United States District Court, S.D. Indiana, Indianapolis Division
ORDER ON PLAINTIFF'S MOTION TO COMPEL
TIM A. BAKER, Magistrate Judge.
This is a high-stakes lawsuit about insurance coverage. Plaintiff Indianapolis Airport Authority, the insured, is suing Defendant Travelers Property Casualty Company, the insurer, for coverage of its claim related to the collapse of temporary shoring towers used in constructing IAA's new midfield terminal project. The collapse damaged steel members, disrupted the original plan for completing the project, and resulted in additional claims by project consultants and contractors. Travelers denied significant portions of IAA's claim, and IAA subsequently filed this lawsuit for breach of contract and for a declaratory judgment of its coverage under the policy. IAA filed the motion to compel at issue here seeking voluminous documents from Traveler's second amended privilege log, asserting that the information is part of Travelers' ordinary course of business. Travelers objects, contending that such information is either privileged, in anticipation of litigation, or irrelevant. For the reasons set forth below, IAA's motion to compel is granted in part and denied in part [Filing No. 67].
A. Attorney-client privilege
Federal Rule of Civil Procedure 26 grants the Court broad discretion over discovery. When a party withholds responsive documents from discovery, it bears the burden of establishing that the withheld materials are not discoverable. Fed.R.Civ.P. 26(b)(5)(A). IAA asserts that Travelers inappropriately withheld certain entries in its privilege log. Among these entries are documents described as communications regarding "coverage issues." IAA contends that Travelers failed to provide an adequate explanation as to how documents concerning coverage issues are privileged. According to IAA, these documents appear to be part of the insurer's ordinary course of business ( i.e., factual inquiries of a claim or evaluation of a claim, which are undertaken to arrive at a claim decision) and thus, are discoverable. Likewise, IAA asserts that Travelers' privilege log does not adequately explain whether Travelers' attorneys Murray Sacks and Chris Perry were acting in a professional capacity or as claims handlers in their communications with claims adjusters.
Indiana law governs the scope of the attorney-client privilege. Under the relevant statute, Indiana protects attorneys from testifying as to communications made to them in the course of their professional business. Ind. Code § 34-46-3-1. The party asserting this privilege has the burden to prove the applicability of the privilege as to each and every document. Irving Materials, Inc. v. Zurich American Ins. Co., No. 1:03-cv-361-SEB-TAB, 2007 WL 4616927, at *3 (S.D. Ind. Dec. 28, 2007). The scope of the attorney-client privilege "should be strictly confined within the narrowest possible limits." Medical Assur. Co., Inc. v. Weinberger, 295 F.R.D. 176, 182 (N.D. Ind. 2013).
A review of Travelers' privilege log reveals countless numbers of entries where "legal opinions, advice and/or recommendations re-coverage issues, " or some variation thereof, is the description provided. For example, Travelers withheld emails from June 2007 for attorney-client privilege and work product, describing it as an "e-mail exchange including communication with in-house counsel, Attorney Murray Sacks regarding analysis of coverage issues." [Filing No. 68-8, at ECF p. 3.] In another entry dated August 25, 2010, Travelers redacted portions of a quarterly loss report with "communications with counsel, Attorney Murray Sacks re: coverage issues." [Filing No. 68-8, at ECF p. 43.] It is unclear what topics the phrase "coverage issues" includes, and Travelers' explanations do not assist the Court in determining whether such topics relate to evaluating and adjusting the claim or whether they relate to privileged communications. See Hartford Financial Services Group, Inc. v. Lake County Park and Recreation Board, 717 N.E.2d 1232, 1236-37 (1999) (finding attorney-client privilege protects attorneys interpreting policy, investigating details, and determining insurer liability but does not protect attorneys giving business advice or acting as negotiators, agents, or claims adjusters in insurance lawsuits).
Nor do Travelers' privilege log descriptions shed light on whether Sacks and Perry evaluated IAA's claim, made factual inquiries of the claim, calculated the claim, or otherwise acted in a manner analogous to a claims handler. See, e.g., Irving Materials, Inc. v. Zurich American Ins. Co., No. 1:03-cv-361-SEB-TAB, 2007 WL 4616917 (S.D. Ind. Dec. 28, 2007) (rejecting an insurance company's argument that its attorney acted only in a professional capacity when facts revealed that the attorney specifically handled the underlying claim); see also Illiana Surgery and Medical Center LLC v. Hartford Fire Ins. Co., No. 2:07-cv-3, 2010 WL 4852459, at *2 (N.D. Ind. Nov. 18, 2010) ("[A]n insurance company's blanket claim of privilege is insufficient without specific information regarding each document withheld on the basis of privilege. Thus, information does not become privileged simply because it came from counsel and was declared as advice."). For instance, Travelers redacted claims handler Nancy Fisher's file notes from January 28, 2008, describing them as "referencing communications with in-house counsel, Attorney Murray Sacks regarding legal opinions, advice and/or recommendations re: proof of loss." [Filing No. 68-8, at ECF p. 13.] Similarly, Travelers withheld emails dated July 23, 2007, regarding "communications with in-house counsel, Attorney Murray Sacks regarding discussions as to legal opinions and strategy regarding proof of loss and other coverage issues." [Filing No. 68-9, at ECF p. 5.] Insurers consider proof of loss and other coverage issues when evaluating and adjusting an underlying claim. Merely declaring that such communications contained legal advice does not shield Travelers from production when the topics discussed are part of its ordinary course of business. Travelers must provide a specific explanation on how these particular topics are privileged, and it has failed to do so.
There is not enough information to determine whether Sacks and Perry were acting in their professional capacities and whether coverage issues are privileged. Within fourteen days of this order, Travelers shall supplement the entries in its second amended privilege log with more detailed descriptions of the privileged documents at issue to opposing counsel so that the parties may attempt to seek agreement as to whether the material is privileged. This includes the documents withheld on the basis of the attorney-client privilege where it does not appear that Sacks and Perry were acting as attorneys. [ See Filing No. 67, at ECF p. 4.] Moreover, the amended privilege log must better describe the coverage issues contained in documents that Travelers withheld under attorney-client privilege. [Filing No. 67, at ECF p. 2-3.] With the benefit of the supplemented privilege log, the parties are to meet and confer in an effort to resolve these outstanding discovery requests. If issues remain after a good faith effort on the part of both parties, they may contact the Magistrate Judge to seek guidance and resolution of any remaining issues.
B. Subrogation Investigation
IAA also argues that information related to Travelers' subrogation investigation should not be privileged because the documents are part of the ordinary course of Travelers' business. More important, the documents in IAA's main claim file discuss notes on the subrogation investigation and were likely considered by claims adjusters in making coverage decisions related to IAA's claim. [ See, e.g., Filing No. 71-4, at ECF p. 109.] Travelers responds that the subrogation investigation was conducted in anticipation of litigation. According to Travelers, the subrogation investigation involved separate claims handlers, different counsel, and was considered and analyzed separately from IAA's claim, so it is also irrelevant.
IAA argues that communications on the subrogation investigation must be produced. Relying on Compton v. Allstate Property & Cas. Ins. Co., 278 F.R.D. 193, 198 (S.D. Ind. 2011), IAA argues that the subrogation investigation would have occurred regardless of the likelihood of litigation as it is part of Travelers' business to evaluate whether the insurer has any subrogation interest to pursue. Travelers argues that Compton does not apply because Compton relied on the insurer-insured privilege in determining that subrogation investigations were not privileged. Travelers is mistaken. In Compton, insurer Allstate redacted documents relating to potential subrogation claims and adjustment claims by the mortgagee as being irrelevant or otherwise privileged. Compton rejected Allstate's argument that claims by the mortgagee were protected under the insurer-insured privilege as the redacted documents did not fit the circumstances required to receive protection under the privilege. As for the subrogation reports, Compton found the reports were part of the ordinary insurance evaluation of a claim and not created in anticipation of litigation. Compton, 278 F.R.D. at 198. Compton analyzed the subrogation reports using the work product doctrine, not the insurer-insured privilege. Like Compton, Travelers' subrogation investigation appears ...