In re Professionals Direct Insurance Co., 578 F.3d 432 (6th Cir. 2009), passed on the scope of Ohio’s uniquely constricted attorney-client privilege for insurance companies in bad faith cases, as well as on the scope of federal work product protection, finding no clear error in the magistrate’s order that the documents in question be produced. In doing so, it addressed the nature and extent of the review that a trial court must do to determine whether the privilege has been divested by the rule of Boone v. Vanliner Insurance Co., 91 Ohio St. 3d 209 (Ohio 2001).This commentary examines the new decision against the background of the law elsewhere on attorney-client privilege in bad faith cases, examines the unique special rule adopted in Vanliner, and assesses the impact of the new decision in light of Vanliner. (Portions of this commentary are drawn from § 16.04 of the forthcoming William T. Barker & Ronald D. Kent, The New Appleman Insurance Bad Faith Litigation.)
The issue in Professionals Direct was what documents generated before denial of coverage would be protected by privilege or work product. As to work product, the magistrate judge found that the pre-denial period was divided between a period before litigation was anticipated and a period where the lawyers were performing a dual function of providing coverage advice and preparing for litigation. The commentary explains that, “[a]s to documents prepared while the lawyers were performing a dual function, the magistrate judge made a document-by-document decision whether coverage advice or litigation preparation was the ‘driving force’ for creation of the document, denying production of those where litigation was the reason for creating the document,” and the Sixth Circuit agreed that this was the correct standard.
The primary issue on the appeal was attorney-client privilege. As the commentary explains, this is a particularly important issue in insurance bad faith cases:
Lawyers are ubiquitous in the claim settlement process: defending insureds and providing coverage advice. The lawyers may be in-house or outside counsel, and both may be involved. And, as soon as a problem appears, lawyers get involved in that (possibly lawyers who were involved before, but not always).
Those with bad faith claims against insurers commonly view the insurer’s communications with its lawyers and the lawyers’ work product as especially valuable evidence for proving bad faith. Indeed, when trying to compel production, they commonly describe this information as essential to proof of their claims. Yet attorney-client communications and attorney work product are generally protected from discovery. While bad faith plaintiffs have made substantial efforts to pierce these protections, sometimes successfully, insurers continue to resist discovery of privileged and work product materials, also with considerable success.
The Sixth Circuit addressed this issue under unique Ohio law. As the commentary explains:
In Boone v. Vanliner Insurance Co., the Ohio Supreme Court had declared that “’documents and other things showing the lack of a good faith effort to settle by a party or attorneys acting on his behalf are wholly unworthy of the protections of any claimed privilege.’” PDIC argued that this required individual review of each document to determine whether the document showed lack of good faith. The magistrate judge disagreed and the Sixth Circuit found no clear error.
The commentary contrasts the law in Ohio with the law elsewhere on attorney-client privilege in bad faith cases and suggests ways in which that contrast should inform interpretation of Vanliner. It also notes the possible impact of a statutory amendment too new to have been applicable in Professionals Direct and comments on a significant procedural difference between state and federal courts in the application of Vanliner.
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