United States District Court, W.D. Washington, Seattle
STAY@HOME DESIGN LLC, BRIAN ROBINSON, JANET ROBINSON, NED CANNON, and MAURA CANNON, Plaintiffs,
FOREMOST INSURANCE COMPANY GRAND RAPIDS, MICHIGAN, a foreign insurance company doing business in the State of Washington, Defendant.
ORDER FOLLOWING IN CAMERA REVIEW
Alice Theiler United States Magistrate Judge.
March 24, 2017, the Court ordered defendant Foremost
Insurance Company Grand Rapids, Michigan
(“Foremost”) to submit certain documents to the
Court for an in camera review. (Dkt. 19.) The
documents were identified on privilege logs from Foremost and
Lether & Associates, PLLC (“Lether”), a law
firm hired by Foremost in relation to an insurance coverage
claim brought by plaintiffs Stay@Home Design LLC, Brian and
Janet Robinson, and Ned and Maura Cannon. (See Dkt.
18-1 at 17-25 (Exs. B & C).) The insurance claim related
to vandalism that occurred at a house owned by plaintiffs.
Foremost denied coverage and this lawsuit, including a
first-party bad faith insurance claim, followed. Now, having
reviewed the documents remaining at issue in the parties'
motions seeking cross-relief under Local Civil Rule 37(a)(2),
the Court finds no basis for granting plaintiffs' motion
to compel and Foremost entitled to a protective order.
withheld documents as protected by attorney-client privilege
and the work product doctrine. The Court considers
attorney-client privilege pursuant to Cedell v. Farmers
Ins. Co. of Washington, 176 Wash.2d 686, 295 P.3d 239
(2013), while the work product doctrine is governed by
Federal Rule of Civil Procedure 26(b)(3) and applicable
federal case law. MKB Constructors v. Am. Zurich Ins.
Co., No. C13-0611-JLR, 2014 U.S. Dist. LEXIS 78883 at
*23-27 (W.D. Wash. May 27, 2014). Accord Barge v. State
Farm Mut. Auto. Ins. Co., No. C16-0249-JLR, 2016 U.S.
Dist. LEXIS 155066 at *14-15 (W.D. Wash. Nov. 8, 2016)
(“Although the attorney-client privilege is a
substantive evidentiary privilege, the work product doctrine
is a procedural immunity governed by [Rule] 26(b)(3).”)
(cited sources omitted).
described in more detail in the Court's prior order,
Cedell creates a presumption in the context of
first-party bad faith insurance disputes in Washington that
the attorney-client privilege is unavailable or
“generally not relevant.” Cedell, 295
P.3d at 246. An insurer may overcome this “presumption
of discoverability by showing its attorney was not engaged in
the quasi-fiduciary tasks of investigating and evaluating or
processing the claim, but instead in providing the insurer
with counsel as to its own potential liability; for example,
whether or not coverage exists under the law.”
Id. However, even if the presumption is overcome, an
insured may pierce attorney-client privilege by showing
“‘a reasonable person would have a reasonable
belief that an act of bad faith has occurred, '”
and demonstrating “‘a foundation to permit a
claim of bad faith [tantamount to civil fraud] to
proceed.'” MKB Constructors, 2014 U.S.
Dist. LEXIS 78883 at *18 (quoting Cedell, 295, P.3d
Washington Supreme Court did not, in Cedell,
“elaborate on what it means for an insurer's act of
bad faith to be ‘tantamount to civil fraud.'”
Id. at *14-16. However, in a case relied upon in
Cedell, the Washington Court of Appeals instructed:
“To strip a communication of the attorney-client
privilege, the party seeking discovery must show that (1) its
opponent was engaged in or planning a fraud at the time the
privileged communication was made, and (2) the communication
was made in furtherance of that activity.” Barry v.
USAA, 98 Wn.App. 199, 989 P.2d 1172, 1176-77
(Wash.Ct.App. 1999). Neither a mere allegation or claim of bad
faith, nor an honest disagreement as to coverage between the
insurer and insured, suffices to waive attorney-client
privilege. MKB Constructors, 2014 U.S. Dist. LEXIS
878883 at *16, and MKB Constructors v. Am. Zurich Ins.
Co., No. C13-0611-JLR, 2014 U.S. Dist. LEXIS 102759 at
*20 (W.D. Wash. July 28, 2014).
to the work product doctrine, a party may not ordinarily
discover documents prepared in anticipation of litigation
unless the party shows “substantial need” for the
materials and the inability to obtain the equivalent by other
means. Fed.R.Civ.P. 26(b)(3)(A)(ii). To obtain opinion work
product, consisting of the “mental impressions,
conclusions, opinions, or legal theories of a party's
attorney or other representative concerning the litigation[,
]” Fed.R.Civ.P. 26(b)(3)(B), an insured in a bad faith
insurance action must make a showing beyond substantial need,
and demonstrate the “‘mental impressions are
at issue and their need for the material is
compelling.'” Barge, 2016 U.S. Dist. LEXIS
155066 at *15-16 (citing Holmgren v. State Farm Mut.
Auto. Ins. Co., 976 F.2d 573, 577 (9th Cir. 1992),
italics in Holmgren). “At a minimum,
compelling need requires that the information sought is not
available elsewhere or through the testimony of another
witness.” Id. at *16.
Court here concluded an in camera review was
necessary to determine whether or not the attorneys
identified on the privilege logs were engaged in
quasi-fiduciary tasks, as well as to consider the documents
in relation to plaintiffs' allegation of bad faith. The
Court likewise found, with certain exceptions, an in
camera review appropriate with respect to documents that
may be protected as work product even if discoverable under
Cedell. See MKB Constructors, 2014 U.S.
Dist. LEXIS 78883 at *27 n.6, and Johnson v. Allstate
Prop. & Cas. Ins. Co., No. C 14-5064-KLS, 2014 U.S.
Dist. LEXIS 121342 at *7 (W.D. Wash. Aug. 29, 2014) (even if
discoverable under Cedell, documents may still be
properly withheld with a showing they are protected work
product under Rule 26(b)(3)). Having now conducted its
review, the Court finds no basis for compelling the
production of the documents withheld from discovery by
asserted by Foremost, and accurately described on the
privilege logs, the documents withheld from discovery involve
attorneys acting in the role of coverage counsel, providing
advice, analysis, and opinions as to the potential for
liability and addressing potential or pending complaints.
They do not involve quasi-fiduciary tasks of claim
investigation, evaluation, or processing.
there any basis for piercing attorney-client privilege
through the allegation of bad faith. Plaintiffs, in asserting
a foundation to permit a bad faith claim tantamount to civil
fraud, asserted Foremost acted unreasonably in disregarding
significant evidence, denying coverage based on
unintentional, non-material alleged misrepresentations and
without further analysis despite errors identified in the
decision to deny, and in relying almost entirely on the
statements of a former tenant who ran illegal drug operations
out of and squatted in the house at issue in their insurance
claim. The Court, however, finds nothing in the
attorney-client communications that would lead a reasonable
person to have a reasonable belief an act of bad faith
occurred, or demonstrating a foundation to permit a claim of
bad faith tantamount to civil fraud to proceed.
Cedell's civil fraud exception does not
Court further finds the work product doctrine applicable to
the documents also withheld on that basis. (See Dkt.
18-1 (Exs. B & C) (attorney-client privilege asserted for
every document withheld as work product).) The documents
withheld as work product are all dated after plaintiffs'
February 22, 2016 twenty-day Insurance Fair Conduct Act
(IFCA) claim notice, and support Foremost's contention it
reasonably anticipated litigation as of an email ten days
earlier threatening the filing of an IFCA claim. (See,
e.g., Dkt. 17 (Exs. 6 & 7).) The documents, as
described on the privilege logs, entail Lether's
correspondence with Foremost or internal Foremost
communications regarding responses to plaintiffs' notices
and claims, legal demands, and this litigation. (Dkt. 18-1
(Exs. B & C).) Plaintiffs do not demonstrate substantial
or compelling need for the production of documents protected
as work product.
four additional documents included in the Court's in
camera review were properly withheld based on relevancy.
(Id. (Ex. C) (LETHER 765 (correspondence between
Lether and King County regarding ECR online payment) and
LETHER 3289-91 (corporate disclosure statement in an