In Celani v Allstate Indem. Co., 2017 NY Slip Op 07799 (4th Dept. 2017), the plaintiff, individually and on behalf of her daughter (hereafter, infant), commenced an action seeking damages for injuries sustained when the infant was accidentally shot with a gun that was owned by her father, defendant Louis Territo (father). Plaintiff previously filed a claim on the infant’s behalf with Allstate Indemnity Company (defendant) pursuant to a homeowner’s insurance policy issued to the father. Defendant disclaimed coverage on the ground that the policy excluded coverage for “bodily injury” to an “insured person,” and that the infant was an “insured person” because she was a relative of the policyholder, her father, and a “resident” of his household. Plaintiff alleged in the amended complaint that the infant’s injuries were caused by the father’s negligence and, pursuant to the terms of the insurance policy, defendant had agreed to indemnify the father for bodily injury.
Thereafter, plaintiff moved to compel disclosure of defendant’s entire claim file, including a legal opinion prepared by defendant’s outside counsel and a claim investigation manual prepared by defendant’s employees. Defendant cross-moved for a protective order preventing disclosure of, inter alia, pre-disclaimer claim notes containing statements made by the father, the legal opinion of outside counsel and pre-disclaimer claim notes related thereto, pre-disclaimer claim notes containing information about defendant’s reserves, and the claim investigation manual. The lower court granted plaintiff’s motion to compel in its entirety, and denied defendant’s cross motion.
On appeal, the Appellate Division held that the lower court had properly ordered disclosure of pre-disclaimer claim notes containing statements made by the father. The Court stated that it is well settled that “there must be full disclosure of accident reports prepared in the ordinary course of business that were motivated at least in part by a business concern other than preparation for litigation.” The father had made his statements to defendant’s investigators before defendant made the decision to disclaim, and there was no dispute that defendant’s employees relied on those statements in making that decision.
However, the Appellate Division also agreed with defendant, that the lower court had abused its discretion in granting that part of plaintiff’s motion seeking disclosure of the legal opinion of outside counsel and pre-disclaimer claim notes related thereto and in denying that part of defendant’s cross motion seeking a protective order with respect to those items, and therefore modified the order accordingly. The Court noted that although reports prepared in the regular course of business are discoverable, documents prepared by an attorney that are “primarily and predominantly of a legal character,” and made to furnish legal services, are absolutely privileged and not discoverable, regardless of whether there was pending litigation at the time they were prepared. The Appellate Division therefore concluded that the legal opinion and the related claim notes were absolutely privileged, and thus a protective order should have been granted in that regard.
In Hewitt v. Palmer Veterinary Clinic, P.C., 145 AD3d 1415 (3d Dept. Dec. 29, 2016) a vet clinic patron brought a negligence and premises liability action against veterinary clinic and dog owner seeking damages for injuries sustained when she was allegedly attacked by dog in waiting room of the clinic. On April 25, 2014, counsel for plaintiff wrote to the clinic to notify it that he had been retained and urge it to notify its liability insurance carrier of plaintiff’s “claim” as soon as possible. After minimal discussions between counsel for plaintiff and representatives of the carrier, plaintiff commenced this negligence and premises liability action against defendants in August 2014. The summons and complaint were served upon the clinic in September 2014. Plaintiff demanded that the clinic produce certain items in the course of discovery, including documents from the file of the insurance adjuster in the clinic’s possession, custody or control that were prepared before service of the complaint. The clinic refused to turn over those items upon the ground that they were “prepared directly in anticipation of litigation,” and the patron moved to compel a response. The lower court denied motion and the patron appealed.
On Appeal, the Appellate Division noted that inasmuch as “[t]he purpose of liability insurance is the defense and settlement of claims … once an accident has arisen,” documents contained in the insurance adjuster’s file are generally protected by “a conditional immunity … as material prepared for litigation” Accident reports that are prepared with “a mixed purpose and result at least in part from the internal operations of the defendant’s business” are not, however, exempt from disclosure. It is therefore incumbent upon “the party resisting disclosure to [in the first instance] show that the materials sought were prepared solely for litigation and this burden cannot be satisfied with wholly conclusory allegations.”
What are some of the significant takeaways for insurance carriers from the Celani and Hewitt cases? The Courts are continuing to favor the expansion of broad based discovery at the expense of eroding the protection afforded to internal claim notes. What can be done? Celani teaches us that while the Courts are continuing to favor broad discovery, they still seemingly afford great deference and protection to attorney work-product. The best hope for staving off compulsory disclosure of claims materials during litigation appears to be securing the involvement of outside counsel whose legal services and work product is presumed by the law to be of a legal character and thus deemed absolutely privileged and therefore continues to enjoy greater protection from the Courts.
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