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Middle District of Pennsylvania Finds Documents Properly Withheld When Counsel Acted as Coverage Counsel, not as Claims Adjuster

In Walter v. Travelers Personal Ins. Co., 2013 U.S. Dist. LEXIS 72771 (M.D. Pa., May 22, 2013) (opinion by J. M.C. Carlson), the United States District Court for the Middle District of Pennsylvania held that "coverage counsel was, in fact, serving the client in an attorney-client capacity, and not in some other functionshutterstock_130099715xsmall.jpg such as a business advisor or claims adjuster." As a result, the court ruled that documents were properly withheld by an insurance company under the attorney-client privilege and work-product doctrine.

Following injuries sustained when the plaintiff was run over by a truck, the plaintiff submitted an insurance claim under a Travelers Personal Insurance Company ("Travelers") policy. After Travelers refused to pay, the plaintiff filed the instant lawsuit. During discovery, the plaintiff moved to compel Travelers to produce certain documents, which Travelers refused on the basis of attorney-client privilege and/or the work-product doctrine. Travelers subsequently submitted the withheld documents to the court for in camera review.

In Walter v. Travelers Personal Ins. Co., 2013 U.S. Dist. LEXIS 72771 (M.D. Pa., May 22, 2013) (opinion by J. M.C. Carlson), the United States District Court for the Middle District of Pennsylvania held that "coverage counsel was, in fact, serving the client in an attorney-client capacity, and not in some other function such as a business advisor or claims adjuster." As a result, the court ruled that documents were properly withheld by an insurance company under the attorney-client privilege and work-product doctrine.

Following injuries sustained when the plaintiff was run over by a truck, the plaintiff submitted an insurance claim under a Travelers Personal Insurance Company ("Travelers") policy. After Travelers refused to pay, the plaintiff filed the instant lawsuit. During discovery, the plaintiff moved to compel Travelers to produce certain documents, which Travelers refused on the basis of attorney-client privilege and/or the work-product doctrine. Travelers subsequently submitted the withheld documents to the court for in camera review.

Relying upon Third Circuit decisions, the court stressed that the attorney-client privilege and work-product doctrine should be used only when necessary to achieve their intended purposes. The attorney-client privilege's purpose is "to encourage clients to make full disclosure of facts to counsel so that he may properly, competently, and ethically carry out representation" in order "to promote the proper administration of justice." The work-product doctrine, on the other hand, "promotes the adversary system directly by protecting the confidentiality of papers prepared by or on behalf of attorneys in anticipation of litigation."

The attorney-client privilege applies to: "(1) a communication (2) made between [the client and the attorney or his agents] (3) in confidence (4) for the purpose of obtaining or providing legal assistance for the client." The privilege protects the information provided by the client who is obtaining legal advice as well as to the lawyer who is providing the advice. However, the privilege does not protect the underlying facts disclosed in those communications and only applies to legal communications, not to non-legal, business advice.

Under Federal Rule of Civil Procedure 26(b)(3), "a party may not discover documents and tangible things that are prepared in anticipation of litigation or for trial' unless otherwise discoverable or a party shows substantial need for the material." Thus, the work-product doctrine is intended "to protect material prepared by an attorney acting for his client in anticipation of litigation" but does not protect those documents prepared "in the ordinary course of business or pursuant to public requirements unrelated to litigation, or for other nonlitigation purposes."

Applying the above principles, the court reviewed each of the withheld documents and concluded that all were properly withheld as one or both of the privileges applied. The plaintiff had argued that coverage counsel was acting as a claims adjuster, not solely as coverage counsel to the insurer. However, the court based its decision on the fact that it had examined all of the documents in their entirety, not simply isolated sections of the documents, and determined that counsel was acting as coverage counsel to the insurance company, not as a business advisor or claims adjuster.

The court also rejected the plaintiff's argument that because Travelers asserted the affirmative defense that its conduct was reasonable, in compliance with applicable Pennsylvania law and regulations, and in accordance with industry standards, customs, practice in the investigation and adjustment of insurance claims, Travelers had waived the attorney-client privilege. The court opined that "the defendant's general defense that it conducted itself lawfully does not negate its ability to protect from disclosure confidential attorney-client communications."

Because the documents were protected by the attorney-client privilege and/or the work-product doctrine and Travelers had not waived any of these privileges, the court ordered that Travelers was not required to produce any of the documents reviewed in camera by the court. 

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