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Sousie v. Allstate Indemnity Company

United States District Court, W.D. Washington

February 26, 2018

ALEXANDER M. and AMY N. SOUSIE, Plaintiffs,



         This matter comes before the Court on Plaintiffs Alexander and Amy Sousie's (“Sousies”) motion to compel (Dkt. 46) and motion to strike testimony (Dkt. 48). The Court has considered the pleadings filed in support of and in opposition to the motions and the remainder of the file and hereby rules as follows:


         On January 4, 2017, the Sousies served the Washington Insurance Commissioner with a complaint against Defendant and foreign insurer Allstate Indemnity Company (“Allstate”). Dkt. 1-1. The Sousies assert a cause of action for breach of their insurance agreement and a violation of Washington's Insurance Fair Conduct Act (“IFCA”). Id.

         On January 4, 2018, the Sousies filed a motion to compel requesting that the Court order Allstate to produce 35 redacted entries from its claims history document and 10 other documents and grant leave to conduct a second deposition of Allstate's investigator, Peter Poulos. Dkt. 46. On January 16, 2018, Allstate responded. Dkt. 50. On January 19, 2018, the Sousies replied. Dkt. 52. On January 23, 2018, Allstate filed a surreply requesting that the Court strike the Sousies' overlength brief. Dkt. 57.[1]

         On January 5, 2018, the Sousies filed a motion to strike Allstate's rebuttal expert. Dkt. 48. On January 22, 2018, Allstate responded. Dkt. 54. On January 22, 2018, the Sousies replied. Dkt. 56.


         A. Motion to Compel

         “On notice to other parties and all affected persons, a party may move for an order compelling disclosure or discovery.” Fed.R.Civ.P. 37(a)(1).[2] “Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case . . . .” Fed.R.Civ.P. 26(b)(1).

         In this case, the Sousies move to compel documents and a second deposition of Allstate's investigator. Regarding the documents, Allstate separates the requested documents into three categories as follows: (1) documents regarding counsel and communications with counsel, (2) documents regarding counsel's invoices and expenses, and (3) material created after Allstate denied the Sousies' claim. Allstate based its withholding of these documents on the assertion of attorney-client and work-product privileges. Before addressing the application of the privileges to the documents, the Court will first address a dispute regarding scope of the applicable law.

         “In Washington, there is a presumption that there is no attorney-client privilege relevant between the insured and the insurer in the claims adjusting process, and that the attorney-client and work product privileges are generally not relevant.” Cedell v. Farmers Ins. Co. of Washington, 176 Wn.2d 686, 698 (2013) (internal citations omitted). An “insurer may overcome the 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.

         Allstate argues that Cedell is not relevant to the Sousies' IFCA claims because it applies only to first party bad faith claims by insureds against their insurers. Dkt. 50 at 4-5. The Court disagrees because an IFCA claim is a specific type of bad faith claim. “IFCA explicitly creates a cause of action for first party insureds who were ‘unreasonably denied a claim for coverage or payment of benefits.'” Perez-Crisantos v. State Farm Fire & Cas. Co., 187 Wn.2d 669, 680 (2017) (citing RCW 48.30.015(1)). Similarly, an insurer establishes the tort of bad faith when an “insurer's breach of the insurance contract was unreasonable, frivolous, or unfounded.” Smith v. Safeco Ins. Co., 150 Wn.2d 478, 484, 78 P.3d 1274, 1277 (2003). Thus, an unreasonable denial of coverage is simply an unreasonable breach of the contractual obligation to provide coverage. Although the parties fail to provide and the Court is unaware of any authority on this specific issue, it is a logical proposition that if Cedell governs the more general bad faith claim, it would also govern the more specific IFCA claim. Therefore, the Court concludes that Cedell governs the Sousies' IFCA claim.

         In light of this conclusion, the Court finds that Allstate has failed to properly assert the privileges in this matter. The Court starts with the presumption against the privileges. Cedell, 176 Wn.2d at 698. The burden then shifts to Allstate to establish that its attorney, Rick Wathen, was providing legal advice regarding coverage issues instead of engaging in quasi-fiduciary tasks. Id. Regarding the documents identified and dated up to the date of denial, Allstate fails to provide any evidence to rebut the presumption that the attorney-client privilege does not apply to these documents. Similarly, Allstate has failed to establish that the work-product doctrine applies to material created before the denial of the Sousies' claim. Therefore, the Court grants the Sousies' motion as to this material.

         Regarding the two “post-denial” documents created after the denial of the claim but before denying the Sousies' reconsideration, this seems to be a gray area wherein Mr. Wathen could have been providing counsel or could have been purely handling the request for reconsideration. As such, Allstate may either produce these two documents or submit them for in camera ...

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