The opinion
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF WEST VIRGINIA
HUNTINGTON DIVISION
TERRY RAINES and
CRISSA RAINES,
Plaintiffs,
v. Case No.: 3:21-cv-00637
WESTFIELD INSURANCE COMPANY,
Defendant.
MEMORANDUM OPINION AND ORDER
On January 11, 2023, the parties appeared by counsel for a hearing on Plaintiffs’
Motion to Compel and/or Motion for in Camera Review, (ECF No. 56). Prior to the
hearing, the parties had met and conferred and substantially resolved the outstanding
disputes. Plaintiffs filed a Supplemental Brief outlining the remaining issues, (ECF No.
74), and Defendant filed a Response, with attachments, addressing those outstanding
issues in detail. (ECF No. 78).
At the hearing, the Court DENIED Plaintiffs’ motion to compel a supplemental
response to Interrogatory No. 3, finding that the current answer supplied by Defendant
was satisfactory and was not ambiguous. Plaintiffs withdrew all other concerns related
to Defendant’s answers to requests for production of documents and interrogatories,
agreeing that the supplemental information provided in the interim by Defendant was
acceptable. With respect to a document production of 3,624 pages, the Court DENIED
Plaintiffs’ motion to compel, finding that the documents were duplicative, but had
nonetheless been produced and were Bates-stamped WIC007051 through WIC010674.
The last remaining matter concerned various redactions by Defendant of
documents produced to Plaintiffs, which redactions were listed on a privilege log. (ECF
No. 74 at 2-6). Each redaction was considered, and Plaintiffs withdrew their objections
to the redactions at Bates-stamped Nos. 003146, 004410-004412, 004418-004420,
004451, 004533-004535, 004536, 004540, 004543-004545, 004547, 004548,
004549, 004550-004551, 004561-004565, 004566-004570, 004574-004575,
004576-004577, 004581-004584, 004622-004623, 010869, 010870, 010874-
010875, 010877, 010881, 010882, 010885-010886, and 010887. As to 001471-001522,
010706, 010707, 010711-010712, 010714, 010718, 010722-010723, and 010724,
Defendant indicated those documents had been produced without redactions. This left
four documents that included redacted reserve amounts, which the Court took under
advisement.
Having now considered the parties’ briefs, the arguments and information
presented at the hearing, and the controlling law, the Court DENIES Plaintiffs’ motion
to compel the redacted reserve amounts, (ECF No. 56), for the following reasons.
I. Relevant Facts
On March 19, 2020, Plaintiff Terry Raines was operating a motor vehicle and
Plaintiff Crissa Raines was a passenger when they were struck in the rear of their
vehicle by another driver. (ECF No. 1-1 at 4). Plaintiffs hired attorneys within six days
of the accident. Specifically, on March 25, 2020, Plaintiffs’ counsel advised
Defendant—Plaintiffs’ underinsured motorist insurance carrier—that his firm was
retained to represent Plaintiffs. (ECF No. 58-1 at 1). After some communications back-
and-forth regarding Crissa Raines’s medical treatment, (ECF Nos. 58-2 through 58-6),
Plaintiffs’ counsel sent Defendant a letter on October 20, 2021 stating that Defendant
was “not treating its insureds in a fair or lawful manner;” submitting “unreasonable
responses;” and “expending all of its efforts to ‘investigate’ Mrs. Raines, while doing
nothing to place her interest at least equal to its own.” (ECF No. 58-7 at 1-2). Counsel
confirmed that the letter constituted “Mrs. Raines’ final attempt to get her insurer to
treat her fairly.” (Id.). On November 15, 2021, Plaintiffs filed the instant lawsuit, which
was removed to this Court based on diversity jurisdiction. (ECF Nos. 1, 1-1). Plaintiffs
alleged four counts in the complaint: (1) negligence of the underinsured motorist, (2)
breach of contract, (3) first party common law extra contractual damages, and (4) first
party statutory claims misconduct. (ECF No. 1-1 at 7-11).
In August 2022, the parties engaged in mediation and reached a partial
settlement resolving the first two counts of the complaint. (ECF Nos. 31, 57 at 2, 58 at
3). The parties began discovery concerning Plaintiffs’ remaining bad faith and unfair
trade practices claims. On November 14, 2022, Plaintiffs filed the instant motion to
compel and/or for in camera review, alleging that Defendant made improper general
objections to their discovery requests and failed to produce responsive documents in
full. (ECF No. 56). As stated, after the parties briefed the issues raised in the motion,
(ECF Nos. 57, 58, 61, 62, 74), Defendant filed supplemental responses and privilege
logs, which ameliorated most of the issues raised in the motion and thereby narrowed
the issues for the Court’s consideration. The Court held a hearing on January 11, 2023
during which the discovery disputes were further resolved, leaving only the matter of
the reserve information that Defendant redacted in its document production at Bates-
stamped Nos. 005923-005924, 010694-010695, 010698, and 010854.
Plaintiffs argue that Defendant should be compelled to produce the reserve
information because it is relevant to their bad faith and unfair trade practices claims.
Essentially, Plaintiffs aim to show through the reserve information that Defendant was
aware of the value of the claim but deferred paying it at that time. In response to the
motion, Defendant notes that it produced nonprivileged reserve information, but
objects to providing post-suit reserve analysis on the ground that it is protected by the
work-product doctrine. Defendant argues that the redacted reserve information was
not only prepared in anticipation of litigation, but was determined after this lawsuit
was filed and reflects the mental impressions, thoughts, and conclusions of Westfield
and defense counsel in evaluating Plaintiffs’ legal claims.
Defendant’s privilege log provides the following information regarding the
documents at issue:
Bates Nos. 005923-005924
These documents are redacted in full based on confidential
information and work product, and they are identified as a “[p]ost
suit note dated August 18, 2022 regarding reserve adjustment
information and analysis by Kristen Rock, mental impressions,
thoughts, and conclusions of Westfield and Counsel regarding
Plaintiffs’ claims following mediation.” (ECF No. 78-19 at 39).
Bates Nos. 010694-010695
These documents are partially redacted. (Id. at 45). The portion
concerning reserve information is redacted based on the work
product doctrine and is identified in the privilege log as “August
17, 2022 at 6:00 p.m. claim note by Glenn Scheuer including post
suit analysis and reserves information reflecting mental
impressions, thoughts, and conclusions of Westfield and defense
counsel in evaluating Plaintiffs’ claims.” (Id.).
Bates No. 010698
This document is partially redacted based on the work product
doctrine. (Id. at 47). The redacted portion is identified in the
privilege log as a “[p]ost suit claim note dated July 13, 2022 by
Kristen Rock regarding reserve information, mental impressions,
thoughts, and conclusions of Westfield and Counsel.” (Id.).
Bates No. 010854
This document is partially redacted based on the work product
doctrine. (Id. at 50). The redacted portion is identified in the
privilege log as “[p]ost suit reserve information reflecting mental
impressions, thoughts, and conclusions of Westfield and Counsel
in evaluating Plaintiffs’ claims. (Id.).
II. Relevant Law
Reserve calculations are “essentially an insurance company’s internal valuation
of a claim” and can “represent an amount the insurance company is comfortable
spending to settle the claim.” Mid-State Auto., Inc. v. Harco Nat'l Ins. Co., No. 2:19-
CV-00407, 2020 WL 1488741, at *6 (S.D.W. Va. Mar. 25, 2020) (citing State ex rel.
Erie Ins. Prop. & Cas. Co. v. Mazzone, 625 S.E.2d 355, 358–59 (W. Va. 2005)). Reserve
information is discoverable in bad faith actions depending on the unique facts of the
case. Id. at *7. However, the work-product doctrine shields such information when it
was created in anticipation of litigation. Nicholas v. Bituminous Cas. Corp., 235 F.R.D.
325, 333 (N.D.W. Va. 2006).
Case law applying Fed. R. Civ. P. 26(b)(3) defines the scope of the work-product
doctrine in a diversity case such as the instant matter. Nicholas, 235 F.R.D. at 331.
Importantly, “[w]ork product that includes the mental impressions, conclusions,
opinions or legal theories of an attorney or other representative of a party concerning
the litigation receives even greater protection.” Nicholas, 235 F.R.D. at 332 (citing In
re Grand Jury Proceedings, 33 F.3d 342, 348 (4th Cir.1994)). Furthermore, “the work-
product doctrine is not confined solely to information and materials gathered or
assembled by a lawyer, but also covers materials gathered by any consultant, surety,
indemnitor, insurer, agent, or even the party itself.” Id. (citing Duplan Corp. v. Deering
Milliken, Inc., 540 F.2d 1215 (4th Cir. 1976).
The critical inquiry to determine if something constitutes work product is
whether the information was documented by either a lawyer or non-lawyer “in
anticipation of litigation.” Id. While reserve information may not be protected by the
attorney-client privilege in the absence of communications between the client and
counsel, it may still be subject to the work-product doctrine if prepared by an insurer
“in anticipation of litigation,” especially if it reveals the mental impressions, thoughts,
and conclusions of the defendant in evaluating a legal claim. Id. (citation omitted).
III. Discussion
Plaintiffs rely on two decisions of this Court, Mid-State and Stone, in support of
their position that Defendant should be compelled to produce the unredacted reserve
information. However, neither case is on point, because neither case considered
whether reserves could be withheld from discovery based upon the protection afforded
to work product. In Mid-State, the plaintiffs sued their insurance company for breach
of contract and bad faith regarding their fire loss claim. Mid-State, 2020 WL 1488741,
at *1. The plaintiffs filed a motion to compel, asserting that the defendant insurer
improperly redacted its reserve calculations and related information from the claim
and special investigation unit files that it produced in discovery. Id. at *6. The
defendant argued that the redactions were proper because “reserve information is not
relevant in first-party bad faith actions.” Id.
Because relevance was the only issue before the Court, its analysis focused on
how reserve information might bear on the claims and defenses in the case. After
acknowledging that federal law determined whether the information was relevant, the
Court looked to the West Virginia Supreme Court for guidance in the bad faith context,
stating “[u]nder West Virginia law, the relevance of reserves information depends on
“the methods by which an insurance company sets a reserve in a particular claim,” and
“[t]o that end, reserves information is appropriately disclosed when ‘the specific facts
of the claim in the case before [the court] directly and primarily influenced the setting
of the reserves in question.’” Id. at *6 n.5. (citing Mazzone at 356 Syl. Pt. 5, 359).
Ultimately, the Court determined in Mid-State that the reserve calculations were
relevant to the plaintiffs’ unfair-settlement claims because the information could
potentially show the insurer’s state of mind regarding the merits of the claim and scope
of the loss during certain points of the claims handling process. Id. Therefore, the Court
compelled the defendant to produce the information without redaction. Id. at *7.
In Stone, insureds alleged that their insurer committed unfair claims settlement
practices with regard to their claim under their underinsured motorist policy. Stone v.
Allstate Ins. Co., No. 2:00-cv-00059, 2000 WL 35609369, at *1 (S.D.W. Va. July 24,
2000). The defendant insurer filed a motion in limine to prohibit reference
to reserve calculations at trial, arguing that the information was unduly prejudicial and
irrelevant. Id. at *1, 3. The Court explained that reserve calculations were sometimes
admissible in bad faith insurance claims. Id. at *4. Specifically, “[i]n cases where a
party has brought a bad-faith insurance claim, reserve evidence has been held
admissible, when it is relevant to show the insurer’s state of mind in relation to its claim
settlement practices.” Id. (citations omitted). The plaintiffs in Stone argued that,
despite the fact that their insurer was on notice of the serious injuries and high value
of the claim, it failed to set a reserve at the policy limits and did not raise the amount
until well after it had been established that the other driver was one hundred percent
at fault and that Mrs. Stone was a paraplegic. Id. The Court concluded that the evidence
of when the reserve was increased was relevant circumstantial evidence for a showing
of bad faith. Id. Therefore, the Court denied the defendant’s motion to prohibit
reference to the reserve information at trial. Id.
Critically, neither of the foregoing cases cited by Plaintiffs involved the discovery
dispute presented in this case. The Mid-State case focused solely on whether the
reserve information was relevant for the purpose of discovery, and the Court in Stone
determined whether the reserve admission was admissible at trial. The defendants in
Mid-State and Stone did not argue, like Defendant asserts here, that the information
was protected by the work-product doctrine.
While neither Mid-State nor Stone provide any authority on the discovery issue
here, the case cited by Defendant, Nicholas, provides useful guidance. In Nicholas, the
Court explained that “[s]etting reserves is a method of managing litigation in which
attorneys, claims adjusters and/or line personnel compile their mental impressions
and opinions concerning the substance of the litigation as well as the cost
of litigation.” Nicholas, 235 F.R.D. at 329–30 (citation omitted). “Specifically, when
setting a reserve, attorneys and claims personnel not only assess the value of the claim
based on the available evidence and the strengths and weaknesses of the claim, but also
take into consideration the probability of an adverse judgment, the jurisdiction, and
the fees and expenses that may be incurred in defense of the claim.” Id. at 330.
There is no “hard and fast rule to determine when a document has been created
in the ordinary course of business and is not protected by the work product doctrine,
or when a document is prepared in anticipation of litigation, and, is, therefore,
protected.” Id. at 332. “Consequently, a court must carefully analyze the factual
circumstances under which the requested documents were created, consider the
purpose of the representatives in preparing the requested documents, and examine the
documents themselves.” Id.
In this case, it is not necessary to examine the documents in camera because
the factual circumstances clearly show that they are protected work product. Defendant
was on notice of potential litigation well before this reserve information was prepared.
On March 25, 2020, within six days of the accident at issue, Plaintiffs retained counsel
who contacted Defendant. (ECF No. 58-1 at 1). On October 20, 2021, Plaintiffs’ counsel
sent a letter accusing Defendant of “not treating its insureds in a fair or lawful manner;”
submitting “unreasonable responses;” and “expending all of its efforts to ‘investigate’
Mrs. Raines, while doing nothing to place her interest at least equal to its own.” (ECF
No. 58-7 at 1-2). Counsel stated that the letter constituted “Mrs. Raines’ final attempt
to get her insurer to treat her fairly.” (Id.). On November 15, 2021, Plaintiffs filed the
instant lawsuit against Defendant. (ECF No. 1-1). As a result of mediation discussions,
the parties partially settled Plaintiffs’ claims on August 17, 2022, leaving only the bad
faith and unfair trade practices claims at issue. (ECF Nos. 31, 57 at 2, 58 at 3).
Similarly, in Nicholas, the Court noted that the plaintiffs retained an attorney
shortly after the underlying motor vehicle accident, who then contacted the defendant
insurer. Nicholas, 235 F.R.D. at 332. Thus, the Court explained that the defendant was
“on notice early in the case that litigation was reasonably foreseeable,” and “its loss
reserve information, therefore, had been prepared ‘in anticipation of litigation.’” Id.
Once the defendant was on notice of potential litigation, it viewed the insureds as
plaintiffs, “and evaluated not only the substance of their claims but also the potential
financial consequences to the company resulting from a lawsuit.” Id. Therefore, the
defendant’s “primary motivating purpose for setting the loss reserves went beyond its
ordinary course of investigating and handling claims and was a financial evaluation of
the claim from the standpoint of pending or anticipated litigation.” Id. The present case
can be compared to Nicholas. See also Westfield Ins. Co. v. Carpenter Reclamation,
Inc., 301 F.R.D. 235, 253 (S.D.W. Va. 2014) (finding that the claim adjuster’s
loss reserve evaluation made “well after Westfield informed Carpenter that Carpenter’s
circumstances were not covered and after she received the phone call from Carpenter’s
attorney […] obviously occurred in contemplation of litigation and
[was] work product protected.”); Mordesovitch v. Westfield Ins. Co., 244 F. Supp.2d
636, 643 (S.D.W. Va. 2003) (“As to the work product exception, the court finds that
the features and reserve information contained in the above-referenced documents
was prepared in anticipation of litigation and reveals the mental impressions,
thoughts, and conclusions of Defendant in evaluating a legal claim. As such, these
documents are protected from disclosure pursuant to the work product exception.”)
(markings and citation omitted)).
Moreover, all of the reserve information presently at issue was prepared after
this lawsuit was filed. It was not only prepared in anticipation of litigation, but once
litigation was certain. The first document at issue, Bates Nos. 005923-005924, is a
“[p]ost suit note dated August 18, 2022 regarding reserve adjustment information and
analysis by Kristen Rock, mental impressions, thoughts, and conclusions of Westfield
and Counsel regarding Plaintiffs’ claims following mediation.” (ECF No. 78-19 at 39).
Clearly, the timing of this reserve information only one day after the partial settlement
of Plaintiffs’ claims indicates that it was prepared regarding the pending litigation. It
is readily apparent from the privilege log that Defendant adjusted its reserve with input
of counsel in light of the mediation and the remaining bad faith and unfair trade
practices claims. This reserve analysis and calculation qualifies as protected work
product.
The next document, Bates Nos. 010694-010695, is an “August 17, 2022 at 6:00
p.m. claim note by Glenn Scheuer including post suit analysis and reserves information
reflecting mental impressions, thoughts, and conclusions of Westfield and defense
counsel in evaluating Plaintiffs’ claims.” (ECF No. 78-19 at 45). This reserve
information was prepared on the day of mediation and qualifies as work product for
the same reasons expressed above. It reflects the mental impressions and opinions of
Defendant and its counsel considering the claims asserted in the pending litigation.
The remaining documents include Bates No. 010698, which is a “[p]ost suit
claim note dated July 13, 2022 by Kristen Rock regarding reserve information, mental
impressions, thoughts, and conclusions of Westfield and Counsel,” (Id. at 47), and
Bates No. 010854, which is “[p]ost suit reserve information reflecting mental
impressions, thoughts, and conclusions of Westfield and Counsel in evaluating
Plaintiffs’ claims, (id. at 50). Again, this reserve information reflects the analysis of
Defendant and its counsel concerning the pending lawsuit. Plaintiffs are not entitled to
this information. For the above reasons, the Court DENIES Plaintiffs’ Motion to
Compel and/or Motion for in Camera Review, (ECF No. 56).
The Clerk is instructed to provide a copy of this Order to counsel of record.
ENTERED: January 17, 2023
Uni ates Magistrate Judge
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