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Rhodes v. AIG Domestic
Claims, Inc., 20 Mass. L. Rep. 491, 2006 Mass.
Super. LEXIS 19 (Jan. 27, 2006) (Gants, J.). |
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In resolving a discovery dispute that
arose in connection with a claim against an insurer
pursuant to M.G.L. ch. 93A and 176D (together “176D”)
for failing to act reasonably and in good faith in
settling plaintiffs’ personal injury claims, the Court
wrote a primer on the work product doctrine,
attorney-client privilege and joint defense privilege
that is required reading for attorneys litigating
similar cases in the future. Indeed, the opinion
provides a review of these doctrines that will be useful
in any kind of litigation.
Plaintiff Marcia Rhodes was paralyzed
from the waist down in a car accident. Defendant Zurich
American Insurance Company (“Zurich”) provided the
personal injury claim defendants with primary coverage
of $2 million. Zurich did not offer policy limits for
over 2 years, despite strong evidence of liability and
extensive damages. When it finally did offer policy
limits, it conditioned the offer on a full release of
all defendants, which plaintiffs rejected. The jury
ultimately awarded plaintiffs $9.4 million in damages,
to which $2.5 million in pre-judgment interested was
added.
In the subsequent 176D litigation, the
plaintiffs sought discovery of the insurance companies’
claims files, including: (1) internal memoranda and
correspondence created before litigation was threatened
or commenced; (2) internal memoranda and correspondence
created after litigation was threatened or commenced;
(3) correspondence between or among the parties and
their attorneys; (4) communications among the defendants
and an insurance broker; (5) documents regarding the
reserve amounts set in the underlying case; and (6)
defendants’ claims manuals.
The Court also held that the parties had
waived the privilege with regard to communications in
which an insurance broker was copied, that the documents
setting the reserve amounts were opinion work product
that must be disclosed, and that the defendants’ claims
manuals were relevant and had to be produced. |
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The Court held that internal memoranda
and correspondence created before litigation was
threatened or commenced are prepared “in the ordinary
line of business or duty,” and did not constitute work
product. The Court rejected the contention that an
insurance company always acts in anticipation of
litigation. The Court also noted that even if these
materials were work product, as a practical matter, at
least the factual reports would be discoverable because
the plaintiffs would have a substantial need for the
materials to prove their case.
The Court applied this reasoning to
internal memoranda and correspondence created after
litigation was threatened or commenced, and held that
factual reports were discoverable under the exception to
work product protection set forth in Mass. R. Civ. P.
26(b)(3) where the party seeking discovery has a
substantial need for the materials and cannot obtain the
substantial equivalent without undue hardship.
The Court distinguished memoranda and
correspondence containing opinion work product, which
are entitled to a higher level of protection. Because of
the nature of a 176D claim, the Court nevertheless
concluded that the defendants were obligated to produce
any such materials. “The need for disclosure of the
opinion work product in the insurance claims file
becomes clear when one considers that the plaintiffs are
certainly entitled to depose the claims representative
responsible for determining the settlement offer and ask
him to explain his reasons for making that offer.”
The Court next held that correspondence
between the parties and their attorneys was protected by
the attorney-client privilege, unless the defendants
asserted advice of counsel as a defense. In order to
sort out the privilege issues, the Court also analyzed
the joint defense privilege, and concluded that
Massachusetts recognizes this privilege under
appropriate circumstances.
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