The Claimant, submits this Motion to Compel Discovery, and states as follows:
C.R.C.P. 121, §1 15(8) Certification: Claimant’s counsel has extensively and repeatedly conferred with counsel for Defendant regarding the herein requested relief prior to filing this Motion. Based on Respondent’s counsel stated positions and refusal to produce the requested discovery, Claimant’s further efforts to amicably resolve this matter would be futile.
I. ISSUE FOR DETERMINATION
Claimant seeks the Panel’s intervention to compel production of the following:
A. The Deposition of liability adjuster Stewart Brown and or 30(b)(6) representative of Respondent
B. Unredacted copy of the insurance claims file
- On December 6, 2006, (“Claimant”) was the fully restrained driver of a pickup truck traveling southbound on Mackay Road and was at a complete stop for traffic. At that time Kevin Baker failed to slow or stop and crashed into the rear of Claimant’s vehicle with great force and violence. The police report indicated that Baker’s vehicle sustained extreme damage.
- Claimant sustained severe injuries in the collision including lumbar back pain, tingling in his feet, tingling in his hands, pain in the interscapular region, and severe pain in his left shoulder which required surgery. Claimant continues to experience residual pain.
- Claimant’s economic losses totaled $61,550.79; $47,596.31 in medical expenses and $13,954.48 in lost wages.
- The insurer for the tortfeasor, Allstate, tendered their policy limits of $50,000.00. in full settlement of Mr. Watson’s claims against Kevin Baker.
- Claimant purchased and paid for an auto policy which included separate premiums for $100,000.00 UIM benefits and $5,000.00 medpay benefits with respondent American Family Mutual Insurance Company.
- Claimant demanded payment of his UIM benefits and Respondent has repeatedly denied owing any benefits and repeatedly refused to provide any explanation which includes a breakdown of how, if at all, Claimant’s demand for benefits was adjusted.
- Claimant, pursuant to the policy, made written demands for arbitration of this matter on February 12, 2009 and when no response was forthcoming again on March 3, 2009. Finally, after continuing to deny and delay, Respondent responded to the demand for arbitration on March 23, 2009.
- Respondent’s Response to the Demand for Arbitration included ten (10) defenses. A copy of which is attached as Exhibit 1.
- Among these defenses Respondent claims the following:
- First Defense: respondent American Family denies that Claimant was injured or damaged to the extent claimed by him, second denies that Claimant has been inadequately compensated with the above-detailed proceeds, and third denies all allegations of Claimant’s demand for uninsured motorist arbitration not expressly admitted. (Please note that the only things Respondent admitted are Kevin Baker’s fault, Allstate’s coverage limit and waiver of subrogation for medpay benefits)
- Second Defense: Claimant failed to use reasonable care for his safety within contemplation of .R.S. 13-21-111. (comparative fault)
- Fourth and Fifth Defenses: summarized as Claimant’s injuries, if any, (emphasis added) may have existed before the collision or after.
- Sixth Defense: Claimant has failed to mitigate his damages, if any, (emphasis added) as required by law.
- Tenth Defense: Claimant’s claims are barred, limited or proportionately reduced pursuant to C.R.S… 111.7 (assumption of risk)
- AMFAMs UIM insurance claims, and adjuster Stewart Brown, possess file information that relates to the claim, particularly any investigative claims, adjuster notes concerning the above asserted defenses which may serve as the basis for how and why with $61,550.79 in economic losses Respondent unreasonably denied any UIM benefits. Defendant has refused to produce this information, providing Claimant with a heavily redacted claims file and claiming privilege for analysis and evaluation and refusing to allow the deposition of Stewart Brown.
- From the very beginning, Claimant has attempted to amicably and
informally work with Respondent in requesting a complete copy of the claims file and schedule the deposition of Mr. Brown. The unredacted claims file and Mr. Brown’s deposition are clearly discoverable under Colorado’s Rules of Civil Procedure.
- No cooperation has been forthcoming from Respondent’s counsel in scheduling this deposition, which has been repeatedly and unreasonably refused. Respondent’s counsel has refused to accept subpoena for a deposition duces tecum of Mr. Brown. Rather than paying for service of process on Mr. Brown after which Respondent’s Counsel will file a motion to quash, the parties agree that the within motion is appropriate.
- It is evident that Respondent, AMFAM, is withholding or hiding significant information relevant to this arbitration. Consequently, Claimant has been forced to now seek the Arbiters assistance in obtaining this information.
A. Standard of Review Re: Motion to Compel
- Discovery, in general, is governed by Colorado’s Rules of Civil Procedure, specifically, Rules 26 37. These Rules are to be construed liberally to accomplish the purposes of discovery which are:
a. to eliminate surprise;
b. to discover all relevant evidence;
c. to simplify the issues; and
d. to promote expedited settlements.
Hawkins v. District Court, Colo. 638 P.2nd 1372 (1982)
- “Parties may obtain discovery regarding any matter, not privileged, which is relevant to the subject matter involved in the pending action, whether … claim or defense.” C.R.C.P. 26(b)(1). When resolving discovery disputes, the Rules should be construed liberally to effectuate the full extent of their truth seeking purpose. Cameron v. District Court, 565 P.2d 925 (Colo. 1977).
- In close cases the balance must be struck in favor of allowing discovery. Smith v.District Court, 797 P.2d 1244, 1248 (Colo. 1990).
B. Respondent’s Adjusters/Investigators Are Individuals With Relevant Information
- Respondent’s Initial Disclosures listed Stewart M. Brown, Laura Beckwith and Marilyn Fitzgerald and the basis for having discoverable information as the claim adjuster, subro adjuster and/or representative of American Family Insurance. Respondent’s initial disclosures are attached hereto as Exhibit 2.
- Respondent asserts privilege over reserve information and settlement authority as well as log notes containing analysis.
- It is inarguable that the information possessed by these individuals and related documents are irrelevant to the parties’ respective claims and defenses.
C. There Is No Such Thing as an Insurance Adjuster/Investigator Privilege
- Apparently AMFAM, its’ representatives and defense counsel believe that their routine claims investigation related documents, are somehow privileged and immune from the burden of discovery. However, that mistaken belief has been routinely rejected by Colorado courts.
- Judge Kane, United States District Court for the District of Colorado, addresses the matter as follows:
“There is no such thing as a generic work product privilege for insurance adjusters. If after there is notice of suit and there is or there is a suit filed, an insurance adjuster is working directly under the supervision and control of trial counsel, and the work that is done is to assist trial counsel in formulating strategy for the trial and is a reflection of the attorney’s thought process, then it, can be work product, but not before – it is the ordinary course of business for insurance companies to engage in this activity and there is no work product. And as far as I know, and hope to shout, there’s no such thing as an insurance company privilege that exists in regard to this.”
See Transcript of Hearing, July 13, 1999, Hewson v. Edwards, 99 K 20, U.S.D.C. Colorado, p. 2, attached as Exhibit 3 (emphasis supplied).
D. Insurance Claim Investigation Documents Are Presumed to Be Ordinary Business Records Which Are Discoverable
- The crux of this discovery issue is that Respondent AMFAM has cut off discovery of investigative insurance claim file materials and log notes claiming that the log notes contain analysis and evaluation for the purpose of establishing reserves and settlement authority. Notably, they have not claimed an arbitrarily chosen a date of “anticipation of litigation”, after which everything is magically transformed into “work product”. That may be the practice of insurance companies, but it is not the law of Colorado. AMFAMs analysis and evaluation are discoverable. These redacted log notes are part of AMFAMs normal business activity with respect to UIM claims.
- The law in Colorado regarding the normal business activity of the insurer and “work product” is set forth in Hawkins v. District Court, 638 P.2d 1372 (Colo. 1982). The court in Hawkins stated:
Rule 26(b)(3) is not intended to protect from general discovery materials prepared in the ordinary course of business. Id., at page 1377.
Because a substantial part of an insurance company’s business is to investigate claims made by an insured against the company or by some other party against an insured, it must be presumed that such investigations are part of the normal business activity of the company and that report and witness statements compiled by or on behalf of the insurer in the course of such investigations are ordinary business records as distinguished from trial preparation materials…This is not to say, however, that under appropriate circumstances an insurance company’s investigation of a claim may not shift from an ordinary business activity to conduct “in anticipation of litigation”. Admittedly, there is no bright line which will mark the division between these two types of activities in all cases. On the one hand a document may be prepared “in anticipation of litigation” prior to the actual commencement of litigation and, on the other, the commencement of litigation is not sufficient by itself to confer a qualified immunity from discovery on a document thereafter prepared. [emphasis added] Id., at page 1378.
- Consider the phrase, “the commencement of litigation is not sufficient by itself to confer a qualified immunity from discovery on a document thereafter prepared”. What does that mean? It means that even the filing of a complaint or commencement of arbitration proceedings does not necessarily and automatically establish a date after which all insurance claim file materials are privileged “work product”.
- The determinative question is not the date of creation of the document or the date that the insurance company anticipated specific, imminent litigation, but the purpose for which the document was created at the time of the document’s creation.
- If the purpose of the document was to defend against specific, anticipated, imminent litigation, then the document is privileged work product. If the purpose of the document was to prepare for trial, then the document is privileged work product. In all other cases regardless of the date of creation of the document the document is presumed to be an ordinary discoverable business record and the insurance company has the burden to overcome the presumption of discoverability.
- There is nothing to suggest in this case that the redacted documents are anything other than discoverable business records. Please note that all of the redacted notes, Exhibit 2, occur several months before Plaintiff’s formal arbitration demand of February 12, 2009.
- In other words, an insurance company document created months before or after demanding arbitration is discoverable unless the insurance company overcomes the presumption that the document is an ordinary business record. They can overcome this presumption by showing that the purpose of the document was to defend against specific, anticipated litigation or to prepare for trial.
- The Hawkins court stated it clearly:
[A] showing by the insurance company that reports and statements were compiled by or under the direction of the insured’s legal counsel for use in specific litigation about to be filed or for use in an upcoming trial would be conclusive evidence that these documents are trial preparation materials. Conversely, a showing that a claims adjuster, or even a lawyer not acting as legal counsel for the insurer, conducted an investigation of a claim, during which he compiled various reports and statements, would not be sufficient by itself to overcome the presumption of an ordinary business activity.
- The only significance of the date of anticipation of litigation is that everything in the claims file created before that date is discoverable. After the date of anticipation of litigation, each and every document in the claims file must be analyzed on a document by document basis to determine if it is an ordinary business record (which it is presumed to be) or if it is privileged work product. Again, Respondent AFMAM does not even claim that the redacted documents and log notes were created in anticipation of litigation but rather claim privilege for its’ adjusters analysis and evaluation – a privilege that does not exist.
E. Claimant is entitled to the entire claims file including reserve or settlement authority
- The scope of discovery in a first party case such as this arbitration is different than in a third-party injury claim. The Colorado Supreme Court in Silva v. Best Western, Inc. 47 P.3d 1184 (Colorado 2002) conducted a survey of the law in discussing whether discovery of reserves and settlement authority were permissible in a 3rd party case. In doing so, the Court discussed discoverability in 1st party cases as well.
As a premise, the Court stated that information regarding reserves is neither automatically protected from, nor subject to, discovery merely because an insurer prepared the information. Rather, reserve information is subject to the same test for discoverability as any other matter.
In it’s conclusion that reserves and settlement authority were not discoverable in 3rd party cases, the Supreme Court gave its imprimatur on the analysis of Weitzman v. Blazing Pedals, Inc., 151 F.R.D. 125, 126 (D.Colo.1993).
In a first-party claim, the insurance company owes a duty to its insured to adjust a claim in good faith that the insurance company does not owe to the plaintiff in the present third-party personal injury claim. Weitzman, 151 F.R.D. at 126…. In a first-party claim, the establishment of reserves and settlement authority could be relevant and reasonably calculated to lead to admissible evidence regarding whether the insurance company adjusted a claim in good faith or made a prompt investigation, assessment, or settlement of a claim. See Weitzman, 151 F.R.D. at 126; Savoy, 176 F.R.D. at 12; Lipton, 48 Cal.App.4th at 1614, 56 Cal.Rptr.2d 341. The scope of discovery has thus been traditionally broader in first-party disputes between an insured party and his or her insurer. Weitzman, 151 F.R.D. at 126. Reserves have been correspondingly more likely to be found discoverable in such actions. However, AIG owes no such duty to the Silvas in the present third-party personal injury action. Consequently, reserves and settlement authority should be less subject to discovery than in bad faith or declaratory judgment actions. Silva at 1193.
- Silva indicates that reserves and settlement authority are subject to discovery. Claimant’s claims are distinguishable from 3rd party claims in that this 1st party claim is between an insured and his insurer and he is asking for payment under the terms of the insurance contract between him and Respondent. Although the amount of the reserves, if any, and settlement authority, if any, may not be admissible in the arbitration, the discovery of same including the reasoning behind both reserves and settlement authority may be admissible in that they may contain information utilized in formulating Respondent’s defenses. Accordingly, Claimant should be able to discover this information.
- In addition, this information may shed light on why Respondent AMFAM has denied payment of any benefits when Mr. Watson has $61,550.79 economic losses, received $50,000.00. from the tortfeasor and has a remaining available $50,000.00 of the $100,000.00 UIM policy. This ‘light’ may lead to an early settlement or, however unlikely, a withdrawal of his UIM claims. The arbiters should keep the potential economies in mind when deciding this issue.
F. The Defendants’ Insurance Adjusters Should Be Compelled to Testify at Deposition and to Fully Disclose and Produce the Entire Insurance Claims File including Reserves and Settlement Authority.
- 1. C.R.C.P. 30(a)(1) provides as follows:
Subject to the provisions of C.R.C.P. Rules 26(b)(2)(A) and 26(d), a party may take the testimony of any person, including a party, by deposition upon oral examination without leave of court except as provided in paragraph (2) of this section. The attendance of witnesses may be compelled by subpoena as provided in C.R.C.P. 45.
- Rule 30 cannot be any clearer that any person in the whole wide world may be deposed. There is absolutely no limitation on who may be deposed. Rule 26(b)(1) provides that …”parties may obtain discovery regarding any matter, not privileged, which is relevant to the subject matter involved in the pending action….”
- Given the non-production of the entire insurance claims file generated to date, Respondent AMFAMs objections to disclosing this relevant information, Plaintiff intends to depose AMFAMs adjuster Stewart M. Brown, AMFAMs adjuster and/or designated representative concerning their investigation of this matter and any and all investigative information generated and/or collected as part of this investigation.
- There are numerous examples of Colorado District Court’s finding that depositions of adjusters, whether 3rd party liability or 1st are permissible. Respondent AMFAMs refusal to allow the deposition of Mr. Brown flies in the face of the Colorado Rules of Civil Procedure and the bulk of District Court orders on this issue. Attached are two recent illustrative rulings from Colorado District Courts finding in 1st party UIM cases a requested C.R.C.P. 30(b)(6) deposition and or deposition of the UIM adjuster is permissible. See Exhibit 4 and Exhibit 5.
G. Respondent Has Not Overcome the Presumption of Discoverability of Insurance Claim and File Investigative Materials.
- The party claiming any privilege has the burden of establishing its applicability. Clark v. District Court, 668 P.2d 3, 8 (Colo. 1983). The insurance company has the burden to establish on a document by document basis that the claims file materials were prepared for the purpose of defending against specific, imminent litigation or were prepared for trial. Hawkins, 638 P.2d at page 1379 80. Moreover, Respondent has failed to show that, the C.R.C.P. 30 depositions are not relevant, discoverable and permissible under the Rules.
- Defendant has failed to satisfy the above burdens; therefore, the Court should compel Claimant’s requested discovery.
- Under Colorado’s Rules of Civil Procedure, Claimant’s requested discovery is clearly relevant to his claims and Respondent’s defenses, and is within the scope of permissible discovery.
- After several repeated attempts to obtain the deposition of Mr. Brown and the complete claims file, there is no justifiable excuse why this information has not been produced. Claimant’s having to compel production of this information and the deposition is a waste of Claimant’s and the Arbiter’s time. For the reasons set forth above, this discovery is clearly relevant and permissible under the Rules.
- Typically Claimant’s counsel does not request nor seek the imposition of sanctions by Courts. However, in this instance, given the well defined law governing disclosure of the requested information, and the extensive and repeated (though futile) efforts Claimant’s counsel has undertaken to try and informally obtain this information from Respondent, Claimant’s counsel believes some form of sanction by the Arbitration Panel is warranted.
WHEREFORE, Claimant respectfully requests that the panel issue an Order compelling the following:
- That Respondent AMFAM shall produce the entire investigative and insurance claims file, including all electronically created, recorded and/or preserved data, and all information and documents relating in any way to Claimant’s and/or obtained up until the commencement of the arbitration.
- That Respondent AMFAM shall cooperate in the scheduling of adjuster Stewart M. Brown’s deposition and a C.R.C.P. 30(b)(6) deposition of AFAMs representative concerning the insurance company’s investigation surrounding the claim up until the commencement of the arbitration; and
- That sanctions, including fees and costs, shall be awarded to Claimant as deemed appropriate by the Court.
Respectfully submitted this 14th of July 2009.