, PA, era/., State ofNcu• Hampshire Superior Court. 7

March 1, 2006, e-mail correspondence between Anne Gray of ACE and co\msel for insurers' aud/ or insurers' representatives regarding action captioned lrl'ing Ott Limited, et al. v. Nat '!union Fire Ins. Co. of Pittsburgh, PA, eta/., State of New Hampshire Superior Court. 8

Both of the above c-mails contRin communication between Anne Gray of ACE and counsel for Plaintiffs' prirnmy insurers concerning joint defense stmtegy. Generally, disclosing attomey-client communications to a third-party undermines the nttorney-client privilege. Uniled States v. Ackert, 169 F.3d I 36, 139 (2d Cir. 1999) (stating that "the attorney-client privilege generally applies only to communications between the attorney and the client"). However, in Mnine, the "common interest" mle is embedded in the attorney-client privilege. Said rule preserves the confidentinlity of privileged information if disclosures are made to certain third parties and their attorneys, concerning a matter of common interest in 11 pending action. The rule states:

A client has a privilege to refuse to disclose, tmd to prevent any other person from disclosing, the contents of nny confidential communicntion ... [b]y the client, the client's representative, the client's lawyer, or the lnwyer's representative to a lawyer representing another party in a pending action concerning a matter of conunon interest therein.

M.R. Evi<l. 502(b)(3) (Restyleded. 2015).

The common-interest docttine is "not an independent basis for privilege, but an exception to the general mle that the attorney-client privilege is waived when plivileged information is disclosed to a third-party. Ccrva/laro v. United States, 284 F.3d 236, 250 (1st Cir. 2002). In order for the common interest exception to apply, "the party nsserting

7 See (Def. 's Autd. Priv. Log. 8-9.)

8 Sea (Def. 's Amd. PriY. Log. ll.)

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the privilege must show that (t) the communications were made in the course of a joint defense effort, (2) the stntements were designed to further the effort, and (3) the privilege has not been waived." United States v. Bay State Ambulance and Hosp. Rental Serv. Inc., 874 F.2d 20, 28 (1st Cir. 1989). "To qualifY for the privilege, the communication must have been made in confidence." ld.; see also Ken's Foods, Inc. v. Ken's Ste<rk House, Inc., 213 F.R.D. 89, 93 (D. Mass. 2002).

The policy behind the doctrine is to prevent disclosure when the attorneys shlll'e their respective legal strategies. In re 1'eleglobe Communications Corp., 493 F.3d. 345, 365 (3d Cir. 2007); Restntement (Third) of the Law Governing Lawyers§ 76 cmt. d. ("A person who is not represented by n lawyer and who is not himself or herself a lawyer cannot participate in a common-interest Hrnmgemen(); 2 Weinstein's Fed. Evid. § 503.21 [2], at 503-68 ("The [common-interest] privilege applies to conummications made by the client or client's lm1•yer to a lawyer l'epresenlfng another in a mallei' of common interest.") (emphasis added and quotations omitted).

ACE contends that the e-mail communication is privileged as all of the parties to the e-mails shared a common interest in litigation defense against the Irving Entities. Further, the distribution list consisted exclusively of client representatives and counsel. However, a plain reading of M.R. Evid. 502(b)(3) reveals that the doctrine only protects commo11 interest communication in two relatively mmow circumstances: first, when a client or a representative of a client sends confidential information to a lawyer representing another party in a pending action concerning a matter of common interest therein; and second, when a lawyer for a client sends confidential infonnation to a lawyer

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representing another pnrty in a pending action concerning a matter of common interest therein. 9 In Mnine, courts exmnine the plain meaning of statutory language. "Only if the statutory language is ambiguous-that is, reasonably susceptible to more than one interprctntion-wil! [the court] consider other indicia of legislative intent. Gr(l]in v.

Griffin, 2014 IviE 70, ~ 18,92 A.3d 1144; Sunshine v. Brett, 2014 :ME 146, ~ 13, 106 AJd 1123. In tllis case, Anne Gray was an employee of ACE. There is no indication that counsel for ACE was cc'd or included in the e-mail chain. The court finds that this type of transaction, while protected by the Restatement, is not protected under a plain rending of Rule 502(b)(3). Thus, under the strict confines of the Rule, the fact that ACE's counsel wns not present vitiates any claim to the attorney-client privilege under the common interest doctrine. The court finds thftt the common interest rule does not 11pply to protect the above-mentioned e-mails.

9 Iu Kohl's Department Stores, Inc. v. Liberty Mutual Insumnce, the Busiuess aud Consumer Court opplied the more expansive Restntement (Third) of Low Governing LRwyers, which slates: "[u]nder the privilege, nuy member of n client set- n client, the client's ogeul for commlmicntion; the client's lawyer, and the lawyer's ogeut ... con exchmtge colllnl\uticntions witl1 members of o similar client set." BCI;>-CV -12-13 (Bus. & Consumer Ct. Oct. 11, 2012, Humphrey, C. J.) nt 6 (quoting Restatement (Third) of the Lnw Governing Lnwyers § 76 cmt. d.). However, the Kohl's cose is distinguishable in that it concerned n matter of first impression in Mnine where nn insurer provided 11 defense to ils insured, ond the insured ond insurer subsequently coopernted in the preparnlion of litigation. Tho court reasoned:

[T)hc insurer and the insured should be oble to communicate freely with respect to the titigntion to the e;-..'tent of their common interest without feor thnt the ptointiff in o subsequent . . . titigntion could seek discovery of those commuuicotions. To hold otherwise would hamstring an insured in defense of clnims ogoiust it ond significantly jeopardize the opport\mity for settlelllent of the litignlion.

!d. Becouse the Rule 502(b)(3) doos not contemplate the insurer-insured join! defense relationship, the court odoptcd tho more 1expnnsive Restatement. However, the relationship between ACE nnd the Plnintiffs' primary insurers is in the court's view the type of relationship contemplntcd by the mle ond thus Ute court will follow the Rule accordingly.

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Defendants also assert that the documents Are protected as work product, but based on the Plaintiff's demonstration of substantinl need, tbe court finds that the documents are discoverable work product.

2. AC"E 's Conmumication wilh Michael Goodhue The Plaintiffs seek production of e-mail correspondence between ACE's representative Kara Fagan, and Attorney Michael Goodhue. The e-rnails are described ns:

• · E-mail correspondence between Kal·a Fagan (of ACE) and outside cotmsel retained to represent and advise ACE with respect to coverage issues related

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to MTBE suits.

Generally, when an insurer hires a licensed Rttomey to perform the investigntion nnd handling of a policyholder's claim, the nttorney-client privilege will only attach to communications mndc for the purpose of securing legal advice. In re Te/eglobe Commc 'ns C01p., 493 F.3d 345, 359 (3d Cir. 2007). An insurer may not assign its ordinnry business functions to an attorney in an attempt to "clonk with privilege matter.s that would otherwise be discoverable." Merrill Jewe!Jy Co. v. St. Pc111l Fire & M(ltine Ins. Co., 49 F.R.D. 54, 57 (S.D.N.Y. 1970). The court !lgrees thnt insurers should not be ~tllowed to create a "blanket obstruction to discovery of its claims investigation" merely by Wring outside counsel to conduct that investigation. Mission Nat 'I Ins. Co. v. Lilly, liZ F.R.D. 160, 163 (D. tvlinn. 1986).

Plnintiff contends that ACE has failed to provide the court with any admissible evidence that the communication with outside counsel from 2005-2009 is privileged

communict~tion for the purpose of obtaining legal advice. ACE contends that it _,

10 Snid c-mnils ore dnted: Augt1sl 7, 2007; Aug\JSI 21, 2007; Febnwry 7, 2008; Felm1nry II, 2008; Fcbntm-y 14, 2008; nnd April 2, 2008. See (Def. 's Amd. Priv. Log 15-20.)

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communicated with outside counsel for two purposes. First to provide ACE with legal advice with respect to Irving's pending coverage litigation; lHld second, to provide ACE with legal advice regnrding its obligations, if any, to provide Irving excess coverage for the llllderlying MTBE Sltits. The Plaintiffs contend that Goodhue was not counsel for the underlying litigation, but counsel for the underlying claim investigation.

Afler conducting in camera review of the subject documents, the court finds that the e-mails mtd memoranda submitted to this court between Kara Fagan and Attorney Goodhue are protected by the attomey-client privilege. It is clear that the c-mails submitted to the court contain legal substantive and procedural advice concerning MTBE litigntion.

3. No Exception to lhe Attomey-Client Privilege Applies This court declines to adopt a per se rule that mere allegations of unfair cl<1ims sel!lemcnt prnctices pierces the attorney-client privilege. Tho Attorney-client privilege is "the oldest of the plivi!eges for confidential communication known to the common law .. . . Its purpose is to encourage full atld frank comm\mication between nttomeys and their

clients nnd thereby promote broader public interests in the observance of lnw and . I

administration of justice." In re Molion to Quash Bar Counsel Subpoena, 2009. lvffi 104,

~ 13, 982 A.2d 330 (quotation mtnks and internal citations omitted). The court finds that the Plaintiffs have established more than "mere nllegntions" of unfair claims practices. Rather, as mentioned above, the court finds that the Plaintiffs have established probable cause that such viol<1tions exist.

The court <1lso declines to extend the crime/fl'aud exception to the attorney-client privilege to encompass violations of the Unfair Claims Settlement Practice.<> Act where

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only probable cnuse of said violftlions exists. 11 The Law Court has instructed that in order to trigger the crime/frnud exception, a party must prove by a preponderance of the evidence that the exception applies to pierce the attorney-client privilege. In reMotion to Quash Bar Cmmsel Subpoena, 2009l'viE 104, ~ 19,982 A.2d 330.

While the LRw Court has not had the opporhmity to rule directly on this issue, in Fermra & DiMercurio, Inc. v. St. Paul Metcmy Ins. Co., the United States District Court for the District of Massachusetts refused to Rpply the crimelft·aud exception to unfair claim settlement conduct. 173 F.R.D. 7, 12 (D. Mass. 1997). Like Maine, Massachusetts recognizes that "facts establishing the clime/fraud exception must be proved by a prepondernnce of the evidence." !d. (quotations omitted). The Court maintained the mmow reading of the evidentiaty tule to include only a "crime or fraud" and found that "it is inappropriate to extend the exception to an unfair and deceptive trade practices claim."/d. 12-13.

Even assuming for purposes of argument, thnt the tort of nn unfnir claims settlement practice during claim processing and/or effecrunting settlements is sufftcient to warnmt applying the crime/fraud exception, the court finds tlu1t the Plnintiffs nevertheless fail to show that ACE sought'the assistance or advice of counsel "in furtherance of ft crime or fraud." M.R. Evid. 502 (d)( I). Under Mnine law, the Plaintiffs must show, by a p1·eponderance of the evidence, that ACE consulted counsel "in furtherance of a crime or fm\Jd". !d.

While probable cause of a violation of the Unfair Claims Settlement Practices Act

may warrant the piercing of work product protection, the Plaintiffs have failed to meet 11 In MAine, the crime frnud exception npplies where "the services of the:'! lnwycr were sought or oblnined to enoble or oid ouyonc to commit or plnn to commit whnt the client knew or rensouably should hnve known to ben crime or froud. M.R. Evid. 502(d)(l).

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the prepondemnce burden necessary to pierce the attorney-client privilege. Thus, the court finds that the documents are protected by the attorney-client privilege and do not fall within any exception to the privilege recognized by Maine law.

C. Documents Subject to the Relevancy Standard Under M.R. Civ. P. 26(b)( 1)

1. Reinsurance bl[ormatlon and Communication The Plaintiffs have requested discovery of certain communication between ACE and ACE's reinsurer. ACE has identified these documents as: "Correspondence with ACE's reinsurer that post-dates Irving's fiHng suit ng11inst ACE and concerns Irving's suit against ACE." 12 ACE claims that the documents are protected by both the work- product doctrine and the attorney-client privilege. The Plaintiffs argue that any privilege was pierced upon fumishing the document to the reinsurer. After reviewing the documents in camem the court finds that .these documents are partially protected to the extent that the documents contain opinion work-product. Although Rule 26 makes ordinary work product discoverable where there is a substantial need, the Rule specifically protects opinion work-product from disclosure even in the face of undue hardship.· Therefore, after cmeful review, the CO\H't has redacted the reinstmmce communications to the extent that they include the "mentAl impressions, conclusions, opinions, or legal theories" of ACE or its attorneys. The remaining portion of the documents are discovemblc so long as they are relevant to the underlying litigation.

a. Relevance o[Reinsurance Commtmicallons Case law across the United States is unsettled as to whether reinsurnnce information is relevant in a coverage dispute. Some courts find that reinsumnce

documents and an insurer's communication with its reinsurers are relevant and therefore 11 See (Dcf. 's Amd. Priv. Log. 25.)

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discovernbl e. See. e.g., Regence Group v. T!G Specialty Ins. Co., 20 I0 \VL 476646, at *3 (D. Or. Feb. 4, 2010) (allowing discovery of "[d]ocuments exchanged between [the insurer] and its reinS\Irers about th[e] underlying litigation"); Cigna Ins. Co. v. Cooper Tire & Rubber, lnc., 180 F. Supp. 2d 933, 936 (N.D. Ohio 2001) (discovery relating to reinsurance is relevant 1111d discoverable). However, other courts have explicitly held that reinsurance information is not relevant in a coverage dispute. These cotuts note that a policyholder is not a party to the reinsurance contract and does not have any tights under that reinsurance contract. See, e.g., Leksi, Inc. v. Fed. Ins. Co., 129 F.R.D. 99, 106 (D. N.J. 1989) (the relevance of reinsurance "is very tenuous and its production is not compelled"); Rhone-Poulenc Rorer, Inc., v. Home Indent Co., 139 F.R.D. 609, 613 (E.D. Pa. 1991) on recons/demlion In part, No. CIV. A. 88-9752, 1991 WL 237636 (B.D. Pa. Nov. 7, 1991) (denying request for reinsurance information where "vngue and limited monetiHY demands nre insufficient to bring the reinsurance agreements" within the scope of discovery).

In this case, the court finds that the communication betwee.n ACE and its reinsurers that post-dates Irving's filing of the underlying action is relevant to the underlying litigation and discoverable. 13 Pursuant to M.R. Civ. P. 26(b)(l):

"[p]arties obtain discovery regarding any matter, not privileged, which is relevant to the subject matter involved in the pending action, whether it relates to the claim or defense of the party seeking discovery or to the claim or defense of any other party, including the existence, description, nature, custody, condition und location of nny books, documents, or other tangible things and the identity and location of persons baving knowledge of any discovernble matter. It is not ground for objection that the information sought will be inadmissible at the trial if the information sought appenrs reasonably ct~lculated to lead to the discovety of admissible evidence.

13 See (Def 's Amd. Priv. Log 25.) The court hns only considered reinsurnuc.c docmnents thnt post-dote the flliog of the underlying sui!. Reinsuroncc documeuls pre-doting the oct ion were 110t submitted to this court for In camero review.

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M.R. Civ. P 26(b)(l). The term "relevant infom1ation" within Rule 26 "includes any matter that is or may become an issue in the litigation." Whitffngham v. Amherst College, 164 F.R.D. 124, 127 (D. Mass. 1995). Further, "[t]he party resisting production bears the burden of establishing lack of relevancy or undue burdett" Aponle-Navedo, eta/. 11.

Nalco Chemical Co., eta/., 268 F.R.D. 31, 36 (D.P.R. 20 10). In this case, the Plaintiff has alleged a violation of the Unfair Claims Settlement Practices Act. It is clear that ACE's communicHiions with reinsurers are relevant to this claim as it may reveal ACE's internal evaluation of the claim. The reinsurance communication may further reveal thllt ACE has taken inconsistent position with the Plaintiffs, which may provide for the unfair claims violation. Fireman's Fund Ins. Co. v. Superior Coul'l, 233 Cal. App. 3d 1138, 1141 (1991) (noting the trial court "abused its discretion in ordering disclosure of ... reinsurance documents without first reviewing them in camera."). Thus, after reviewing the subject documents in ccrmem, the court finds that they are relevant 1111d therefore discovere'lble subject to the courts redaction of "mental impressions, conclusions, opinions, or legal theories" of ACE or its attorneys.

2. Pricing and Ratingln{ormationu Pl11intiffs seek the production of documents containing certain pricing and rating informntion. 15 ACE contends that said documents are irrelevant to the underlying action and did not submit them to this court for in camem review. At the February 12, 2015 · oral argument on this matter, ACE explained that the documents contain proprietary market information. However, given the lenient standard for relevance under Rule

14 It is !he uuderstnnding of Ute court thntlhc pnrties have come to nu ngreemenl concerning !he discovcrnbility of ACE's stnndord fonn louguoge oud policies. Therefore, Ute court hos omitted nunlvsis ns to this infonnolion. 15 S~e (Def. 's Amd. Priv. Log I, 5.)

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26(b)(l), the court finds thnt these documents nrc relevant as they may provide evidence of the values assigned to the Plaintiffs' clnims and nil ow for assessment of any bad faith in the processing of the Plnintiffs' claims. Becnuse of the sensitive nntme of the information the Plaintiffs have demonstrated consistent willingness to abide by confidentiality reqt1ests nnd ngree to reasonable protective orders.

3. Publica/ions and Articles Concerning Finally, Plaintiffs seek discove~y of copies of pub Iications and ~trlicles on coverage issues related to MTBE suits. ACE contends that these documents are protected by the work-product doctrine because the nrticles were selected nnd obtained in anticipation of litigation nnd discovery of such will reveal ACE's mental impressions. 16 Opinion work product "typically includes items such 11s attorney's legal strategy, intended lines of proof, evaluation of strengths and weaknesses of his case, nnd inferences be draws from interviews of witnesses, and is normally accorded absolute protection from discovery." Fmzier v. Se. Pennsylvani(t Tra11Sp. Auth., 161 F.R.D. 309 (E.D. PR. 1995). Moreover, the court understnnds "it is not just the work.of the attorney that is protected [by the work product doctrine]. Also protected nre documents created by the party or the party's represcmtatives, as long as they are created in anticipntion of litigation." See M.R. Civ. P. 26(b)(3). Springfield Terminal Ry. Co, v. Dep't ofTransp., 2000 lviE 126, ~ 18, 754 A.2d 353, 358.

However, in this case, bRsed on the minim11i description provided by ACE, the articles and publications consist of non-protected factm1l in.fonuation, nnd thus, must be produced. The mere f11ct thnt an llttomey or a party representative reviews an article or

publicntion does not menn th<U the underlying dRill or the document itself is privileged. 16 See (Def. 's Amd. Priv. Log 23.)

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Rather only confidential communications made with legal objectives arc privileged.

Thus, because these documents are relevnnt to the underlying action, they 11re discoverab Ie.

V, CONCLUSION

Based on the foregoing, the court GRANTS plaintiffs Motion to Compel as to the following documents:

• November 21, 2005 ACE hnndwritten notes regarding conference call with Stunrt Rogers (of Mnrsh, Irving's insurance broker) nnd Ralph Muoio (of Covington Burling) regarding MTBE suits. 17

ACE handwri"en notes regarding stnnrs of MillE suits nnd Irving's suit niainst its primary insurers pending in the St11te of New Hampshire Superior Court. 1

ACE handwritten notes concerning discussions with counsel for insurers 11nd/or insurers' representatives regarding action captioned lrl'ing Oil Limited, eta/. v.

Nat 'I Union Fire Ins. Co. of Pillsburgh. PA, et al., Slate of New Hampshire Superior Court. 19

• Febmary 6, 2006, joint defense communication between Anne Gray of ACE and counsel for insurers' and/ or insurers' representatives regarding action captioned lrvllig Oil Limited, eta/. v. Nat'lunion Fire Ins. Co. of Pi!lsburgh, PA, eta/., Sterle ofNew Hampshire Superior Court. 20

• M11rch I, 2006, e-mail correspondence between Anne Gmy of ACE and counsel for insurers' 1111d/ or insurers' representatives regarding action captioned Irving Oil Limited, eta/. v. Nat'/ union Fire Ins. Co. ofPtllsburgh, PA, eta!., State of New Hampshire Superior Court. 21

• Correspondence with ACE's reinsurer that post-elates Irving's tiling suit against ACE 11nd concerns Irving's suit agninst ACE. 22

Pricing nnd Rnting Information 23 17 See (Dcf. 's Auld. Priv. Log. 8.)

1 ~ See (Dcf. 's Amd. Priv. Log. 22.)

19 See fd. 20 See (Def. 's Amd. Priv. Log. 8-9.) 21 See (Def. 'sA mel. Priv. Log. II.) 22 See (Amd. Priv. Log 25.) 23 See (Amcl. Priv. Log l, 5.)

Articles and publications on MTBE obtained 11nd ptinted by ACE representative. 2'1

The court DENIES Plaintiffs' motion ns to the following documents:

• E-m11il correspondence between Kara Fngan (of ACE) and outside counsel retained to represent and advise ACE with respect to coverage issues related to MTBE suits. 2s .

The court will set up a conference call with co\msel to discuss the logistics for production of redacted documents. The court would like to 11lso discuss with counsel the status of certnin documents referred to Plaintiff's motion that were not submitted for in camera review (including non-MTBE claims files and underwriting files) to ensure tbat this order has nddrcssed all of the disputed documents.

Pursuant to M.R. Civ. P. 79(n), the clerk is hereby directed to incorporate this order into the docket by reference.

Dntcd: lVInt•ch 17,2015 '},~~

Justce, Business & Cotlslel' Com·t

21 ' Sec(Def. 's•Amd. Priv. Log 23.) 25 Snid e-mnils nre doted: August 7, 2007; August 2 t, 2007; Febmnry 7, 2008; Febmnry J t, 2008; Fcbn111ry 14, 2008; ond April 2, 2008.

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Entered on the Docket: J

'1.f3· 1·'(

Copies sent via Maii_Eiectronically v

Irving Oil Limited, and Highlands Fuel Delivery, LLC v. Ace INA Insurance BCD-CV-2009-35

Irving Oil Limited and Highland Fuel Delivery, LLC Plaintiff

Counsel: John Ciraldo, Esq.

David McConnell, Esq.

Jennifer Pincus, Esq.

One Canal Plaza, Suite 900 PO Box 426

Portland, ME 04112-0426

Ace INA Insurance Defendant

Counsel: Harold Friedman, Esq.

Brett Leland, Esq.

One Portland Square

PO Box 586

Portland, ME 04112-0586

AND

Laurence Leavitt, Esq.

25 Pearl Street

PO Box 4726

Portland, ME 04112-4726