A Deal Is Not A Deal, Until It’s A Deal

CSignature.1alifornia Code of Civil Procedure section 664.6 was enacted in 1981 to provide a summary procedure to enforce settlements. That statute provides that a settlement may be enforced by motion either when an agreement is signed by all parties outside the presence of the court or when the settlement terms are placed on the record in open court. Notwithstanding its simplistic language, that code section continues to spawn a litany of appellate decisions.

The latest case interpreting that code section, J.B.B. Investment Partners, LTD. V. R. Thomas Fair 2014 DJAR 16071, held that an automatically generated e-mail signature was insufficient to comply with the terms of that statute. The Fair case arose in the context of an alleged Ponzi scheme involving Arizona real estate. Plaintiffs contended that defendants had made fraudulent representations and omissions to induce their investment in apartments.

Prior to instituting litigation, numerous e-mail negotiations were exchanged in an attempt to resolve those disputes. Based on Fair’s electronic signature at the end of one of those e-mails, plaintiffs asserted that a settlement had been reached. The trial court enforced the purported settlement under California’s Uniform Electronic Transactions Act (UETA) contained in California Civil Code section 1633.1 et seq. and under the “common law of contract.” The appellate court reversed, holding that Fair’s printed name on an e-mail was ineffective to constitute an enforceable settlement under 664.6.

While acknowledging that under UETA an electronic signature can suffice under certain circumstances, the Court of Appeals noted there was no meeting of minds at the time Fair printed his name on the subject e-mail. Further, the Fair court emphasized there was no evidence that the parties consented to conduct the transaction by electronic means as required by UETA . To the contrary, the appellate court found at the time of the subject e-mail there were still a number of settlement terms yet to be finalized. The Court of Appeals also concluded that the e-mail signature was insufficient under contract law to bind Fair, as the record was devoid of evidence demonstrating that Fair intended to execute a settlement agreement by electronic means.

The moral of the Fair case-All is Fair in Love, War and Contracts! To quote movie mogul Samuel Goldwyn, an oral contract is not worth the paper it is written on!

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Oregon’s Revised and Expanded Product Liability Statute of Repose

hourglass.1Oregon, like many states, has a statute of repose (“SOR”) that sets a time frame in which product liability lawsuits must be filed. Prior to 2009, ORS 30.905(2), the statute governing Oregon’s SOR, set an 8 year limitation period that started to run when the product was first purchased for use or consumption. The rule was clear: if a lawsuit was not filed 8 years from that date, it was time barred. Simply stated, case closed.

In 2009, the Oregon legislature revisited its SOR. First, the legislature extended the SOR from 8 years to 10 years. Second, and more importantly, the legislature added a “look away” provision which allows a claimant to extend the SOR further if the state where the product was made or imported into has a SOR longer than 10 years.

ORS 30.905(2), as amended in 2010, now reads as follows:

A product liability civil action for personal injury or property damage must be commenced before the later of:

(a) Ten years after the date on which the product was first purchased for use or consumption; or
(b) The expiration of any statute of repose for an equivalent civil action in the state in which the product was manufactured, or, if the product was manufactured in a foreign country, the expiration of any statute of repose for an equivalent civil action in the state into which the product was imported.

Accordingly, if a product in Oregon is more than 10 years old, the “look away” language in subsection (b) above requires that a determination of the SOR for the State in which the product was manufactured or imported into be made in any product liability claim. If the manufacturing/importing state has a SOR longer than 10 years or no SOR at all, the claim in Oregon may not be barred. Interestingly, 5 states have SORs longer than Oregon’s and 32 states do not have product liability SORs at all. A question therefore exists regarding what SOR time period to apply if the state where the product was manufactured does not have a SOR. In this situation, manufacturers argue that if the state where the product was made has no SOR, Oregon’s 10 year SOR applies. Claimants whose product is beyond the 10 year statute argue that if the state where the product was made has no SOR, the time period is indefinite.

In revising ORS 30.905, the Oregon legislature debated the pros and cons of the proposed changes to the SOR extensively. An examination of the debates suggests support for the argument that the legislature did, in fact, contemplate that claimants would benefit from an expanded and/or indefinite SOR if the look away state does not have a product liability SOR. The Legislative News Release that was issued once the bill was passed is telling:

This Senate passed legislation this morning that keeps courtroom doors open for consumers harmed by dangerous products that are greater than 8 years old. SB 284 increases the statute of ultimate repose – age of a defective product – for product liability actions from its current limit of 8 years to 10 years. The bill also includes a “look away” provision to the state of manufacture, giving the injured party the length of time allowed in the state where the product was originated.

Oregon Legislative News Release, 5/26/2009 (underlining added).

As you can see, determining exactly when Oregon’s product liability SOR runs is not as straightforward as it might seem.  This blog will be updated should any further developments occur that provide clarity to exactly how to interpret the “look away” provision.

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Colorado Homeowners Protection Act Overrides Subrogation Waiver

Home Protection.1The Denver office of Cozen O’Connor recently arbitrated a construction defect caused subrogation loss which occurred during a remodel of a high end vacation residence where the insured and the general contractor had entered into an AIA form agreement, including the standard general conditions. As expected, the general contractor raised the subrogation waiver contained in the AIA agreement as a complete bar to the subrogation claim and, alternatively, the waiver of consequential damages provision in the AIA agreement as a bar to recoverable damages.

Cozen O’Connor argued, pursuant to the Homeowners Protection Act of 2007 (“the HPA”), the AIA waiver of subrogation was void as against the public policy of the State of Colorado and that any waiver of damages was void unless consistent with the language of the HPA. The HPA’s stated purpose was to preserve Colorado residential property owners’ legal rights and remedies. It further provided that “in any civil action or arbitration proceeding described in section 13-20-802.5(1), any express waiver of, or limitation on, the legal rights, remedies or damages provided by the ‘Construction Defect Action Reform Act’, this part 8 . . . are void as against public policy.” C.R.S. § 13-20-806(7)(a). This subsection only applies to the legal rights, remedies or damages of claimants asserting claims arising out of residential property. C.R.S. § 13-20-806(7)(c). “Claimant” is defined as a person (other than the attorney general) who asserts a claim against a construction professional that alleges a defect in the construction of an improvement to real property. C.R.S. § 13-20-802.5. By definition, Claimant would include a subrogating insurance carrier.

In addition, C.R.S. § 13-20-806(7)(a) provides that any effort by a contractor to expressly waive or limit a Claimant’s damages for a construction defect by agreement is void as a matter of law. Pursuant to CRS § 13-20-802.5, damages to real property and for loss of use (allowed living expense) are specifically permitted by CRS § 13-20-802.5 and cannot be waived.

The Arbiter ruled that both the AIA subrogation and consequential damage waivers were void as a matter of law. We believe that this is the first time that the interplay between the HPA and subrogation waivers and contractual limitations of liability has been addressed by an Arbiter or the Colorado courts. The HPA provides a strong argument when faced with AIA contractual defenses in a residential subrogation loss caused by a construction defect.

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Gross Negligence in Oil Well Drilling: Alberta Queen’s Bench Clarifies the Standard Required of Oil & Gas Drilling Operators

oil.1 The author of the following blog post, Robert Sottile, is an Articling Student with Cozen O’Connor.

The recent decision of the Alberta Court of Queen’s Bench in Bernum Petroleum Ltd v Birch Lake Energy Inc (Bernum)[1], outlines the requirements to establish gross negligence in losses involving the drilling and operation of oil wells.

Background

In Berunum, the plaintiff and defendant entered a joint operation agreement to develop oil wells on certain lands and to contribute proportionally to the related costs. Bernum, the operator of the drilling operations, sought to recover Birch Lake’s share of development costs in relation to a specific well. Birch Lake refused to pay its share of development costs, contending that Bernum was grossly negligent while drilling and developing the well.
Bernum and Birch Lake’s relationship in the joint operation agreement was governed by the 2007 Canadian Association of Landmen Operating Procedure (the “CAPL”), which limited Bernum’s liability to Birch Lake to cases of gross negligence or wilful misconduct. Birch Lake alleged that Bernum was grossly negligent though employing a mud system it had experienced problems with in a prior well. Birch Lake’s expert witness contended that this inadequate mud system prevented Bernum from drilling as far down as the well, which led to issues with its ability to prevent collapse.

The Court’s Description of Gross Negligence

In articulating the standard for gross negligence, the Court made reference to prior definitions in the caselaw, which included, “a…marked departure from the standards [of] reasonable companies…in a like position” and “conscious wrongdoing…or a very marked departure from the standard of care required.” The Court also looked for guidance in the definition of gross negligence in the CAPL, which defines it as,

any act omission or failure to act…by a person that was intended to cause, or was in reckless disregard of, or wanton difference to, the harmful consequences to the safety or property of another person…which the person acting or failed to act knew (or should have known) would result from such act…

After looking at these authorities, the Court stated that the unifying characteristic is the requirement that the wrongful actor have an intention to commit the grossly negligent act alleged. As a result, the Court concluded that in order to establish that a person was grossly negligent, there must be some “degree of intentionality in the act or omission.”

The Court’s Conclusion in Bernum

The Court concluded that Birch Lake failed to establish Bernum was grossly negligent in drilling the oil well. Birch Lake did not provide any evidence that the difficulties experienced in the well would have been avoided if Bernum had used a different mud system.

In the Court’s view, it was problematic that Birch Lake did not lead any evidence of the industry standards to compare the actions of Bernum. The Court noted that determining whether a particular individual acted grossly negligent must be determined in a context specific manner with reference to the oil and gas industry. Factors to be considered include that oil and gas is a “high-risk, speculative business…many things can go wrong in the course of drilling, resulting in unanticipated delays and cost overuns. Often the decisions in the course of drilling must be made quickly without time for extended consultation.”

Commentary

This decision is of importance to insurers looking to pursue subrogation for a losses relating to oil drilling and well development. While this decision outlines a very high threshold to satisfy gross negligence, it demonstrates the Court’s willingness to address the issue in the context of oil well operation and development by providing a standard required when conducting drilling operations. When assessing recovery potential for such claims, attention should be paid to the court’s comments on assessing gross negligence through a context-specific analysis of the oil and gas industry and the importance to consider industry standards.

This decision is also important for insurers looking for recovery potential from acts of gross negligence outside the oil and gas industry when a tortfeasor has limited its liability to an insured. The Court’s articulation of the standard for gross negligence will likely also be applicable to other loss scenarios when a defendant’s liability is limited by contract to acts of gross negligence.

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Watts Class Action Settlement Info – Acetal Plastic Toilet Connectors

Toilet Connector.1On August 5, 2014, a Class Action settlement has been reached with Watts Water Technologies, Inc. and Watts Regulator Co. (“Watts”) regarding toilet Connectors with coupling nuts made with acetal plastic designed, manufactured, and/or distributed by Watts between 1999 and July 2009. The settlement covers the purchase and possession of a Watts toilet connector, as well as, payments made to repair property damage suffered as a result of the failure of a Watts toilet connector.

The Honorable William H. Orrick, of the United States District Court for the Northern District of California, is overseeing this Class Action. The settlement resolves the case Trabakoolas v. Watts Water Technologies, Case No. 3:12-CV-01172, which claimed that the acetal coupling nuts, instructions, and warnings on these Watts toilet connectors were defective. The lawsuit had claimed that Watts’ negligence led to the failure of the toilet connectors. Watts denied all the claims and allegations in the lawsuit. Watts maintained that the acetal coupling nuts on its toilet connectors are not defective in any respect, that the failure rate is very low and that any failures are the result of other factors (such as improper installation, misuse, or product lifespan).

The Court did not decide in favor of Plaintiffs or Watts as part of the Class Action settlement. Rather, both sides agreed to settle the case to avoid the cost and risk of a trial. Watts did not admit any fault and continues to deny any wrongdoing. As such, the settlement of the Class Action does not mean that any laws were violated.

Under the Settlement Agreement, for payment of property damage due to failure, Settlement Class Members can recover up to 25% of documented costs of repairs for property damage caused by the failure of an acetal coupling nut of a Watts toilet connector, with a minimum recovery of $4. The Claims Administrator will review claims to determine whether they are eligible and timely and pay the amount of the claims. Claims for damage that occurred from January 1, 2009, to January 1, 2012, must be submitted and/or postmarked on or before August 5, 2015. Claims for damage that occurred after January 1, 2012, must be submitted and/or postmarked on or before August 5, 2019.

The Settlement Agreement provides precise and more detailed explanations of the benefits to members of the Settlement Class, as well as, specific documentation required to submit a claim. For more of these details, please check out the class action website at www.toiletconnector.com.

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Spoliation in Texas: A New Approach

spoliation.1The Supreme Court of Texas recently revisited the concept of spoliation of evidence in Brookshire Brothers, Ltd. v. Aldridge. The case involved a slip and fall at a Brookshire Brothers grocery store. In discovery, the grocery store produced a video approximately eight minutes in length starting just before the plaintiff entered the store and concluding shortly after his fall. The plaintiff later requested an additional two-and-a-half hours of additional footage from the store cameras. The grocery store was unable to comply with that request because the footage had been recorded over almost a year earlier.

The trial court ultimately allowed the jury to hear evidence on whether the grocery store spoliated the video, submitted a spoliation instruction to the jury and allowed the jury to decide whether spoliation occurred. The jury determined that the grocery store was negligent and awarded the plaintiff damages. The court of appeals later affirmed the trial court’s judgment on the verdict, holding that the trial court did not abuse its discretion in admitting evidence of spoliation or providing the jury with a spoliation instruction.

The grocery store appealed to The Supreme Court of Texas. The Court noted that to address spoliation, trial courts must have wide discretion in remedying such conduct and in imposing sanctions to deter it. However, the court also noted that the imposition of a severe sanction (such as a spoliation jury instruction) can shift the focus of the case from the merits of the lawsuit to the alleged improper conduct of one of the parties during litigation. In order to combat this potential problem, the Court decided that greater clarity was needed regarding whether spoliation occurred, and the parameters of a trial court’s discretion to impose an appropriate remedy.

In crafting a new approach to the issue of spoliation, the court held that a spoliation analysis will involve a two-step judicial process: (1) the trial court must determine, as a question of law, whether a party spoliated evidence, and (2) if spoliation occurred, the court must assess an appropriate remedy. To conclude that a party spoliated evidence, the court must find that (1) the spoliating party had a duty to reasonably preserve evidence, and (2) the party intentionally or negligently breached that duty by failing to do so. Spoliation findings-and their related sanctions-will now be determined solely by the trial judge in order to avoid unfairly prejudicing the jury by the presentation of irrelevant facts to the merits of the underlying lawsuit.

This decision is an important one for subrogation professionals that handle claims in Texas. No longer will a party be able to assert that it will obtain a spoliation instruction without a court first determining that such an instruction is warranted as a matter of law. The other important takeaway from this decision is the fact that the spoliation must be intentional or negligent. However, the court noted that with respect to negligent spoliation, the act must so prejudice the non-spoliating party to a degree that it is irreparably deprived of having any meaningful ability to present a claim or defense. This is obviously a high hurdle to clear which should alleviate a number of the unfounded spoliation claims in Texas that subrogation professionals often encounter.

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Communications with Experts – Additional Protection Under Federal Rules When Counsel is Involved

Expert Communications.1An adjuster is notified of a new fire loss and goes diligently to work. He visits the site and interviews the insured. The adjuster obtains information on the damages caused by the fire as well as theories about how the fire started and potentially responsible third parties. He retains an origin and cause expert and provides her with what he has learned. He relays not only facts, but also shares his opinions on how the fire started and his views on the strengths and weaknesses of bringing a subrogation claim against particular parties. Once the expert conducts her scene examination, the adjuster asks her to provide a signed report detailing her opinions on the cause and origin of the fire and the responsible parties. On his receipt of the report, the adjuster retains subrogation counsel.

Although the above adjuster might be commended for his dedication and hard work, he may have inadvertently forfeited an important advantage provided by both federal and state court rules and thereby prejudiced the subrogation case. If a subrogation lawsuit is filed, all of the adjuster’s opinions about the strengths and weaknesses of the case that he communicated to the expert may be discoverable. In addition, the expert’s report may also be discoverable.

In 2010, the Federal Rules of Civil Procedure were amended to provide work-product protection against discovery of draft expert disclosures and, with limited exceptions, communications between the expert and counsel. Many states have adopted similar rules.

In particular, Federal Rule of Civil Procedure 26(b)(4), provides:

(B) Trial-Preparation Protection for Draft Reports or Disclosures. Rules 26(b)(3)(A) and (B) protect drafts of any report or disclosure required under Rule 26(a)(2), regardless of the form in which the draft is recorded.

(C) Trial-Preparation Protection for Communications Between a Party’s Attorney and Expert Witnesses. Rules 26(b)(3)(A) and (B) protect communications between the party’s attorney and any witness required to provide a report under Rule 26(a)(2)(B), regardless of the form of the communications, except to the extent that the communications:

(i) relate to compensation for the expert’s study or testimony;

(ii) identify facts or data that the party’s attorney provided and that the expert considered in forming the opinions to be expressed; or

(iii) identify assumptions that the party’s attorney provided and that the expert relied on in forming the opinions to be expressed.

It is always wise for an insurer to engage subrogation counsel as soon as possible after being notified of a new loss. However, as a result of these changes to the rules, it is even more important to do so. Counsel and the expert can freely communicate about the loss, including exchanging draft reports, and such communications generally will not be discoverable in any subsequent litigation.

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Judicial Notice of Internet Evidence

websites.1With the explosion of the Internet over the past 20 years, some practitioners would say it was only a matter of time before courts started to take judicial notice of Internet evidence. With the proliferation of websites whose content is monitored for accuracy, more and more courts are doing just that. Courts are now willing to take judicial notice of evidence that can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned pursuant to Fed. R. Evid. 201(b)(2). Of course, whether or not the court will take judicial notice of evidence from the Internet will largely depend on the website where the evidence was located.

I. GOVERNMENT WEBSITES

Federal, state and municipal websites, including those of governmental agencies, are considered self-authenticating under Fed. R. Evid. 902(5), which provides that “official publications” are self-authenticating. Fed. R. Evid. 902(5) defines “official publications” to include “a book, pamphlet or other publication purporting to be issued by a public authority.” Although electronically stored information (“ESI”) is not specifically mentioned in the Rule, courts have held that ESI is included in the phrase “other publications.” See, e.g., Williams v. Long, 585 F. Supp. 2d 679, 688 n. 4 (D. Md. 2008) (Rule 902(5) provides for self-authentication of “other publications” and it is the act of posting information on the Internet by a qualifying public authority that is the act of publication). As a general rule, because records and information located on government websites are self-authenticating under Fed. R. Evid. 902, the courts will typically take judicial notice of the content on the government’s website. Newton v. Holland, 2014 WL 318567 (E.D. Ky. Jan. 29, 2014). That includes judicial notice of the content on federal, state and municipal agencies’, departments’ and other entities’, including government-owned corporations’ websites. (citations omitted). Courts have also taken judicial notice of the content of foreign governments’ websites, particularly to establish the law of the relevant foreign jurisdiction. United States v. Broxmeyer, 699 F. 3d 265, 296 (2d Cir. 2012). Courts commonly take judicial notice of website data compiled or generated by a governmental entity for the truth of the matters asserted, provided that the facts at issue are not subject to reasonable dispute.

II. NON-GOVERNMENTAL WEBSITES

Although courts are generally reluctant to take judicial notice of evidence from non-governmental websites, there are still many circumstances in which judicial notice of non-governmental websites is appropriate. One example would be the website of a corporate or other private-sector organization. Whether a court will take judicial notice of the content of the corporate or other private-sector organization’s website mainly depends on the nature of the content at issue and the purpose for which judicial notice is taken. Corporations that are subject to federal security laws are also subject to civil and criminal penalties for false statements in their descriptions of financial conditions and business operations that are contained on their websites. Courts have taken judicial notice of such information to determine whether the corporation is large or small, or sophisticated or unsophisticated, or is engaged in a particular line of business. Liberty Mut. Ins. Co. v. Consol. Elec. & Tech. Assocs. Corp., 2007 WL 118938 (E.D. Mich. Jan. 10, 2007). Judicial notice of that type of information is premised on the presumptive truthfulness of published information whose accuracy is subject to criminal and civil sanctions. When it is offered or used against the party publishing the information on its website, the presumption is enhanced by the same circumstantial guarantees of accuracy that give rise to the hearsay exception for party admissions. The courts have also taken judicial notice of the content on a corporation’s website based on the corporation’s strong motivation to ensure the accuracy of that information. Judicial notice has been premised on the presumptive truthfulness of information that is vital to a commercial establishment’s survival. Again, when such information is offered or used against the party publishing it on their website, the presumption of accuracy is enhanced by the same circumstantial guarantees of accuracy that give rise to the hearsay exception for party admissions.

III. TRUSTED JUDICIALLY NOTICED WEBSITES

There are certain websites and types of websites that courts turn to repeatedly to take judicial notice. Many courts have taken judicial notice of the reliability and accuracy of Google Maps, MapQuest and similar websites for the purpose of determining both locations and distances. (citations omitted). Courts routinely look to internet calendars to take judicial notice of the particular days of the week that are relevant to when certain events occurred on past dates. Local 282, Int’l. Bhd. of Teamsters v. Pile Found. Constr. Co., 2011 WL 3471403 (E.D.N.Y. Aug. 5, 2011). The courts have also recently started to take judicial notice of the accuracy and reliability of global positioning system (GPS) data. United States v. Brooks, 715 F 3d 1069, 1078 (8th Cir. 2013). IV. CONCLUSION Although courts are far from taking judicial notice of content contained on Facebook and other social media sites, they have come a long way from the days when information from the Internet was deemed insufficiently trustworthy to satisfy a hearsay exception. As the Internet continues to spread throughout our daily lives, we can be certain that judicial notice of evidence from that medium will continue as well.

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Responsibility of Electric Utilities to Trim Trees and Other Vegetation

It is hard to believe that summer is coming to an end and storm season will be upon us. It is never too early to be prepared for the property losses caused by high winds and winter storms. This blog explores the duty of electric utilities to trim trees and other vegetation around power lines.

Often utility lines are downed by tree limbs that fall on the power lines during ice storms and high wind events. In turn, the downed lines send electrical surges into residences and businesses, which may cause a fire. Many subrogation professionals fail to seek recovery in such cases believing that downed electrical lines are an act of God or that the local utility did not have a duty to actively inspect for and remove vegetation that may pose a threat to the electrical distribution system. Before closing such a case, one should be mindful that most states have adopted the National Electric Safety Code (“NESC”). The NESC is a national industry standard for the safety of utility lines. The NESC requires electric utilities to prune trees away from power lines and other electrical equipment. Rule 281 of the NESC, found in the NSB Handbook 81 provides:

Where trees exist near supply-line conductors, they shall be trimmed, if practicable, so that neither the movement of the trees nor the swinging or increased sagging of conductors in wind or ice storms or at high temperatures will bring about contact between the conductors and the trees.

National Electric Safety Code, NBS Handbook 81 (National Bureau of Standard, 6th Edition 1961).

Many states require utilities to proactively inspect for and remove vegetation that pose a risk to wires. For example, in New Jersey, utilities are required “to perform vegetation management on vegetation that pose a threat to its energized conductors at least once every four years.” New Jersey Administrative Code 14:5-9.4(b). The utility is also required to remove all vegetation that is close enough to the electrical line to “affect reliability or safety” once the utility becomes aware of the threat. N.J.A.C. 14:5-9.4(c).

In sum, when deciding if a utility should have or could have prevented a fire caused by a downed line, at the very least, the subrogation professional should check the NESC and the state code to determine if the utility complied with the mandatory vegetation control requirements. This is in addition to inverse condemnation arguments, where applicable, as this site has written about previously.

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Discovery of Initial Claims Investigation Documents

A recent opinion out of the United States District Court for the Eastern District of Pennsylvania illustrates the ongoing and vexing problem of determining whether documents created during an insurer’s early claims investigation are protected from disclosure in subsequent litigation under an attorney-client or work-product privilege.

In Henriquez-Disla v. Allstate Prop. and Cas. Ins. Co., 2014 WL 2217808 (E.D.Pa. May 29, 2014), a homeowner filed an insurance claim following an alleged theft at the home. The insurer conducted a preliminary coverage and subrogation investigation and ultimately retained counsel within one month of the loss. Counsel later conducted an examination under oath of the insured. The claim was ultimately denied when the insurer determined that the claim was fraudulent.

In the ensuing “bad faith” lawsuit brought by the insured against the insurer, the insured sought production of claims log entries, emails and other documents that included communications with counsel before suit was filed as well as materials relating to the insurer’s subrogation investigation including a cause and origin report (interestingly, the court described the cause and origin report as having been commissioned as part of the subrogation investigation and not as part of the coverage review). The insurer resisted producing these materials and the homeowner brought a motion to compel discovery.

The court ordered production of the early communications with counsel that collected factual information only, and did not contain legal advice, finding that the “collection of information for the EUO’s, are part of the ordinary business function of claims investigation and therefore fall outside the attorney-client privilege.” With respect to the insurer’s materials relating to subrogation, including the cause and origin report, the court likewise ordered that these be produced, finding that such information was part of the “ordinary business functions in claims investigation” and was not protected by a work-product privilege.

This case demonstrates that while early retention of counsel is an important factor considered by the courts in determining the applicability of attorney-client and work-product privileges, it is not the only factor, and that if ordinary claims functions are assigned to counsel, the factual information collected by counsel may ultimately be discoverable. Similarly, subrogation materials collected in the ordinary course of claims investigation, and not in anticipation of litigation, are likewise at risk of being discoverable.

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