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DISCOVERY ORDER FOLLOWING IN CAMERA REVIEW
Summary: Insurer resists discovery of 30 pages of documents from its claims file. Claimant moves to produce.
Held: None of the documents are communications between attorney and client and are therefore not protected by the attorney-client privilege. Some, but not all of the documents do constitute either work product or, if not work product, contain mental impressions which are protected.
¶1 Kathy A. Burnside Lund (claimant) injured her head and neck on September 1, 1998, while working for The Industrial Company (Industrial) at the Stillwater Mine in Nye, Montana. The insurer, St. Paul Fire & Marine Insurance Company (St. Paul), accepted liability for the injury but has denied benefits for permanent impairment, wage loss, and further medical care. It also maintains it has paid for all reasonable medical care. Through her petition claimant seeks permanent partial disability benefits and medical treatment.
¶2 Following the filing of the petition in this matter, discovery disputes arose between counsel for the parties, leading to this Court's December 6, 2001 Order Regarding Discovery Motions. (2001 MTWCC 62.) One area of dispute involved the insurer's claims file. St. Paul produced much of its claims file, but withheld certain documents based upon its assertion of attorney work product and/or attorney-client privilege. Claimant sought production of the withheld documents. In my December 6th Order, I directed St. Paul to describe each of the withheld documents as required by ARM 24.5.324. Once the documents were described, claimant was to then file a further motion to compel production identifying the specific documents she sought.
¶3 St. Paul's counsel, Mr. Joe C. Maynard, thereafter provided claimant's counsel, Mr. Timothy B. Strauch, with a "privilege log." Mr. Strauch believed the log was inadequate. To avoid protracted discussions on the issue, the Court's hearing examiner obtained the agreement of both counsel that Mr. Maynard would forward all of the withheld documents to the Court for in camera review.
¶4 Thirty pages of documents were thereafter received and were reviewed by the hearing examiner. After the initial review, the hearing examiner asked for further information from counsel regarding when counsel for the insurer and counsel for claimant were first involved in the claim, when demands were first made on the insurer, and how the documents fit within Montana precedent concerning work product. Additional argument was received from both counsel and considered by the hearing examiner. The matter was then deemed submitted for decision.
¶5 As an initial matter the hearing examiner reviewed the documents to determine if any of the documents are protected by the attorney-client privilege. In conducting that review, the hearing examiner was guided by Kuiper v. District Court of Eighth Judicial Dist. of State of Montana, 193 Mont. 452, 461, 632 P.2d 694, 699 (1981), in which the Montana Supreme Court said:
The client in the context of the withheld documents was St. Paul. None of the withheld documents reflect communications between counsel for St. Paul and any of St. Paul's adjusters or other employees, officers, directors, or agents. Thus, the privilege is inapplicable.
¶6 The remaining issue is whether any of the documents are protected under the work- product doctrine. The doctrine was first articulated by the Supreme Court of the United States in Hickman v. Taylor, 329 U.S. 495 (1947). That case considered the discoverability of memoranda and statements prepared by an attorney in anticipation of litigation following a tugboat accident. Initially, the Supreme Court noted that the attorney-client privilege
329 U.S. at 508. However, for reasons of policy and justice, the Court held that the materials were nevertheless protected by a "work product doctrine." The Court explained:
329 U.S. at 510-511.
¶7 As articulated by the Supreme Court, the work-product doctrine is not an absolute privilege. The Court held that "[w]here relevant and non-privileged facts remain hidden in an attorney's file and where production of those facts is essential to the preparation of one's case, discovery may properly be had." 329 U.S. at 511.
¶8 In Montana, the work-product doctrine is found in Rule 26(b)(3) of the Montana Rules of Civil Procedure, which provides in pertinent part:
Interpreting the rule against the backdrop of Hickman, the Montana Supreme Court has held that the attorney work-product doctrine "[as] incorporated into Rule 26(b)(3), gives a qualified immunity to materials prepared 'in anticipation of litigation,' and nearly absolute immunity to the 'mental impressions, conclusions, opinions, or legal theories of an attorney or other representative of a party to the litigation.'" State of Montana, ex rel., Burlington Northern Railroad Company v. District Court of the Eighth Judicial District, 239 Mont. 207, 217, 779 P.2d 885, 892, quoting Kuiper, supra, 193 Mont. at 463, 632 P.2d at 701.
¶9 The Montana Supreme Court has addressed the application of the work-product rule to an insurer's claims file, although never in the context of a workers' compensation claim. The seminal case is Kuiper v. District Court, 193 Mont. 452, 632 P.2d 694 (1981), which involved a strict liability claim against a tire manufacturer for personal injuries. One of the work-product issues in that case was whether documents prepared prior to the commencement of litigation were covered by the work-product rule. The Court answered the question in the affirmative:
193 Mont. at 465, 632 P.2d at 694. Although the Court referred to the "claim file," the "claim" file in question in Kuiper was that of the tire manufacturer's in-house counsel. This is evident from the Court's description of the documents at issue, which consisted primarily of memoranda or communications involving an individual identified as in-house counsel. 193 Mont. at 460-462, 632 P.2d at 699-700.
¶10 The Kuiper decision is important in other respects. First, it affirmed that notwithstanding the fact that a document is deemed to be work product a plaintiff is entitled to production of the document if he shows he "has a substantial need of the materials in the preparation of his case and that he is unable without undue hardship to obtain the substantial equivalent of the materials by other means." Kuiper, supra, 193 Mont. at 465, 632 P.2d at 701. Second, it reiterated the rule that "those portions of the documents which relate to the mental impressions" of the author of the document are entitled to greater protection. Quoting In re Murphy, 560 F.2d 326 (8th cir. 1977), the Supreme Court stated:
193 Mont. at 466, 632 P.2d at 701-702.
¶11 Cantrell v. Henderson, 221 Mont. 201, 718 P.2d 318 (1986), is important in the context of workers' compensation claims files because it expressly limits the "claims file" language of Kuiper to claims files maintained by attorneys. At issue in Cantrell was the protection afforded to a statement of the defendant truck driver which was taken by his employer's insurance company. The district court held that the statement was subject to the work-product rule and need not be produced. On appeal, the Montana Supreme Court reversed. It expressly limited the "claims file" language in Kuiper to an attorney's claim file:
221 Mont. 208, 718 P.2d 322 (emphasis added).
¶12 Clark v. Norris, 226 Mont. 43, 734 P.2d 182 (1987), provides further elucidation as to what is and is not protected under the work-product rule. That case involved an action for medical malpractice. Plaintiff sought discovery of "the report of the liability claim [Dr.] Norris provided to his insurance carrier, and the incident report prepared by St. Peter's Hospital for its attorneys." 226 Mont. at 49, 734 P.2d at 186. The defendant doctor argued that his report was privileged because it was filed "after Clark had filed her claim with the medical/legal panel." 226 Mont. at 49, 734 P.2d at 186. The Supreme Court held that, under Rule 26(b)(3), "it must be determined whether, in the light of the nature of the document and factual situation in a particular case, the document can fairly be said to have been prepared or obtained because of the prospect of litigation." Id., 226 Mont. at 50, 734 P.2d at 186 (emphasis added). Because proceedings before the medical/legal panel "are a condition precedent to and an integral part of the litigation process," the Supreme Court found the doctor's report "was in anticipation of litigation and entitled to the qualified protection from discovery pursuant to Rule 26(b)(3), M.R.Civ.P." Id.
¶13 However, it declined to extend the same protection to the hospital's report, distinguishing between documents prepared in anticipation of litigation, such as the doctor's, and documents routinely prepared or required irrespective of litigation.
226 Mont. at 50-51, 734 P.2d at 187. On the record before it, the Clark Court was not persuaded "of the requisite confidential nature of the [hospital] reports necessary to warrant their immunity from discovery afforded an attorney-client relationship." Id. at 51. The hospital administrator had testified that hospital policy required that an incident report be prepared and that he kept such reports on file indefinitely and routinely forwarded them to hospital counsel "regardless of whether litigation on that particular incident ever materializes." Id.
¶14 In State of Montana, ex rel., Burlington Northern Railroad Company v. District Court of the Eighth Judicial District, 239 Mont. 207, 779 P.2d 885 (1989), the Supreme Court reaffirmed the distinction between documents truly prepared in anticipation of litigation and those prepared as a regular business practice. At issue were witness statements taken by a senior claims examiner of the railroad just hours after an accident. The defendant railroad contended the witness statements were privileged work product "taken by an agent of defendant and . . . taken in anticipation of litigation." Id. at 215. Plaintiff responded that the "statements were simply statements taken in the regular course of business and are discoverable without any showing of need." Id. at 215-16, emphasis added. The Court agreed:
239 Mont. at 216, 779 P.2d at 891.
¶15 Palmer by Diacon v. Farmers Ins. Exchange, 261 Mont. 91, 861 P.2d 895 (1993), concerned when documents may be considered as prepared in anticipation of litigation. That case was a bad faith action arising out of the insurer's denial of a claim to recover uninsured motorist benefits. The insurer objected to producing materials dated after the insured's attorney threatened to sue for bad faith if the insurer denied the claim. The insurer argued that, "after that date, the unprivileged materials in the file were prepared in anticipation of litigation, thus were subject to the work-product doctrine." 261 Mont. at 114, 861 P.2d at 909. The Court agreed:
261 Mont. at 115, 861 P.2d at 910.
¶16 As in previous decisions, the Palmer Court noted that protection given to opinions within work product is "broader" than the opinions of only the attorney, protecting as well "the mental impressions of an attorney or other representative of the party concerning the litigation." 261 Mont. at 116, 861 P.2d at 911 (emphasis added). However, it went on to point out that some opinions and mental impressions may be discoverable even though they constitute work product and are subject to greater protection than non-opinion work product. The Court cited cases from several courts, including the Ninth Circuit Court of Appeals, which had held that despite the extra protection afforded opinion work product, mental impressions may nonetheless be discoverable "when the mental impression is directly at issue in the case and the need for the material is compelling." 261 Mont. at 117, 861 P.2d at 911. The case under consideration furnished an example:
Id. While the Court refused to rule that such mental impressions were always discoverable in any bad faith case, it noted, "It is difficult to envision a circumstance in which the compelling need requirement would not be met when the mental impressions of a party are directly at issue in the case." Id. (italics in original, bold added). In contrast, the Court noted the work-product doctrine "protects materials containing the mental impressions of [the insurer's] attorneys." Id., emphasis added.
¶17 The Workers' Compensation Court has addressed the work-product rule in several cases. Those cases provide further instruction concerning the nature, scope, and application of the work-product privilege.
¶18 In Adels v. Cigna Insurance Co., WCC No. 9307-6831 (1/6/94) and (3/10/94), one of the documents at issue was an investigative report. This Court held that the report was covered by the work-product rule despite the fact that it was a part of the insurer's claims file maintained prior to litigation. The significant fact to that determination was the fact that the insurer's attorney "was involved prior to the time of the investigative report which is sought by the petitioner." Adels (3/10/94) at 2. "That involvement strongly suggests that the investigative report was prepared in anticipation of litigation rather than in the ordinary course of the insurer's business." (Id.)
¶19 In Mutchie v. Old Republic Insurance Co., WCC No. 9411-7185 (1/20/95), the insurer produced redacted copies of notes and memos made by the claims adjuster. Counsel for the insurer argued the redacted portions were protected by the work-product rule. Citing Rule 26(b)(3), the Workers' Compensation Court "determined that most of [the redacted portions] were not made in contemplation of litigation or that petitioner has made a requisite showing of substantial need for the information." Id. at 2. The Court explained:
Mutchie, supra, at 2 (emphasis added).
¶20 In Mutchie, the dispute also involved the reasonableness of the insurer's adjustment of petitioner's claim. As the Court noted:
Id. While ordering production of most of the notes and memos concerning that issue, the Court nonetheless held that portions discussing actual attorney advice and specific mental impressions were protected and need not be disclosed.
¶21 Turning to the present case, the insurer argues that "the claimant is not entitled to any adjuster's notes whatsoever, with the exception of [notes concerning] direct contact with [claimant], once counsel is involved." (December 19, 2001 letter from Mr. Joe C. Maynard.) In its subsequent brief, the insurer urged that work-product protection was triggered by the threat of litigation following involvement of claimant's counsel even though the insurer had not yet involved counsel on its behalf. The insurer argues:
(Respondent's Brief in Opposition to Request for Adjuster's Notes at 2-3.)
¶22 On the facts presented, I am unpersuaded by the insurer's argument as to the time the work-product rule was triggered. The correspondence identified by the insurer as indicating the possibility of litigation, while involving claimant's attorney, either concerned requests that could just as well have come from claimant and which are by their nature part of the claims adjusting process, or is correspondence with the employer's counsel concerning claimant's job status. The correspondence was initially between Michael W. Cotter (Cotter), the attorney for claimant, and Carol Crews (Crews) of Crawford & Company, which adjusted the claim, and between Cotter and Colin Reid (Reid), an attorney for The Industrial Company, which was claimant's employer. Later on, other adjusters for Crawford were involved in the correspondence. The following is a summary of the correspondence:
¶23 The insurer contends these contacts evidence disputes and the threat of litigation, making adjustment of the case following the initial contact by Cotter as in "anticipation of litigation." The letters exchanged during 1998 and early 1999 do not evidence a dispute so much as a request that the insurer (and employer) give attention to the matter, make determinations as to whether benefits are due, and pay benefits. While Cotter did assert a right to payment, the letters during 1998 and early 1999 do not reflect a final determination by the insurer or any statement that litigation was inevitable or even likely. Indeed, Cotter's letter of January 22, 1999, suggests expectation that matters would be "very easily resolved." (Ex. G-1 to Respondent's Brief in Opposition to Request for Production of Adjuster's Notes.)There is no indication that positions were entrenched and litigation imminent. The insurer's position that all entries following initial contact from Cotter must be deemed work product is without merit.
¶24 Moreover, even after it becomes likely that litigation will ensue on a workers' compensation claim, not every entry into a claim file is work product. Claimants are entitled to discovery records of ongoing adjustment decisions. Because insurance files continue to contain routine entries after litigation seems inevitable, the determination of work product involves scrutiny of each document to determine whether the document contains entries that are in fact prepared in contemplation of litigation.
¶25 St. Paul provided 30 pages of documents which it asserts are privileged. Each page is marked with a sticker bearing a five digit number. The hearing examiner has reviewed those documents in camera. Many of the pages are print-outs of a computerized diary system. Others are handwritten notes on various notepads or transmittal forms. A few are copies of statutes. Several are "claim progress" notes which constitute separate, brief records of phone calls or transactions. These notes cover some of the same time periods as the diary file notes.
¶26 The grid below identifies each document by its page number, contains a brief description of each page, and sets out the Court's order regarding production. The discoverability of the documents was judged on the basis of their content in the context of the letters produced by respondent and in light of Montana law reviewed above. Based on the hearing examiner's review and recommendations, the Court is ordering that St. Paul produce most of the documents. The documents that are ordered produced were not, in the judgment of the hearing examiner, prepared in actual contemplation of litigation and do not reflect the mental impressions of the claims adjuster or St. Paul's attorneys regarding claims or defenses.
¶27 With regard to whether the adjuster was acting in contemplation of litigation at any particular point, it is noted that a document dated December 31, 1998, contains what appears to be a computer-generated prompt which asks, "Litigation involved y/n." The entry is "n," indicating no. (Page 00335.) An entry dated January 15, 1999, however, contains a reference reasonably construed as indicating the adjuster believed a threat of litigation existed. ( Page 00250.) As will be clear from the below rulings, the hearing examiner determined that some documents after that date do appear to have been prepared in anticipation of litigation. Some contain opinions or mental impressions relating to possible litigation. Those entries are deemed protected by the work-product privilege.
¶28 Some of the documents ordered produced are records of communications among the adjuster, claimant's counsel, and Colin Reid (Reid), an attorney for the employer. Respondent has not asserted an attorney-client privilege regarding communications with Reid, nor is that privilege applicable. In the background of some of those communications, and other notes in the file which I am ordering the insurer to produce, is the possibility of a claim by claimant against the employer for wrongful termination. Because wrongful termination of employment is not a claim threatened against the insurer, the work-product doctrine is not applicable to St. Paul.
¶29 Respondent must comply with this Order on or before March 8, 2002. Respondent must provide legible copies to claimant's counsel.
DATED in Helena, Montana, this 1st day of March, 2002.
c: Mr. Timothy B. Strauch
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