Water's Edge, A Condominium Owners Association v. Affiliated FM Insurance Company

Opinion

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE

WATER’S EDGE, A CASE NO. C19-1553JLR CONDOMINIUM OWNERS REVIEW Plaintiff, v.

AFFILIATED FM INSURANCE COMPANY, et al., Defendants.

On December 21, 2020, the court ordered Plaintiff Water’s Edge, a Condominium Owners Association (“the Association”) and Defendant Affiliated FM Insurance Company (“AFM”) to simultaneously submit letter briefs regarding various discovery issues. (See 12/21/20 Dkt. Entry; Pl. Statement (Dkt. # 52); Def. Statement (Dkt. # 54).) The court further ordered AFM to submit the documents at issue for an in camera review. // (12/21/20 Dkt. Entry.) On January 29, 2021, the court held a telephonic motion hearing and resolved two of the three discovery issues. (See 1/29/21 Min. Entry (Dkt. # 56).) The court now addresses the remaining issue of which, if any, of AFM’s withheld

or redacted documents should be produced pursuant to Cedell v. Farmers Ins. Co., 295 P.3d 239 (Wash. 2013). (See id.) The court has reviewed the 173 documents at issue. Based on the court’s in camera review, the parties’ submissions, and the parties’ representations during the telephonic motion hearing, the court GRANTS in part and DENIES in part the Association’s motion to compel.

As the court has articulated in past discovery disputes (see 10/27/20 Min. Entry (Dkt. # 48); 11/10/20 Order (Dkt. # 49)), Cedell creates a presumption that “there is no attorney-client privilege relevant between the insured and the insurer in the claims adjusting process,” 295 P.3d at 246. However, the insurer may overcome this presumption by showing that its attorney was “not engaged in the quasi-fiduciary tasks of

investigating and evaluating or processing the claim, but instead in providing the insurer with counsel as to its own potential liability.” Id. The insured is thus entitled to discovery of documents involving attorney work on quasi-fiduciary tasks. See Linder v. Great N. Ins. Co., No. C15-5002RBL, 2016 WL 740261, at *3 (W.D. Wash. Feb. 25, 2016) (ordering production of legal invoices involving attorneys’ performance of

quasi-fiduciary tasks). But even if the insurer successfully overcomes the initial presumption, the insured may still pierce the attorney-client privilege through the “fraud” exception. Cedell, 295 P.3d at 246-47. The insured must assert that the insurer has engaged in “an act of bad faith tantamount to civil fraud” and make “a showing that a reasonable person would have a reasonable belief that an act of bad faith has occurred.” Id. Upon triggering the “fraud” exception, the court conducts an in camera review to determine whether there is

“a foundation to permit a claim of bad faith . . . to proceed.” Id. at 247. To strip a communication of its attorney-client privilege, the insured must show that “(1) [the insurer] was engaged in or planning a fraud at the time the privileged communication was made, and (2) the communication was made in furtherance of that activity.” Barry v. U.S.A.A., 989 P.2d 1172, 1176 (Wash. Ct. App. 1999).

However, Cedell and its progeny are inapplicable when an insurer withholds documents under the work product doctrine in federal court. MKB Constructors v. Am. Zurich Ins. Co., No. C13-0611JLR, 2014 WL 2526901, at *8 (W.D. Wash. May 27, 2014). The primary purpose of the work product rule is to “prevent exploitation of a party’s efforts in preparing for litigation.” Admiral Ins. Co. v. U.S. Dist. Court, 881 F.2d

1486, 1494 (9th Cir. 1989). To qualify as protected work product, the document must be prepared in anticipation of litigation or for trial. Holmgren v. State Farm Mut. Auto. Ins. Co., 976 F.2d 573, 576 (9th Cir. 1992). Accordingly, based on the foregoing legal standards, the parties’ submissions, and the court’s in camera review, the court ORDERS AFM to produce the following

documents with the indicated alterations: // // // Document Privilege Alteration(s) Log ID Produce and leave unredacted legal service charge on 6/21/19 003_00007 starting with "For FM Global Matter . . ." Remaining charges may be redacted. Produce and leave unredacted legal service charge on 11/8/19. 006_00012 Remaining charges may be redacted. 010_00020 Remove all redactions 020_00030 Produce the entire document 021_00031 Produce the entire document Produce and leave unredacted the two charges on 6/21/19; the 025_00037 charge on 7/15/19 re. the call with client's adjuster; and the 8/26/19 charge re. claim investigation. Remaining charges may be redacted. Produce and leave unredacted the charge on 8/16/19 by K. Librera; the portion of the charge on 8/19/19 by K. Librera at "call with 029_00043 client . . . D. Bentson regarding claims letter"; the 8/23/19 charge by K. Librera; and the 8/27/19 charge. Remaining charges may be redacted. Produce and leave unredacted the charges on 9/10/19 "Review and Analyze draft letter . . ."; 9/11/19 "Review and analyze . . ."; and 035_00052 9/25/19 "Telephone calls from and to . . ." Remaining charges may be redacted. Produce and leave unredacted the charge on 9/9/19 by H. Kurzwell from "analysis of further letter from Ashbaugh . . . "; 9/10/19 by H. 041_00061 Kurzwel at "Miscellaneous problems . . . Comments relating to same"; and 9/19/19 by H. Kurzwell. Remaining charges may be redacted. Produce and leave unredacted the charge on 10/16/19 from "work 047_00070 on strategy . . ." Remaining charges may be redacted. Produce and leave unredacted the charges on 10/1/19 by K. Librera re. "call regarding inspection"; 10/2/19 by H. Kurzweil at 049_00073 "Conference call with . . . Relevant to inspection"; and 10/2/19 by K. Librera at "updates regarding investigation and site inspection." Remaining charges may be redacted. Produce and leave unredacted the charges on 1/6/20 by H. Kurzweil from "Attention to follow up . . ."; 1/8/20 by H. Kurzweil from "Telephone conference . . ."; 01/23/20 by H. Kurzweil at "attention 057_00085 to. . . claim notice"; 1/24/20 by H. Kurzweil at "Work on response to. . . additional information"; 1/27/20 by H. Kurzweil from "Update on response . . ."; and 1/29/20 by H. Kurzweil at "further attention to . . . of same." Remaining charges may be redacted. Document Privilege Alteration(s) Log ID 079_00122 Produce the entire document 081_00124 Produce the entire document 083_00128 Produce the entire document 088_00133 Produce the entire document 093_00140 Produce the entire document 102_00149 Produce the entire document Remove redactions from the paragraph beginning with “We are 106_00153 puzzled . . .” The remainder of the redactions can remain. 112_00160 Remove all redactions 114_00162 Produce the entire document 115_00163 Produce the entire document 116_00164 Produce the entire document Produce and redact sentence beginning with “Our 117_00165 recommendation . . .” 122_00170 Produce the entire document 149_00205 Produce the entire document 150_00206 Produce the entire document 151_00207 Produce the entire document 152_00208 Produce the entire document 153_00209 Produce the entire document 154_00210 Produce the entire document 155_00211 Produce the entire document 156_00212 Produce the entire document 157_00213 Produce the entire document 158_00214 Produce the entire document 159_00215 Produce the entire document 160_00216 Produce the entire document 161_00217 Remove all redactions AFM shall produce these documents within seven days of the filing date of this order. Dated this 2nd day of February, 2021. A JAMES L. ROBART United States District Judge