United States District Court, W.D. Washington, Seattle
MARKET PLACE NORTH CONDOMINIUM ASSOCIATION, a Washington non-profit corporation, Plaintiff,
AFFILIATED FM INSURANCE COMPANY, Defendant.
ORDER GRANTING IN PART PLAINTIFF'S MOTION TO
RICARDO S. MARTINEZ CHIEF UNITED STATES DISTRICT JUDGE.
matter comes before the Court on Plaintiff Market Place North
Condominium Association (“the Association”)'s
Motion to Compel Documents. Dkt. #35. For the reasons set
forth below, the Court GRANTS IN PART the Association's
background of this case is not necessary for the purposes of
Market Place North Condominium is located in downtown
Seattle. Dkt. #22 (Peter Danelo Declaration), ¶ 3. The
property consists of a high-rise tower, a set of townhomes, a
parking garage, and four commercial spaces. Id. The
property is managed by an Association, which is acting as the
Plaintiff in this case. In August 2015, the Association
undertook certain outdoor deck repairs of the high-rise
tower. Id. at ¶ 5. Those repairs were completed
in spring 2016 and cost the Association approximately $400,
000. Damage uncovered during those deck repairs led the
Association to investigate other portions of the building.
Id. at ¶ 6. After learning in the summer of
2016 that water intrusion damage, or at least signs of it,
existed throughout the property, the Association put its
insurer, Defendant in this case, on notice. Id. at
Association's investigation team met in person with AFM
in early December 2016 to show damage already uncovered at
the property, indicators that additional damage existed, and
to discuss the Association's proposed intrusive
investigation plan that it wanted AFM to participate in.
See Dkt. 20-3. AFM rejected the Association's
proposal, indicating that it did not believe it had a legal
obligation “to investigate potential damage, as opposed
to actual damage.” Dkt. #20-4 at 2. The Association
then sent AFM a notice under Washington's Insurance Fair
Conduct Act based on AFM's failure to investigate. Dkt.
#20-5. AFM did not change its position, and the Association
filed a Complaint in King County Superior Court in March of
2017. See Dkt. #6. AFM removed to this Court in
April of 2017. Dkt. #1. Later the Association amended to add
an IFCA claim after it believed coverage was denied in a
September 22, 2017 letter from AFM. See Dkt. #20-7.
As the Court has previously stated, it is unclear if this
letter was a final decision. Although AFM stated coverage
decisions and conclusions it also stated that it was
providing “preliminary analysis of potential coverage
issues, ” and that it “finds itself in the
position of attempting to analyze coverage in the absence of
a fully supported and documented claim.” Id.
is proceeding in this case, and this Motion was filed to
address the issue of attorney-client privilege asserted by
AFM for certain documents. AFM provided the Association with
documents created during its investigation including (1) a
file titled “claim file, ” (2) emails of DiAnna
Webber (AFM's principal adjuster of the Association's
claim), and (3) emails of two other AFM employees, Richard
Sunny and Erik Lonson, involved in the adjustment and denial
of the Association's claim. Dkt. #36 at 2. AFM provided
several privilege logs claiming the attorney-client privilege
for these and other documents. See Dkt. #36-1.
According to the Association, AFM claims this privilege for
some communications created seven months before this suit was
filed and 13 months before the apparent coverage denial
letter in September 2017. Id. at 6.
Association argues that it is entitled to the above discovery
pursuant to Cedell v. Farmers Ins. Co. of
Washington, 176 Wn.2d 686, 295 P.3d 239 (2013) and the
civil fraud exception.
may obtain discovery regarding any non-privileged matter that
is relevant to any party's claim or defense and
proportional to the needs of the case, considering the
importance of the issues at stake in the action, the amount
in controversy, the parties' relative access to relevant
information, the parties' resources, the importance of
the discovery in resolving the issues, and whether the burden
or expense of the proposed discovery outweighs its likely
benefit.” Fed.R.Civ.P. 26(b)(1). If requested discovery
is not answered, the requesting party may move for an order
compelling such discovery. Fed.R.Civ.P. 37(a)(1). The party
that resists discovery has the burden to show why the
discovery request should be denied. Blankenship v. Hearst
Corp., 519 F.2d 418, 429 (9th Cir. 1975).
Association argues that, pursuant to Cedell, the
attorney-client privilege generally does not apply to the
claims-adjustment process, but that Cedell
recognized an exception when the attorney is not actually
engaged in investigating and evaluating or processing the
claim. Dkt. #35 at 7. The Association contends that AFM
should have sought a protective order prior to the documents
being due and asked the Court to undertake an in camera
review of the documents it intended to withhold. Id.
at 8. Finally, the Association argues that the civil fraud
exception applies here. Dkt. #35 at 11-12. The Association
seeks an order to produce “all documents on the four
privilege logs at issue that [AFM] is withholding based on
attorney-client privilege (and any similar documents that it
intends to withhold from future productions on the same
grounds).” Id. at 6-7.
argues that, although it did hire counsel at an early stage,
“counsel has not performed AFM's adjustment or
investigation of [the Association]'s Notice of Loss or
Claim- that was done by AFM adjusters and its consultants at
WJE, who attended MPN's invasive exploratory
investigation.” Dkt. #38 at 5. AFM states that counsel
only “provided legal advice and strategy relating to
coverage and AFM's obligations under the Policy.”
Id. AFM asserts that it has produced a variety of
un-redacted attorney-client communications, redacting or
withholding “only attorney fee invoices and
communications where AFM counsel was asked to or did provide
legal advice or strategy as to AFM's “potential
liability” or coverage, which Cedell
protects.” Id. at 4. AFM spends significant
time arguing that its use of counsel was accelerated by the
Association's early filing of this lawsuit, at one point
stating that the Association “sued before completing
its own invasive exploratory investigation-the results of
which it had insisted were necessary before it could inform
AFM what the ‘nature and extent' of loss
was!” Id. at 7. AFM cites to Richardson v.
Gov't Employees Ins. Co., 200 Wn.App. 705, 714,
(2017) for the proposition that Cedell discovery is
cut off once litigation commences. Id. at 9-10.
However, this Court has recently found in a similar case that
“nothing in Cedell limits the discoverability
presumption to prelitigation evidence, and
Richardson, supra, is inapposite to ...