A first party bad faith action in which the West Virginia Supreme Court of Appeals held that the insurer’s national coverage counsel’s coverage opinion letters to the insurer were attorney-client privileged.
How later courts described this case
- A first party bad faith action in which the West Virginia Supreme Court of Appeals held that the insurer’s national coverage counsel’s coverage opinion letters to the insurer were attorney-client privileged.
Written by the judges who cited it.
The opinion
IN THE SUPREME COURT OF APPEALS OF WEST VIRGINIA
January 2014 Term FILED
April 10, 2014
released at 3:00 p.m.
No. 13-1172 RORY L. PERRY II, CLERK
SUPREME COURT OF APPEALS
OF WEST VIRGINIA
STATE OF WEST VIRGINIA EX REL.
MONTPELIER US INSURANCE COMPANY
AND CHARLSTON, REVICH & WOLLITZ LLP,
Petitioners
V.
HONORABLE LOUIS H. BLOOM,
JUDGE OF THE CIRCUIT COURT OF
KANAWHA COUNTY, WEST VIRGINIA;
JAMES M. BUCKLAND; B&B TRANSIT, INC.;
B&D SALVAGE, INC.; AND TIM’S SALVAGE, INC.,
Respondents
PETITION FOR WRIT OF PROHIBITION
WRIT GRANTED AS MOULDED
Submitted: March 5, 2014
Filed: April 10, 2014
Lee Murray Hall Guy R. Bucci
Sarah A. Walling Bucci, Bailey & Javins, L.C.
Jason D. Bowles Charleston, West Virginia
Jenkins Fenstermaker, PLLC
Huntington, West Virginia F. Alfred Sines, Jr.
Attorneys for Petitioner, Victoria L. Casey
Montpelier Insurance Company Charleston, West Virginia
Attorneys for Respondents,
Ancil G. Ramey James M. Buckland,
Charles F. Johns B&B Transit, Inc.,
Mark Jeffries B&D Salvage, Inc., and
Steptoe & Johnson PLLC Tim’s Salvage, Inc.
Bridgeport, West Virginia
Attorneys for Petitioner,
Charlston, Revich & Wollitz
The Opinion of the Court was delivered PER CURIAM.
SYLLABUS BY THE COURT
1. “In order to assert an attorney-client privilege, three main elements must
be present: (1) both parties must contemplate that the attorney-client relationship does or will
exist; (2) the advice must be sought by the client from the attorney in his capacity as a legal
advisor; (3) the communication between the attorney and client must be intended to be
confidential.” Syllabus point 2, State v. Burton, 163 W. Va. 40, 254 S.E.2d 129 (1979).
2. “The burden of establishing the attorney-client privilege or the work
product exception, in all their elements, always rests upon the person asserting it.” Syllabus
point. 4, State ex rel. U.S. Fidelity and Guaranty Co. v. Canady, 194 W. Va. 431, 460 S.E.2d
677 (1995).
3. “To determine whether a document was prepared in anticipation of
litigation and, is therefore, protected from disclosure under the work product doctrine, the
primary motivating purpose behind the creation of the document must have been to assist in
pending or probable future litigation.” Syllabus point 7, State ex rel. United Hospital Center,
Inc. v. Bedell, 199 W. Va. 316, 484 S.E.2d 199 (1997).
4. “Rule 26(b)(3) of the West Virginia Rules of Civil Procedure makes a
distinction between factual and opinion work product with regard to the level of necessity
i
that has to be shown to obtain their discovery.” Syllabus point 7, In re Markle, 174 W. Va.
550, 328 S.E.2d 157 (1984).
5. “The question of the relevancy of the information sought through
discovery essentially involves a determination of how substantively the information
requested bears on the issues to be tried. However, under Rule 26(b)(1) of the West Virginia
Rules of Civil Procedure, discovery is not limited only to admissible evidence, but applies
to information reasonably calculated to lead to the discovery of admissible evidence.”
Syllabus point 4, State Farm Mutual Automobile Insurance Co. v. Stephens, 188 W. Va. 622,
425 S.E.2d 577 (1992).
ii
Per Curiam:
This case was brought under the original jurisdiction of this Court by
Montpelier US Insurance Company and Charlston, Revich & Wollitz LLP (collectively
“Petitioners”), seeking a writ of prohibition to prevent enforcement of a discovery order of
the Circuit Court of Kanawha County.1 The circuit court’s order required the Petitioners to
disclose allegedly privileged documents to the plaintiffs below: James M. Buckland’s B&B
Transit, Inc.; B&D Salvage, Inc.; and Tim’s Salvage, Inc. (collectively “Respondents”).2 In
this proceeding, the Petitioners contend that the documents in question are protected by the
attorney-client privilege and the work product doctrine, and that they were not relevant to any
issue in the case. Upon consideration of the parties’ briefs and argument, the submitted
appendix, and the pertinent authorities, the writ of prohibition is hereby granted as moulded.
I.
FACTUAL AND PROCEDURAL HISTORY
This case has its origins in an action for property damage brought by Jason and
Gina Corrick (the “Corricks”) against B&B Transit.3 The Corricks filed their lawsuit in
1
Pursuant to Article VIII, Section 3, of the West Virginia Constitution, this
Court has original jurisdiction in prohibition proceedings.
2
James M. Buckland is the President of B&B Transit, Inc.; B&D Salvage, Inc.;
and Tim’s Salvage, Inc.
3
The Corricks also sued the West Virginia Department of Environmental
(continued...)
1
Logan County in January 2012, alleging that B&B Transit “negligently and unlawfully
caused a landslide” that damaged their home. B&B Transit filed a notice and coverage claim
with its insurer, Montpelier US Insurance Company (“Montpelier”). In February 2012,
Montpelier’s national coverage counsel, Charlston, Revich & Wollitz (“CRW”), notified
B&B Transit that the policy it purchased from Montpelier did not provide coverage for the
Corricks’ claims. Specifically, CRW informed B&B Transit that the policy had a subsidence
exclusion that did not cover property damage “arising out of or aggravated by the subsidence
of land as a result of landslide.” In January 2013, the Corricks amended their complaint by
taking out the language which alleged the damage was caused by a “landslide.” After the
complaint was amended, Montpelier retained counsel for B&B Transit and provided a
defense. Montpelier settled the case against B&B Transit in October 2013.
In November 2012, while the Corricks’ original complaint was still pending,
the Respondents filed a first-party bad faith claim4 against the Petitioners.5 In February 2013,
the Respondents filed an amended complaint.6 While the case was pending, the Respondents
3
(...continued)
Protection and the State of West Virginia.
4
The record does not disclose why the action was filed by four plaintiffs when
only B&B Transit was sued by the Corricks.
5
The Respondents named additional defendants in the lawsuit.
6
The original complaint was not made part of the record, so we do not know
(continued...)
2
served discovery requests on the Petitioners.7 CRW opposed disclosure of certain requested
documents based upon the attorney-client privilege, work product doctrine, and relevancy.
The Respondents filed a motion to compel disclosure of the documents. The circuit court
referred the matter to a discovery commissioner.
The discovery commissioner reviewed, in camera, the documents objected to
by CRW and held a hearing on the matter. The discovery commissioner subsequently issued
a recommended decision that required CRW to disclose (1) copies of any agreement or
contract with Montpelier, including billing statements;8 (2) copies of any commercial liability
coverage opinion letters provided to Montpelier prior to the claim by the Corricks;9 (3) copies
of any coverage opinion letters provided to Montpelier finding coverage for an alleged
claim;10 and (4) copies of any seminar or training materials prepared for any insurer or
6
(...continued)
what differences existed between the two complaints.
7
The Petitioners have separate counsel.
8
These documents were tendered pursuant to Respondents’ Request for
Production No. 10.
9
These documents were tendered pursuant to Respondents’ Request for
Production No. 11.
10
These documents were tendered pursuant to Respondents’ Request for
Production No. 20.
3
industry group related to coverage interpretation or extra-contractual liability.11 The
Petitioners filed objections to the discovery commissioner’s recommendation.12 On
November 12, 2013, the circuit court entered an order adopting the discovery commissioner’s
recommendation. The Petitioners thereafter filed the instant petition for a writ of
prohibition.13
II.
STANDARD OF REVIEW
In this proceeding, we are asked to review a discovery order by the circuit court
that adopted recommendations of a discovery commissioner. We have established that “[a]
writ of prohibition is available to correct a clear legal error resulting from a trial court’s
substantial abuse of its discretion in regard to discovery orders.” Syl. pt. 1, State Farm Mut.
Auto. Ins. Co. v. Stephens, 188 W. Va. 622, 425 S.E.2d 577 (1992). Insofar as it is an
extraordinary remedy, “[p]rohibition lies only to restrain inferior courts from proceeding in
causes over which they have no jurisdiction, or, in which, having jurisdiction, they are
exceeding their legitimate powers and may not be used as a substitute for writ of error, appeal
or certiorari.” Syl. pt. 1, Crawford v. Taylor, 138 W. Va. 207, 75 S.E.2d 370 (1953). In
11
These documents were tendered pursuant to Respondents’ Request for
Production No. 22.
12
The discovery commissioner appears to have made a recommendation on
other matters that are not part of this proceeding.
13
The Petitioners filed a joint petition.
4
cases where a trial court is alleged to have exceeded its authority, we apply the following
standard of review:
In determining whether to entertain and issue the writ of
prohibition for cases not involving an absence of jurisdiction but
only where it is claimed that the lower tribunal exceeded its
legitimate powers, this Court will examine five factors: (1)
whether the party seeking the writ has no other adequate means,
such as direct appeal, to obtain the desired relief; (2) whether the
petitioner will be damaged or prejudiced in a way that is not
correctable on appeal; (3) whether the lower tribunal’s order is
clearly erroneous as a matter of law; (4) whether the lower
tribunal’s order is an oft repeated error or manifests persistent
disregard for either procedural or substantive law; and (5)
whether the lower tribunal’s order raises new and important
problems or issues of law of first impression. These factors are
general guidelines that serve as a useful starting point for
determining whether a discretionary writ of prohibition should
issue. Although all five factors need not be satisfied, it is clear
that the third factor, the existence of clear error as a matter of
law, should be given substantial weight.
Syl. pt. 4, State ex rel. Hoover v. Berger, 199 W. Va. 12, 483 S.E.2d 12 (1996). With the
foregoing standards as our foundation, we now consider the merits of the Petitioners’ request
for a writ of prohibition.
5
III.
DISCUSSION
The Petitioners have set out their arguments in three parts: (1) attorney-client
privilege applied to three types of documents, (2) work product doctrine applied to all the
documents, and (3) relevancy of the documents. We will examine the issues separately.14
A. Application of the Attorney-Client Privilege
The Petitioners argue that the attorney-client privilege prevented disclosure of
(1) copies of any commercial liability coverage opinion letter provided to Montpelier prior
to the claim by the Corricks; (2) copies of coverage opinion letters provided to Montpelier
finding coverage for an alleged claim; and (3) copies of any seminar or training materials
prepared for any insurer or industry group related to coverage interpretation or
extra-contractual liability. We will examine the first two issues together and the third issue
separately. However, before doing so, we will set out some general principles that will guide
our analysis.
14
In anticipation of an argument by the Respondents, the Petitioners have asked
this Court not to consider the application of the crime-fraud exception to disclosure of the
documents at issue. The Petitioners argue that the crime-fraud exception was not relied upon
by the discovery commissioner nor the circuit court. The Respondents have asked this Court
to apply the crime-fraud exception to the documents. We decline to address the crime-fraud
issue on the merits because it was not relied upon by the discovery commissioner or circuit
court, nor was it presented below by the Respondents. See Syl. Pt. 4, Wheeling Downs
Racing Ass’n v. West Virginia Sportservice, Inc., 157 W. Va. 93, 199 S.E.2d 308 (1973)
(“This Court will not consider questions, nonjurisdictional in their nature, which have not
been acted upon by the trial court.”).
6
“Confidential communications made by a client or an attorney to one another
are protected by the attorney-client privilege.” Franklin D. Cleckley, Robin J. Davis, &
Louis J. Palmer, Jr., Litigation Handbook on West Virginia Rules of Civil Procedure §
26(b)(1), at 693 (4th ed. 2012). This Court has noted that “the attorney-client privilege
historically belongs to the client.” State of West Virginia ex rel. Allstate Ins. Co. v. Madden,
215 W. Va. 705, 714, 601 S.E.2d 25, 34 (2004).15 It also has been recognized that “[t]he fact
that the client is a corporation does not vitiate the attorney-client privilege.” Southeastern
Pennsylvania Transp. Auth. v. Caremarkpcs Health, 254 F.R.D. 253, 257 (E.D. Pa. 2008).
In syllabus point 2 of State v. Burton, 163 W. Va. 40, 254 S.E.2d 129 (1979), this Court set
forth a three-prong test to determine whether the attorney-client privilege may be asserted
to prevent disclosure of communication:
In order to assert an attorney-client privilege, three main
elements must be present: (1) both parties must contemplate that
the attorney-client relationship does or will exist; (2) the advice
must be sought by the client from the attorney in his capacity as
a legal advisor; (3) the communication between the attorney and
client must be intended to be confidential.
We also have held that “[t]he burden of establishing the attorney-client privilege or the work
product exception, in all their elements, always rests upon the person asserting it.” Syl. pt.
4, State ex rel. U.S. Fid. and Guar. Co. v. Canady, 194 W. Va. 431, 460 S.E.2d 677 (1995).
15
Montpelier’s standing to join this proceeding is due to the fact that it was
CRW’s client and therefore controls the attorney-client privilege asserted in this matter.
7
1. Coverage opinion letters provided to Montpelier by CRW. The
Petitioners argue that the attorney-client privilege prevented disclosure of (1) coverage
opinion letters CRW provided to Montpelier prior to the claim by the Corricks and (2)
coverage opinion letters provided to Montpelier that found coverage for claims. The order
of the discovery commissioner found that the attorney-client privilege did not apply to these
documents because “CRW communicated its opinion coverage interpretations of the covered
party’s insurance policy to a non-client by a letter.” As we understand the order and the issue
as briefed by the parties, merely because CRW sent letters to Montpelier’s insureds regarding
Montpelier’s position on insurance coverage for a claim, the attorney-client privilege was
waived as to coverage opinion letters CRW sent to Montpelier. The Respondents summarize
their argument by indicating that, “[w]here an attorney acts to investigate a claim and has
direct contact with third parties as a result of the investigation, the attorney-client privilege
does not apply.”16 Under the facts of this case, we disagree.
16
The Respondents also have made an undeveloped statement that the attorney-
client privilege was waived because Montpelier placed CRW’s advice in issue. We have
held that the assertion of legal advice as a defense “does not constitute a waiver of the
privilege.” State ex rel. Marshall Cnty. Comm’n v. Carter, 225 W. Va. 68, 77, 689 S.E.2d
796, 805 (2010). We have explained that legal advice by counsel only “becomes an issue
where a client takes affirmative action to assert a defense and attempts to prove that defense
by disclosing or describing an attorney’s communication.” State ex rel. U.S. Fid. & Guar.
Co. v. Canady, 194 W. Va. 431, 442 n.16, 460 S.E.2d 677, 688 n.16 (1995) (citations
omitted). The Respondents have failed to develop this issue for this Court to make a
determination of whether the legal advice exception has any application in this case. The
general rule of this Court is that “issues which are . . . mentioned only in passing but are not
supported with pertinent authority, are not considered[.]” State v. LaRock, 196 W. Va. 294,
(continued...)
8
It has been recognized “that an insurance company’s retention of legal counsel
to interpret the policy, investigate the details surrounding the damage, and to determine
whether the insurance company is bound for all or some of the damage, is a classic example
of a client seeking legal advice from an attorney.” Hartford Fin. Servs. Grp., Inc. v. Lake
Cnty. Park & Rec. Bd., 717 N.E.2d 1232, 1236 (Ind. App. 1999) (internal quotations and
citation omitted). In this situation, a coverage opinion letter written by outside counsel to the
insurer containing legal advice “is protected by the attorney-client privilege because it
involved confidential communications.” Howard v. Dravet, 813 N.E.2d 1217, 1222
(Ind. Ct. App.2004).
In the instant case, the Respondents contend that, because the Petitioners
disclosed the recommendation of the coverage opinion letters to the insureds, the
attorney-client privilege was lost as to the actual coverage opinion letters. As a general
matter, it has been recognized that “‘[s]tatements made by a client to an attorney are not
within the attorney-client privilege if the information is given with the intent that it be used
and disseminated to third parties.’” State ex rel. Ash v. Swope, 232 W. Va. 231, ___, 751
S.E.2d 751, 757 (2013) (quoting Franklin D. Cleckley, Robin J. Davis, & Louis J. Palmer,
Handbook on Evidence for West Virginia Lawyers, § 501.02[7][F] (5th ed. 2012). See
16
(...continued)
302, 470 S.E.2d 613, 621 (1996).
9
United States v. Martin, 773 F.2d 579, 584 (4th Cir.1985) (“To be privileged it must be
intended that information given [to] an attorney remain confidential; information given with
the intent that it be used . . . is inconsistent with the confidentiality asserted.”).17 Application
of the third-party disclosure exception to the attorney-client privilege, in the context of the
Respondents’ argument, appears to be novel. The Respondents have not cited to, nor have
we found, any case in the country that has held that the attorney-client privilege does not
apply to a coverage opinion letter when an insurer communicates the gist of the
recommendation contained in the letter to the insured. This is not to say that the issue of
disclosure of a coverage opinion letter and the attorney-client privilege has not been litigated.
This issue is frequently litigated, but usually in the context of an insured seeking an
attorney’s coverage opinion letter because it was part of the insured’s claim file.
For example, the decision in Bertelsen v. Allstate Insurance Co., 796 N.W.2d
685 (S.D. 2011), involved breach of contract and first-party bad faith claims against an
17
We recognize that “[s]everal courts hold that the attorney-client privilege
does not apply where the attorney acted as a claims adjustor on the initial claim determination
because the attorney is not acting as a lawyer in such instance.” Dakota, Minnesota &
Eastern R.R. Corp. v. Acuity, 771 N.W.2d 623, 638 (S.D. 2009). See Woodruff v. American
Family Mut. Ins. Co., 291 F.R.D. 239, 246 (S.D. Ind. 2013); First Aviation Servs., Inc. v.
Gulf Ins. Co., 205 F.R.D. 65, 68-69 (D. Conn. 2001); Allendale Mut. Ins. Co. v. Bull Data
Sys., Inc., 152 F.R.D. 132, 137 (N.D. Ill.1993); Mission Nat’l Ins. Co. v. Lilly, 112 F.R.D.
160, 163 (D. Minn. 1986); Evans v. United Servs. Auto. Ass’n., 541 S.E.2d 782, 791
(N.C. Ct. App. 2001). In the instant case, the Respondents have not presented any evidence
to show that CRW was acting as a claims adjuster.
10
insurer. The insured in the case was injured in an auto accident. The insurer denied coverage
on the basis of a workers’ compensation exclusion in the policy. The insured ultimately
prevailed on the breach of contract claim, but the jury rejected the bad faith claim.18 The
insured appealed the adverse bad faith claim verdict. One of the issues raised on appeal by
the insured was that the trial court committed error in finding the attorney-client privilege
protected from disclosure a coverage opinion letter in the claim file that was written for the
insurer by outside counsel. The appellate court found that the attorney-client privilege did
in fact apply to the coverage opinion letter:
Under the medical payments provision in the policy,
Allstate contracted to pay medical benefits directly to the
[insured], creating an adversarial first-party coverage situation.
When the [insured] notified Allstate of [the] claim, Allstate
retained outside counsel to obtain a professional legal opinion
on what it considered a novel question of coverage. Allstate’s
retention of counsel was for the purpose of facilitating the
rendition of professional legal services, which is a classic
example of a client seeking legal advice from an attorney. The
[insured] w[as] not [a] joint client[] of the counsel Allstate
retained. It thus appears that the attorney-client privilege
protects the coverage opinions outside counsel prepared for
Allstate during the investigation of [insured’s] claim.
Bertelsen, 796 N.W.2d at 701 (internal quotations and citations omitted).
In the case of Aetna Casualty & Surety Co. v. Superior Court, 153 Cal. App. 3d
467 (1984), an insurer filed a declaratory relief action against its insured to determine
18
The insured’s spouse was also a plaintiff in the case.
11
whether the policy it issued covered the destruction of the insured’s home due to a mudslide.
The insured filed a claim alleging bad faith in the denial of insurance coverage. The insured
also served a subpoena duces tecum seeking files from the attorney who investigated the
claim for the insurer to determine whether the policy covered the accident. The insurer filed
a motion to quash the subpoena. The trial court denied the motion and the insurer filed a
petition for an extraordinary writ with the appellate court. During the proceeding before the
appellate court, the insured conceded that the attorney-client privilege attached to many of
the documents in the files. However, the insured contended that the privilege did not apply
because he and the insurer were joint clients of the attorney; the insurer was relying on advice
of counsel as a defense; the attorney was retained by the insurer to act in the capacity of an
agent other than an attorney; and the insurer’s state of mind was at issue. The appellate court
rejected all of the insured’s arguments. Pertinent to the discussion in the instant case, the
appellate court in Aetna held the following:
[A]n insurance company should be free to seek legal advice in
cases where coverage is unclear without fearing that the
communications necessary to obtain that advice will later
become available to an insured who is dissatisfied with a
decision to deny coverage. A contrary rule would have a
chilling effect on an insurance company’s decision to seek legal
advice regarding close coverage questions, and would deserve
the primary purpose of the attorney-client privilege-to facilitate
the uninhibited flow of information between a lawyer and client
so as to lead to an accurate ascertainment and enforcement of
rights.
....
12
[I]n the case before us Aetna retained Thornton to investigate
Pietrzak’s claim and make a coverage determination under the
policy. This is a classic example of a client seeking legal advice
from an attorney. The attorney was given a legal document (the
insurance policy) and was asked to interpret the policy and to
investigate the events that resulted in damage to determine
whether Aetna was legally bound to provide coverage for such
damage.
....
In the instant case it appears that the judge did not
conduct an in camera examination of the written or verbal
communications which Pietrzak seeks to discover. . . . In these
circumstances, it was error for the judge to give Pietrzak carte
blanche access to the files and testimony, as he did.
Aetna, 153 Cal. App. 3d at 474-76. See State Farm Fire & Cas. Co. v. Superior Court, 206
Cal. App. 3d 1428 (1988) (applying Aetna).
The decision in Howard v. Dravet, 813 N.E.2d 1217 (Ind. Ct. App. 2004),
involved a litigant’s attempt to obtain the complete investigation file involving three third-
party insureds. The decision in Howard was an action for injuries and wrongful death. The
initial three defendants in the case were all insured by the same insurer, Great West Casualty
Company (“Great West”). Great West provided a defense for all three defendants. After the
insurer settled the case for all three defendants, but before the case was actually dismissed,
the plaintiffs amended the complaint and added a defendant, an auto repair shop owner
named Paul Howard. Mr. Howard served a request for production of documents directly on
Great West (a non-named party), seeking Great West’s complete file on the accident. Great
13
West filed a motion to quash the request on the grounds of the attorney-client privilege and
work product doctrine. The trial court granted the motion. Mr. Howard appealed the
decision. One of the issues decided on appeal was whether the insurer’s coverage opinion
letter was protected by the attorney-client privilege. The appellate court summarily found
that the privilege applied to the coverage opinion letter:
Here, the evaluation letter, which contained legal advice
to Great West from its counsel, is protected by the
attorney-client privilege because it involved confidential
communications.
Howard, 813 N.E.2d at 1222.19
The Petitioners in the instant case also cited to the decision in United Services
Automobile Association v. Roth, 859 So. 2d 1270 (Fla. Dist. Ct. App. 2003), as authority for
finding the attorney-client privilege applies. The decision in Roth is a per curiam opinion
that summarily addressed the attorney-client privilege. While it is not totally clear, it appears
that the insureds in Roth requested the insurer disclose coverage opinion letters involving
other insureds. The trial court ordered the documents be disclosed. The appellate court
disagreed and tersely wrote:
We have reviewed the documents in question and find
that they are protected by the attorney-client privilege. . . . That
privilege covers communications on legal matters between
19
The opinion went on to hold that the privilege attached to the coverage
opinion letter did not extend to other documents in the claim file.
14
counsel and client. Any communication to which the privilege
attaches is absolutely immune from disclosure. The trial court
deviated from the essential requirements of the law when it
ordered USAA to produce these documents.
Roth, 859 So. 2d at 1271. See Arch Coal, Inc. v. Federal Ins. Co., No. 4:05CV00712 ERW,
2006 WL 1391317, at*1 (E.D. Mo. May 22, 2006) (“The coverage opinion contains a
thorough legal analysis of the case. The coverage opinion constitutes a communication
between an attorney and his client and is protected by the attorney-client privilege.”).
The insurers in Bertelsen, Aetna, and Howard informed the insureds of the
recommendation contained in the actual coverage opinion letters submitted by outside
counsel. Even so, the decision in Bertelsen, Aetna, and Howard found that the coverage
opinion letters were protected by the attorney-client privilege. Moreover, the opinion in Roth
appears to be on all-fours with the instant case, with respect to imposing the attorney-client
privilege on coverage opinion letters written for claims not involved in that litigation. We
find the analysis in the above-authorities is applicable to the request for coverage opinion
letters in this case. Consequently, we find the attorney-client-privilege protected the
coverage opinion letters from disclosure.20 In rendering this finding, we reject the
20
We should point out that in reviewing the documents placed under seal with
this Court, we found six drafts of letters written by CRW that were addressed to
policyholders, but submitted to Montpelier for its approval. We are not certain which
discovery request called for the production of these draft letters. Nothing in the record
submitted to this Court demonstrates that these draft letters were in fact sent out as proposed
(continued...)
15
Respondents’ reliance on State ex rel. United Hospital Center, Inc. v. Bedell, 199 W. Va.
316, 484 S.E.2d 199 (1997).
The decision in Bedell was a medical malpractice action. The plaintiff in the
case fell when a hospital nurse was attempting to help her get out of bed. After the accident,
the hospital’s general counsel/risk manager investigated the incident and thereafter
completed a “General Counsel/Risk Manager’s Investigation Form,” which consisted of four
pages of notes and a statement by the nurse who attended the plaintiff. During discovery in
the case, the plaintiff requested, among other things, disclosure of the investigation report
prepared by the hospital’s general counsel/risk manager.21 The circuit court ordered
disclosure of the report. The hospital filed a petition for a writ of prohibition with this Court
seeking to prevent disclosure of the report.22 The hospital contended that the report was
20
(...continued)
by CRW. Without any evidence showing the actual dissemination of any of the letters to
insureds, the draft letters retained their status as legal advice to Montpelier and, as such, were
protected from disclosure by the attorney-client privilege. See Yamagata Enters., Inc. v. Gulf
Ins. Co., No. 2:07-CV-00644-HDM-GWF, 2008 WL 942567, at *1 (D. Nev. April 7, 2008)
(“Having considered this matter and heard oral argument of counsel, the Court finds that
Plaintiff has not demonstrated sufficient grounds to overcome the attorney-client privilege
or the work-product doctrine regarding Defendant’s confidential communications with its
outside counsel relating to the issue of policy coverage or to obtain production of counsel’s
draft letters.”).
21
The plaintiff died during the course of the litigation.
22
The hospital also sought to prevent disclosure of other matters that are not
relevant to this case.
16
protected from disclosure by the attorney-client privilege and work product doctrine. With
respect to the attorney-client privilege claim, this Court disposed of the issue in three
sentences. The opinion held that
the hospital has failed to articulate a clear argument as to how
the elements of the attorney-client privilege have been met with
regard to the investigation report. As a result, the hospital has
failed to carry its burden of establishing the attorney-client
privilege, in all its elements, with regard to . . . the . . .
investigation report.
Bedell, 199 W. Va. at 326, 484 S.E.2d at 209 (footnote and citation omitted). Next, the
opinion pointed out in a footnote that “the hospital’s arguments with regard to the
investigation report largely consisted of protection of this document under the work product
doctrine.” Bedell, 199 W. Va. at 326 n.12, 484 S.E.2d at 209 n.12.
The summary resolution of the attorney-client privilege issue in Bedell has no
application to the instant case. The attorney in Bedell simply filled out a fact-based accident
report. There was no evidence that the hospital asked the attorney to render a legal opinion
on anything in the report. Conversely, the documents at issue in the instant case involve legal
opinions requested by Montpelier from outside counsel. Obviously, in rendering those legal
opinions, CRW had to examine the facts unique to each case. However, the critical work of
CRW was a determination of whether the policy language, judicial decisions, and other
applicable laws obligated Montpelier to recognize the claims filed. There was no evidence
17
of this type of legal work being performed by the attorney in Bedell. Therefore Bedell does
not alter our determination that the attorney-client privilege prevented disclosure of the
coverage opinion letters in this case.23
2. Seminar and training materials. The circuit court ordered CRW to
disclose all seminar or training materials it prepared for any insurer or industry group
involving coverage interpretation or extra-contractual liability. The Petitioners argue that
these documents were prepared for nonparties and are protected by the attorney-client
23
The discovery commissioner also found, and the Respondents argue, that
because CRW was named as a defendant, the attorney-client privilege was waived as to the
coverage opinion letters. We summarily reject this contention. The Respondents have not
cited to any authority, nor have we found any, that supports the discovery commissioner’s
finding. This Court has previously recognized that an attorney for an insurance company
can, in fact, assert the attorney-client privilege when being deposed in a bad faith case. See
Syl. pt. 11, State of West Virginia ex rel. Allstate Ins. Co. v. Madden, 215 W. Va. 705, 601
S.E.2d 25 (2004) (“In an action for bad faith against an insurer, the general procedure to be
followed to depose attorneys employed by the insurer is as follows: (1) The party desiring
to take the deposition(s) must do so in accordance with the mandates of Rule 30 of the West
Virginia Rules of Civil Procedure; (2) If the responding party asserts a privilege to any of the
questions posed, the responding party must object to such questioning in accordance with the
directives of Rule 30(d)(1); and (3) If the party seeking testimony for which a privilege is
claimed files a motion to compel, or the responding party files a motion for a protective
order, the trial court must hold an in camera proceeding and make an independent
determination of the status of each communication the responding party seeks to shield from
discovery.”). The discovery commissioner stated in his recommendation that this Court
would not apply the Madden limitations because CRW is a party. We fail to see a reason to
restrict Madden. Whether the attorney is a joint defendant or nonparty deponent is irrelevant
to the client’s right to prevent disclosure of attorney-client communication. The privilege
is not that of CRW. The privilege belongs to the client, Montpelier. See State ex rel. Allstate
Ins. Co. v. Gaughan, 203 W. Va. 358, 372 n.21, 508 S.E.2d 75, 89 n.21 (1998) (“The
attorney-client privilege belongs to the client.”).
18
privilege. The recommended decision of the discovery commissioner does not contain any
specific analysis on this issue. The Respondents have argued simply that the training
materials are discoverable because they “would apply directly to the process and mode by
which . . . claims are handled and considered by the Petitioners.”
Our research has revealed that at least one court has addressed the issue of the
discovery of insurance company training materials and the attorney-client privilege.24 In
Santer v. Teachers Insurance and Annuity Association, No. 06-CV-1863, 2008 WL 821060
(E.D. Pa. Mar. 25, 2008), a federal district court issued a memorandum order on the
plaintiff’s request to discover materials related to training that defendant insurer provided to
its employees which concerned bad faith insurance practices, insurance litigation in general,
and privacy rights. The defendant objected to production on the grounds that the materials
were subject to the attorney-client privilege. The district court agreed as follows:
24
We will note that this issue is usually litigated in the context of trade secrets.
Several courts have concluded that insurers’ training manuals contain trade secrets and have
therefore granted protective orders for them. See Buzoiu v. Risk Mgmt. Alts., Inc., 2004 WL
870700 (E.D. Pa. Apr. 5, 2004); Hamilton v. State Farm Mut. Auto. Ins. Co., 204 F.R.D. 420
(S.D. Ind. 2001); Bertelsen v. Allstate Ins. Co., 796 N.W.2d 685 (S.D. 2011). But other
courts have denied insurers’ motions for protective orders of their training manuals because
they did not present sufficient evidence to establish that the manuals contained trade secrets.
See Adams v. Allstate Ins. Co., 189 F.R.D. 331 (E.D. Pa. 1999); McCallum v. Allstate Prop.
& Cas. Ins. Co., 204 P.3d 944 (Wash. Ct. App. 2009); Woo v. Fireman’s Fund Ins. Co., 154
P.3d 236 (Wash. Ct. App. 2007);. In the instant proceeding, the Petitioners have not raised
a trade secrets objection.
19
After careful and meticulous in camera review of the
materials plaintiff seeks, the Court finds that the documents are
privileged. Standard’s in-house attorneys prepared the materials
for the purpose of answering their clients’ questions concerning
how statutes and court decisions in the areas of bad faith,
insurance litigation, and privacy affect the way Standard handles
claims. Standard’s attorneys then presented these materials to
Standard claims representatives during training sessions in a
question and answer format. The contents of the materials,
generally speaking, include explanations of basic legal concepts
and direction concerning where claims representatives fit into
the legal process when Standard is sued. The materials are thus
communications from an attorney to a client that reflect
communications from the client to the attorney for the purpose
of securing an opinion of law.
Santer, 2008 WL 821060, at *1.
The decision in Santer is instructive on the resolution of the seminar/training
materials sought in this case. We have reviewed all of the documents submitted under this
discovery request. All of the documents reflect CRW’s legal opinion on specific topics. The
documents explain legal concepts and procedures and specific policy issues. As recognized
in Santer, these documents clearly demonstrate specific requests by CRW’s clients for legal
opinions on specific subjects. Further, as in Santer, we find these documents are protected
by the attorney-client privilege.
B. Application of Work Product Doctrine
20
The circuit court ordered CRW to disclose its contract with Montpelier and its
billing statements for the work performed on the coverage opinion letter for the claim filed
by Respondents. The Petitioners contend that this material was protected from disclosure by
the work product doctrine.25
The work product doctrine is embodied in Rule 26(b)(3) of the West Virginia
Rules of Civil Procedure.26 We have held that the “work product protection under the
provisions of Rule 26 extends only to documents prepared in anticipation of litigation.” State
ex rel. Erie Ins. Prop. & Cas. Co. v. Mazzone, 220 W. Va. 525, 534, 648 S.E.2d 31, 40
25
The Petitioners also have also argued that the work product doctrine prevents
disclosure of the coverage opinion letters and training documents. Insofar as we have
determined that the attorney-client privilege protects those documents from disclosure, we
need not address those matters under the work product doctrine.
26
Rule 26(b)(3) provides as follows:
(b) Subject to the provisions of subdivision (b)(4) of this
rule, a party may obtain discovery of documents and tangible
things otherwise discoverable under subdivision (b)(1) of this
rule and prepared in anticipation of litigation or for trial by or
for another party or by or for that other party’s representative
(including the party’s attorney, consultant, surety, indemnitor,
insurer, or agent) only upon a showing that the party seeking
discovery has substantial need of the materials in the preparation
of the party’s case and that the party is unable without undue
hardship to obtain the substantial equivalent of the materials by
other means. In ordering discovery of such materials when the
required showing has been made, the court shall protect against
disclosure of the mental impressions, conclusions, opinions, or
legal theories of an attorney or other representative of a party
concerning the litigation.
21
(2007). We have recognized that “documents prepared in the regular course of the
compiler’s business, rather than specifically for litigation, even if it is apparent that a party
may soon resort to litigation are not protected from discovery as work product.” State ex rel.
United Hosp. Ctr., Inc. v. Bedell, 199 W. Va. 316, 328, 484 S.E.2d 199, 211 (1997) (internal
quotations and citation omitted). This Court also has held that, “[t]o determine whether a
document was prepared in anticipation of litigation and, is therefore, protected from
disclosure under the work product doctrine, the primary motivating purpose behind the
creation of the document must have been to assist in pending or probable future litigation.”
Syl. pt. 7, Bedell, id. The “authority to invoke the protection of the work product doctrine
generally rests exclusively with attorneys[.]” State ex rel. Erie Ins. Prop. & Cas. Co. v.
Mazzone, 220 W. Va. 525, 532, 648 S.E.2d 31, 38 (2007). It has been held that “Rule
26(b)(3) of the West Virginia Rules of Civil Procedure makes a distinction between factual
and opinion work product with regard to the level of necessity that has to be shown to obtain
their discovery.” Syl. pt. 7, In re Markle, 174 W. Va. 550, 328 S.E.2d 157 (1984). This
distinction has been described as follows:
Under Rule 26(b)(3), factual work product refers to
documents and tangible things that were prepared in anticipation
of litigation or for trial (1) by or for a party, or (2) by or for that
party’s representative, which includes an attorney, consultant,
surety, indemnitor, insurer, or agent. When factual work
product is involved, the party demanding production must show
a substantial need for the material and establish that the same
material or its equivalent cannot be obtained through other
means without undue hardship. Opinion work product consists
of mental impressions, conclusions, opinions or legal theories
22
that are contained in factual work product. Where opinion work
product is involved, the showing required to obtain discovery is
stronger than that for factual work product, because the rule
states that the court shall protect against disclosure of mental
impressions, conclusions, opinions or legal theories. Opinion
work product enjoys a nearly absolute immunity and can be
discovered in only very rare and extraordinary circumstances.
State ex rel. Erie Ins. Prop. & Cas. Co. v. Mazzone, 218 W. Va. 593, 599, 625 S.E.2d 355,
361 (2005) (Davis, J., concurring). It has been noted that “the burden of establishing the
work product exception always rests upon the person asserting it.” Cleckley, Davis, &
Palmer, Litigation Handbook § 26(b)(3), at 721.
The issue of whether retention agreements and billing statements are protected
from disclosure under the work product doctrine is one of first impression for this Court.
However, the issue has been addressed in other jurisdictions:
Generally speaking, attorney’s retainer agreements are
not privileged. . . . Additionally, information relating billing,
contingency fee contracts, fee-splitting arrangements, hourly
rates, hours spent by attorneys working on the litigation, and
payment attorney’s fees does not fall within either the
attorney-client or the work product privilege.
Monroe’s Estate v. Bottle Rock Power Corp., No. 03-2682, 2004 WL 737463, at*11
(E.D. La. Apr. 2, 2004). See Martin v. Martin, No. 2011-T-0034, 2012 WL 5195816, at*9
(Ohio App. 2012) (Grendell, J., dissenting) (“With respect to . . . the fee agreement and
billing statements, it has been held that documents such as time sheets and billing records can
generally be categorized as routine office records that fall outside the definition of trial
23
preparation records, and, consequently, are not covered by attorney-client privilege or work
product.”). It has been observed “that the motivating force behind the preparation of attorney
invoices is to secure payment, and therefore, attorney billing records are not likely to contain
disclosures of confidential information or mental impressions, conclusions, or opinions in
the nature of work product.” Schenck v. Township of Center, Butler Cnty., 975 A.2d 591,
595 (Pa. 2009) (Saylor, J., dissenting). See Anderson Columbia v. Brown, 902 So. 2d 838,
841-42 (Fla. Dist. Ct. App. 2005) (“The hours expended and rate charged by defense counsel
is not information protected by either the attorney-client or work product privilege.”);
Freebird, Inc. v. Cimarex Energy Co., 264 P.3d 500, 507 (Kan. Ct. App. 2011) (“Likewise,
the work-product doctrine . . . does not offer a per se exemption for attorney billing
statements. Certainly, if the billing statement narrative reflected litigation strategy or
specified the nature of the services provided, such as research to a particular area of law, it
may be privileged.”).
Under certain circumstances, retention agreements and “details in billing
statements may reveal confidential communications between client and attorney or the
attorney’s mental impressions or legal theories, that is, his work product, which is protected
and generally not open to discovery.” Hanover Ins. Co. v. Rapo & Jepsen Ins. Servs., Inc.,
870 N.E.2d 1105, 1114 (Mass. 2007). See Shell v. Drew & Ward Co., 897 N.E.2d 201, 206
(Ohio Ct. App. 2008) (“Having determined that both the fee agreements and the billing
24
records in this case contain privileged information, we determine that the trial court erred in
concluding otherwise and in ordering their disclosure.”). The court in Shell found billing
statements protected from disclosure because “[t]hey contain[ed] the names of persons to
whom [the attorney] spoke about the . . . litigation and the types of documents [he] reviewed
in preparation for the . . . litigation, as well as different areas of law that [he] had researched
in preparation for the litigation.” Shell, 897 N.E.2d at 206. See Hewes v. Langston, 853
So. 2d 1237, 1249 (Miss. 2003) (“We conclude that the billing statements and DayTimer
entries are the type of detailed statements that are protected by the work product doctrine, and
the trial court erred in ordering them produced.”). However, it has been said that “[t]o the
extent [retention agreements and] billing records may contain ‘ordinary work product’ or
‘opinion work product,’ [they] are . . . subject to redaction of such information.” Tacke v.
Energy West, Inc., 227 P.3d 601, 610 (Mont. 2010). See Sokol Holdings, Inc. v. Dorsey &
Whitney, LLP, 2009 WL 2501542, No. C.A. No. 3874-VCS, at*8 (Del. Ch. Aug. 5, 2009)
(“[A]lthough attorney timesheets and invoices may be redacted to the extent they reveal the
strategic thought processes of counsel, the basic information of those documents-hours and
billing-remains discoverable.” (footnote added)); McCarthy v. Slade Assocs., Inc., 972
N.E.2d 1037, 1050 (Mass. 2012) (“To the extent that a particular description of services in
one or more of the bills might contain substantive references to privileged attorney-client
communications, these entries may be redacted by the motion judge.”).
25
In the instant proceeding, the Petitioners argue generally that the retention
agreement and billing statements were protected by the work product doctrine.27 The
Petitioners’ brief did not make any specific work product argument regarding the retention
agreement.28 With respect to the billing statements, the Petitioners argued that those
documents reveal the mental impression of counsel, because they “reveal exactly what was
done, how long it took and precisely the issues researched, and how long such research and
writing took.”29 We disagree.
We have reviewed both the retention agreement between CRW and Montpelier,
and the two billing statements tendered by CRW. The retention agreement is a general
agreement that states how legal work would be assigned to CRW, how conflict of interests
would be resolved, how billing would occur, CRW’s obligation to obtain professional
liability insurance, how disputes between the parties would be resolved, and a few other
miscellaneous matters. Nothing contained in the retention agreement would make either
prong of the work product doctrine applicable. See Gold Standard, Inc. v. American Barrick
Res. Corp. 801 P.2d 909, 911 (Utah1990) (“[T]he primary purpose behind creating the June
27
The Petitioners allege that the discovery commissioner reviewed the
discovery requests only under the factual work product prong.
28
The bulk of Petitioners’ focus under the work product analysis was on the
coverage opinion letters–which we disposed of under the attorney-client privilege.
29
It will be noted that the discovery commissioner recommended redacting the
amount actually charged for each task performed.
26
11 letter was not ‘to assist in pending or impending litigation.’ There is no indication that
the letter or ideas generated by the letter were intended for use in litigation. . . . It outlines
a retainer agreement and sets up a plan for allocating costs and burdens. . . . The letter does
not contain any legal strategies, theories, or conclusions[.]”). With respect to the two billing
statements, those documents are typical non-protected billing statements that provide very
general descriptions of the work performed, the initials of the attorney performing the work,
and the time it took to perform each task (as indicated, the actual amount charged was
ordered redacted). See McCarthy v. Slade Assocs., Inc., 972 N.E.2d 1037, 1050-51 (Mass.
2012) (“[A]s a general proposition, billing records are just that-records of amounts being
billed to a particular client for services rendered and, presumably, a description of those
services, the identity of those who rendered them and the time they each spent in doing so,
and actual costs incurred. This is usually the stuff of fact, not opinion. To the extent that a
particular description of services in one or more of the bills might contain substantive
references to privileged attorney-client communications, these entries may be redacted by the
motion judge.”). Therefore, we find that the circuit court was correct in adopting the
discovery commissioner’s recommendation that the work product doctrine did not prevent
disclosure of the retention agreement and billing statements.
27
C. Relevancy
The Petitioners argue that if this Court finds the retention agreement and billing
statements are not protected by the work product doctrine, those documents are still not
discoverable because they were not relevant to any issue in the case and would not lead to
the discovery of any relevant evidence.30 It is provided under Rule 26(b)(1) that “[p]arties
may obtain discovery regarding any matter, not privileged, which is relevant to the subject
matter involved in the pending action[.]” This Court addressed the contours of relevancy
under Rule 26(b)(1) in Syllabus point 4 of State Farm Mutual Automobile Insurance Co. v.
Stephens, 188 W. Va. 622, 425 S.E.2d 577 (1992), as follows:
The question of the relevancy of the information sought
through discovery essentially involves a determination of how
substantively the information requested bears on the issues to be
tried. However, under Rule 26(b)(1) of the West Virginia Rules
of Civil Procedure, discovery is not limited only to admissible
evidence, but applies to information reasonably calculated to
lead to the discovery of admissible evidence.
It also has been observed that “[t]he party seeking to prevent discovery has the burden of
showing the requested information is not relevant.” Cleckley, Davis, & Palmer, Litigation
Handbook § 26(b)(1), at 690.
30
The Petitioners also make this argument with respect to the coverage opinion
letters and training documents, which we have determined are protected from disclosure by
the attorney-client privilege.
28
The discovery commissioner’s order states summarily that “the documents
identified on the privilege log are relevant . . . pursuant to [Rule] 26 based upon the
Plaintiffs[’] complaint and theory of the case against CRW.” We have reviewed the amended
complaint filed with the record in this case and agree with the discovery commissioner that
the retention agreement and billing statements may be relevant to at least one of the claims
against the Petitioners. The amended complaint alleges that the Petitioners entered into a
civil conspiracy whereby CRW would “provide Montpelier ‘paid for hire’ coverage denial
opinions that were not based on a proper investigation of the facts . . . and designed solely
for the purpose of giving Montpelier a defense to any bad faith or unfair trade practices claim
and to deny proper claims.” Although we make no ruling on the veracity or viability of these
allegations, they do make the retention agreement and billing statements relevant. See Phillip
M. Adams & Assocs., LLC v. Winbond Elecs. Corp., No. 1:05-CV-64 TS, 2010 WL 3258198,
at*1 (D. Utah Aug. 17,2010) (“Because the testing using the detector in the Qui Tam cases
may be marginally relevant to Dr. Adams’ testimony in the present case or to the issue of
damages, such information is discoverable under Rule 26(b)(1).”). Consequently, we must
reject the Petitioners’ contention that the retention agreement and billing statements are not
relevant.
29
IV.
CONCLUSION
The requested writ of prohibition is granted as moulded. That part of the
circuit court’s order which permits discovery of documents sought through Respondents’
Request for Production Nos. 11, 20, and 22 is prohibited from enforcement. The documents
tendered under those requests are prohibited from disclosure under the attorney-client
privilege. That part of the circuit court’s order which permits discovery of documents sought
under Respondents’ Request for Production No. 10 is not prohibited from enforcement.
Writ granted as moulded.
30