# Environmental Packaging Technologies, Ltd. v. Arch Insurance Company

> District Court, S.D. Texas · March 4, 2020

URL: https://www.frixlaw.com/law-library/cases/10673312

## Case

- **Court:** District Court, S.D. Texas
- **Decided:** March 4, 2020
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

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## Opinion text

□ Southern District of Texas
ENTERED
March 04, 2020
UNITED STATES DISTRICT COURT David J. Bradley, Clerk
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
ENVIRONMENTAL PACKAGING §
TECHNOLOGIES, LTD, ET AL., §
§
Plaintiffs. §
§
VS. § CIVIL ACTION NO. 4:18-—CV—00240
ARCH INSURANCE COMPANY, §
ET AL., §
§
Defendants. §
ORDER
This is an insurance coverage dispute arising out of an underlying state court
action in which a multi-million-dollar judgment was entered against Environmental
Packaging Technologies, Ltd. (“EPT’’). Plaintiffs have sued EPT’s insurers, Arch
Insurance Company and National Union Fire Insurance Company of Pittsburgh
(“National Union”), for allegedly failing to honor the obligations and related legal duties
arising out of their respective insurance policies.
Before me presently is a discovery dispute between Plaintiffs and National Union
concerning the applicability of the work-product privilege to a single document National
Union contends is privileged. The document at the center of this dispute is a three-page
Digest Report which National Union produced in redacted form in August 2018. The
Digest Report provides various claim history, policy information, and reserve data. In a
December 2, 2019 discovery dispute letter directed to the court, Plaintiffs argued that the
Digest Report was not protected from disclosure by the work-product privilege and

requested that the document be produced in unredacted form. United States District
Judge George C. Hanks, Jr. held a telephonic hearing on January 7, 2020, to address
several outstanding discovery issues, including the Digest Report, and he asked for
additional briefing on the claims of privilege. On January 14, 2020, the day the
supplemental briefing was due, National Union sent Plaintiffs a letter stating that the
Digest Report had been inadvertently produced. The letter further claimed that the
entirety of the Digest Report is protected from disclosure by the work-product privilege
and requested that Plaintiffs destroy all copies in their possession.
Recently, this case has been transferred to me to handle all pretrial matters. I have
carefully analyzed the briefing on the work-product privilege, read the cases cited by both
sides in support of their respective positions, and reviewed in camera the Digest
Report—both in clean form and redacted form. For the reasons outlined below, I
conclude that National Union has not met its burden to establish that the work-product
privilege applies to the Digest Report.
THE APPLICABILITY OF THE WORK-PRODUCT PRIVILEGE
The work-product doctrine first appeared in 1947 when the United States Supreme
Court decided Hickman v. Taylor, 329 U.S. 495 (1947). The Supreme Court’s Hickman
decision served as the authority for work-product protection for over two decades. Then,
in 1970, the work-product doctrine was codified in Federal Rule of Civil Procedure
26(b)(3). Today, the rule provides: “Ordinarily, a party may not discover documents and
tangible things that are prepared in anticipation of litigation or for trial by or for another

party or its representative (including the other party’s attorney, consultant, surety,
indemnitor, insurer, or agent).” FED. R. CIV. P. 26(b)(3)(A).
The mere allegation that a document or group of documents constitutes work-
product is insufficient. Instead, the burden is on the party who seeks work-product
protection to show that the materials at issue were prepared by its representative in
anticipation of litigation or for trial. See Hodges, Grant & Kaufman v. U.S. Gov’t, Dep’t
of the Treasury, LR.S., 768 F.2d 719, 721 (Sth Cir. 1985). To assert work-product
privilege, the party resisting discovery must show: “(1) the materials sought are
documents or tangible things; (2) the materials sought were prepared in anticipation of
litigation or for trial; (3) the materials were prepared by or for a party’s representative;
[and] (4) if the party seeks to show that the material is opinion work product, that party
must show that the material contains the mental impressions, conclusions, opinions, or
legal theories of an attorney or other representative of a party.” SEC v. Brady, 238
F.R.D. 429, 441 (N.D. Tex. 2006).
This lawsuit was filed on January 25, 2018. The Digest Report was generated □□
February 26, 2018. Because the Digest Report was created after this lawsuit had
commenced, National Union asserts that the document is automatically protected from
disclosure by the work-product privilege. I disagree. To show that a document was
created in anticipation of litigation, a party must do more than simply establish that the
document was created after a certain date. As the advisory committee notes to Rule
26(b)(3) make clear, “ImlJaterials assembled in the ordinary course of business, or
pursuant to public requirements unrelated to litigation, or for other nonlitigation purposes

are not under the qualified immunity provided by this subdivision.” FED. R. CIV. P.
26(b)(3) advisory committee’s note to 1970 amendment. “The work product doctrine
focuses only on materials assembled and brought into being in anticipation of litigation.
Excluded from work product materials .. . are materials assembled in the ordinary course
of business, or pursuant to public requirements unrelated to litigation.” U.S. v. El Paso
Co., 682 F.2d 530, 542 (Sth Cir. 1982) (internal quotation marks and citation omitted).
Factors that courts rely on to determine the primary motivation for the
creation of a document include the retention of counsel and his involvement
in the generation of the document and whether it was a routine practice to
prepare that type of document or whether the document was instead
prepared in response to a particular circumstance. If the document would
have been created regardless of whether litigation was expected to ensue,
the document is deemed to have been created in the ordinary course of
business and not in anticipation of litigation.
Elec. Data Sys. Corp. v. Steingraber, No. 4:02-cv-225, 2003 WL 21653414, af *5 (E.D.
Tex. July 9, 2003) (citation omitted).
Here, National Union has presented no evidence indicating that “the primary
motivating purpose behind the creation of the [Digest Report] was to aid in possible
future litigation.” Paso Co., 682 F.2d at 542 (quotation marks and citation omitted).
The declaration provided to the court in support of the assertion of the work-product
privilege merely states that the document was created after the inception of this case.
This is not enough. See Orchestrate HR, Inc. v. Trombetta, No. 3:13-CV-2110-P, 2014
\
WL 884742, at *2 (N.D. Tex. Feb. 27, 2014) (“The proponent must provide sufficient
facts by way of detailed affidavits or other evidence to enable the court to determine
whether the documents constitute work product.”). The declaration does not provide any

1

indication who created the document, why the document was created, or whether the
document would have been generated in the ordinary course of business irrespective of
the litigation. Although National Union has the burden of establishing that a document is
protected by the work-product privilege, it is noteworthy that only Plaintiffs present me
with any evidence concerning how the Digest Reports are created. That evidence is in
the form of deposition testimony from National Union’s corporate representative, Gene
Domanico. He testified that Digest Reports are routinely prepared for supervisors of a
claim as part of the claims file and contain content downloaded from the claims system.
This strongly suggests that the Digest Report would have been created even if there was
no lawsuit. Because National Union has failed to satisfy its burden to show that the
Digest Report was created in anticipation of litigation, I find the work-product privilege
does not protect the document from disclosure.
RELEVANCE OF RESERVE INFORMATION
There is one other issue I need to address: that is, whether I should order the
production of an unredacted copy of the Digest Report. Before clawing back the Digest □

Report, National Union had redacted information-on the document reflecting National
Union’s reserves in connection with the underlying state court lawsuit. Reserves are an
insurance company’s best estimate of the eventual cost of the claim to the company,
including both the cost of indemnifying the insured and the cost of adjusting the claim.
See Maryland Cas. Co. v. United States, 251 U.S. 342, 350 (1920). National Union
argues that such information is not relevant to the Texas Insurance Code claims brought

by Plaintiffs in this case. Plaintiffs vehemently disagree, noting that district courts within’
the Fifth Circuit routinely order the production of reserve information in similar cases.
Federal Rule of Civil Procedure 26(b)(1) governs the scope of discovery and
allows a party to discover any non-privileged matter that is relevant to any party’s claim

or defense and proportional to the needs of the case. The federal rules “promote broad
discovery so that all relevant evidence is disclosed as early as possible, making trial ‘less

a game of blind man’s bluff and more a fair contest? . . . where each party can
knowledgeably evaluate the strength of its evidence and chances of ultimate success.” -

Chaisson v. Zapata Gulf Marine Corp., 988 F.2d 513, 517 (Sth Cir. 1993) (quoting U.S.
v. Procter & Gamble Co., 356 U.S. 677, 682 (1958)). In cases like this one alleging
violations of the Texas Insurance Code for unfair and deceptive practices, establishment
of loss reserves is highly relevant because it “could well belie a later claim that the
insurer thought in good faith that there was no possibility of the claim falling within
coverage.” Trinity E. Energy, LLC v. St. Paul Surplus Lines Ins. Co., No. 4:11-CV-814-
Y, 2013 WL 12124022 at *2 (N.D. Tex. Mar. 8, 2013) (quotation marks and citation
omitted). See also Westheimer Regency I, LP v. Great Lakes Reinsurance (UK) SE, No. □

5:18-cv-14-OLG, 2018 WL 7198643, at *3 (W.D. Tex. Aug. 20, 2018) (holding reserves
information relevant and discoverable); Shaw v. Zurich Am. Ins. Co., No. 2:12-CV-
00797-JRG, 2014: WL 2891904, at “2 (ED. Tex. Jun. 26, 2014) (“The Court finds that
information about [the insurer’s] reserves is relevant and discoverable and was
improperly withheld.”); Culbertson v. Shelter Mut. Ins. Co., No. 97-1969, 1998 WL
743592, at *1 (E.D. La. Oct. 21, 1998) (Loss reserve information “may be relevant to the

good or bad faith of defendant in denying the claim because it may demonstrate or lead to
admissible evidence with respect to the thoroughness with which defendant investigated
and considered plaintiffs ... claim.”). I, therefore, reject National Union’s effort to
withhold reserve data, finding that such information is both relevant and discoverable.
National Union is ordered to produce an unredacted copy of the Digest Report within five
business days.
Signed in Houston, Texas this 4th day March, 2020.
ANDRE . EDISON
UNITED STATES MAGISTRATE JUDGE

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10673312. Public record. Not legal advice.