New York Appellate Court Upholds Finding that Insurance Companies Must Produce Documents in Coverage Dispute

New York Appellate Court Upholds Finding that Insurance Companies Must Produce Documents in Coverage Dispute

The Appellate Division of the Supreme Court of New York, First Department [enhanced version available to lexis.com subscribers] has upheld an August 19, 2013 ruling rejecting arguments by Factory Mutual Insurance Company, AIG, ACE, and Arch, that the work done by their coverage counsel in connection with handling a claim was protected from disclosure.

Granting a motion to compel production of documents, the underlying decision held that documents generated by an insurance company as part of its claims-handling determination as to whether to pay or deny a claim are not work product even if they were prepared by counsel.  Allowing a narrow exception for documents that actually contain legal advice, the Court ordered the insurance companies to produce pre-denial documents that the insurance companies argued were protected by the attorney-client or work product privileges.   

The Appellate decision ruled:

The motion court properly found that the majority of the documents sought to be withheld are not protected by the attorney-client privilege or the work product doctrine or as materials prepared in anticipation of litigation. The record shows that the insurance companies retained counsel to provide a coverage opinion, i.e. an opinion as to whether the insurance companies should pay or deny the claims. Documents prepared in the ordinary course of an insurer's investigation of whether to pay or deny a claim are not privileged, and do not become so "'merely because [the] investigation was conducted by an attorney'" (see Brooklyn Union Gas Co. v. American Home Assur. Co., 23 AD3d, 191 [Ist Dept 2005]) [enhanced version available to lexis.com subscribers].

Anderson Kill shareholder John O'Connor, counsel to the policyholder, commented, "The Appellate Division, like the trial court that examined the hundreds of documents in camera, held that placing attorneys on the claims-handling team does not shield an insurance company from its duty to disclose to its policyholder all documents pertaining to its analysis of the claim and its determination to deny it."

John Nevius,  John O’Connor, Pamela Hans, Kerry Sheehan, and Carrie DiCanio are counsel for the policyholder.

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