Insurance Claim File protected under Work Product Doctrine
In Depositors Insurance Co. v. Canal Insurance Co., a declaratory judgment action was filed by Depositors Insurance Company against Canal Insurance Co. At issue in the declaratory judgment is the scope of the liability coverage under a motor vehicle insurance policy by Canal to Four Winds Corporation. The coverage dispute relates to a collision between a motor vehicle operated by Michael Baumann and a tractor-trailer unit negligently operated by an alleged employee of Four Winds. Michael Baumann, whose vehicle was insured by Depositors, sought recovery for personal injuries. Martha Baumann sought recovery for loss of consortium. Four Winds allegedly owned the trailer involved in the accident, but Canal denied coverage on the basis that the trailer was not listed on the policy’s schedule of insured vehicles. As a result, Depositors paid Baumanns under its uninsured motorist coverage policy. Depositors, as the Baumanns’ subrogee, filed a negligence action against Four Winds, the driver of the tractor-trailer, and the owner of the tractor pulling Four Winds’ trailer. Canal provided a defense under a reservation of rights. Depositors asserted that Four Winds’ liability was covered under an endorsement to the policy providing coverage for vehicles not listed in the policy, where such coverage is required under federal law establishing financial responsibility requirements for motor carriers.
Pursuant to Illinois Supreme Court Rule 214, Depositors requested that Canal produce, inter alia, “[a] full and complete copy of the electronic and paper claim file created and/or maintained by Canal Insurance Company in connection with the claim filed by Michael and Martha Baumann for injuries or damages allegedly sustained in the April 24, 2006, vehicle accident including, but not limited to, that portion of any claim file created and/or maintained for the litigation arising out of [the negligence lawsuit filed by Depositors as the Baumanns’ subrogee].” Depositors also requested production of the underwriting file for the policy issued by Canal to Four Winds. Canal produced various documents, which were organized into three files (which have been referred to as the “claim center file,” the “underwriting file,” and the “final file”). However, Canal also withheld documents from each of the files, claiming that the documents were privileged from discovery. Depositors moved to compel production of the withheld documents. However, Canal refused to produce roughly 200 pages of documents. Depositors subsequently moved for sanctions against Canal for its noncompliance.
The issue before the court is whether any of the documents that Canal claims are privileged from discovery are within the ambit of the work product doctrine. Attorney work product is protected under Illinois Supreme Court Rule 201(b)(2), which provides, in pertinent part, that “[m]aterial prepared by or for a party in preparation for trial is subject to discovery only if it does not contain or disclose the theories, mental impressions, or litigation plans of the party’s attorney.” A major point of contention between the parties is whether work product created by defense counsel in the negligence lawsuit is privileged from discovery in the declaratory judgment action. “It has been held * * * that the work product doctrine protects materials prepared for any litigation or trial, so long as they were prepared by or for a party to the subsequent litigation. [Citation.] The rationale for continuing protection, even in unrelated cases, was explained in In re Murphy, 560 F.2d 326 (8th Cir.1977). The court agreed with the rationale expressed in Murphy and concluded that the work product privilege extended to all subsequent litigation.
The court determined that all material prepared by or for Canal is privileged from discovery if it “contain[s] or disclose[s] the theories, mental impressions, or litigation plans” (Ill.S.Ct. R. 201(b)(2)) of defense counsel or coverage counsel. The court further stated that the scope of protected work product is broader in federal courts than in Illinois courts. Canal has claimed the work product privilege against disclosure of the reserves it set for the Baumanns’ negligence claim and Depositors’ subrogation claim. The documents submitted for review do not show that the reserves necessarily reflect the theories, mental impressions, or litigation plans of defense counsel or coverage counsel. Canal also argued that reserve information simply is not relevant to the question of coverage. Canal did not raise a relevance objection when it originally submitted its files to the trial court for in camera review. Because the relevance objection was not properly raised below, the court did not consider the issue on appeal.
The court reviewed the documents that Canal contended are privileged against discovery and concluded that some of the material constituted as protected work product. The court next determined whether any of the remaining documents were protected by the attorney-client privilege. To be entitled to the protection of the attorney-client privilege, a claimant must show that: “(1) a statement originated in confidence that it would not be disclosed; (2) it was made to an attorney acting in his legal capacity for the purpose of securing legal advice or services; and (3) it remained confidential.” The privilege applies only where the client has expressly made the communication confidential or where the client would reasonably believe that the attorney would understand the communication to be confidential. The court reviewed the documents that Canal contends are privileged against discovery and found that none of the documents meet all of the above criteria for privileged status that are not otherwise covered by the work product privilege.
The court held that the claim file and final file were entitled to protection under the work product doctrine. However, after reviewing all of the documents that Canal refused to turn over, we conclude that Canal withheld a substantial number of documents with no good-faith basis to believe that they were privileged. However, it set reserves for the Baumanns’ negligence claim and Depositors’ subrogation claim. The documents submitted for review do not show that the reserves necessarily reflect the theories, mental impressions, or litigation plans of defense counsel or coverage counsel.
Depositors Insurance Co. v. Canal Insurance Co., 2013 WL 5509108 (Ill.App. 2 Dist.). (This order was filed under Supreme Court Rule 23 and may not be cited as precedent by any party except in the limited circumstances allowed under Rule 23(e)(1)).
