United States District Court, D. Montana, Missoula Division
OPINION AND ORDER
W. Molloy, District Judge
a bad faith action arising out of a fatal accident involving
a vehicle owned by Plaintiff High Country Paving and insured
by Defendant United Fire and Casualty Company. United Fire
ultimately settled with the third-party victims of the
accident for policy limits of $3 million without securing a
release for High Country. High Country subsequently settled
with the third parties for an additional $1, 275 million.
High Country sued United Fire, alleging bad faith (Count 1)
and breach of contract for failing to pay comprehensive
general liability ("CGL") coverage (Count 2). (Doc.
21.) United Fire has asserted an "advice of
counsel" defense, (Doc. 26 at 22), and designated
attorneys as expert witnesses, (Doc. 32-1).
are two discovery motions pending. First, High Country seeks
to compel United Fire to produce documents currently withheld
under claims of either privilege or work-product protections
on the ground that United Fire has waived such protections.
(Doc. 31.) Second, United Fire seeks to compel production of
communications containing any evaluation of the third-party
claims against High Country. (Doc. 35.) All the documents
identified in the parties' privilege logs have been
reviewed in camera. (See Doc. 71.) For the reasons
discussed below, both motions are granted.
motion to compel may be filed when a party disagrees with the
objections interposed by the other party and wants to compel
more complete answers. See Moreno Rivera v. DHA Global
Forwarding, 272 F.R.D. 50, 53-54 (D.P.R. 2011). While
the scope of discovery is quite broad, see Fed. R.
Civ. P. 26(b)(1), otherwise discoverable information may be
withheld if it is privileged or protected by the work product
doctrine, Fed.R.Civ.P. 26(b)(5)(A). Montana privilege law and
federal work product law apply here. Moe v. Sys. Trans.,
Inc., 270 F.R.D. 613, 622 (D. Mont. 2010).
privilege is construed narrowly under Montana law. Am.
Zurich Ins. Co. v. Mont. Thirteenth Jud. Dist. Ct, 280
P.3d 240, 245 (Mont. 2012). In the bad faith context,
privilege is waived when an insurer relies on advice of
counsel as a defense, Palmer by Diacon v. Farmers Ins.
Exch, 861 P.2d 895, 907 (Mont. 1993), or when it names
its attorneys as expert witnesses, Dion v. Nationwide
Mut. Ins. Co., 185 F.R.D. 288, 295 (D. Mont. 1998).
protected under the work product doctrine, a document must be
"prepared in anticipation of litigation."
Fed.R.Civ.P. 26(b)(3)(A). The party withholding the documents
has the burden to show that each document withheld
was "prepared or obtained because of the prospect of
litigation." Moe, 270 F.R.D. at 625 (internal
quotation marks and emphasis omitted). Nevertheless, work
product protection is not absolute and materials may be
discoverable if the opposing party can establish a
substantial need for the information and undue hardship in
obtaining it by other means. See Fed. R. Civ. P.
26(b)(3)(A). Mental impression work product is subject to
additional protection, see Id. 26(b)(3)(B), and a
requesting party must show that the "mental impressions
are directly at issue in a case and the need for the material
is compelling." Dion, 185 F.R.D. at 292.
High Country's Motion to Compel
Country generally requested information and correspondence
related to the claim file, with no temporal limitation.
(See Doc. 32-3.) In response to High Country's
discovery requests, United Fire provided a privilege log that
includes 36 entries. (See Doc. 32-2.) High Country
now seeks production of all the items included in United
Fire's privilege log except documents related to the
collateral criminal proceeding against Mr. Farrin Pearson,
the driver involved in the accident giving rise to the case.
(See Doc. 31 at 2.) Thus, the following documents
need not be produced: UF000041-44, 000054-55, 000061-62,
000083-88, 000113-16, 000171-79, 000182-87, 000213-18,
001587, 001588, and 001589. Additionally, it appears that
some of the requested documents have already been produced,
including: UF000001-02, 000039, 001570, 001571, and
002186-87. The remaining documents in United Fire's
privilege log are addressed below.
Montana law, "[t]he attorney-client privilege applies
unless the insurer directly relies on advice of counsel as a
defense to the bad faith charge." Palmer, 861
P.2d at 907 (internal quotation marks and emphasis omitted).
Privilege is also abrogated when an insurer names its
attorney as an expert witness. Dion, 185 F.R.D. at
295. United Fire, having done both, concedes that it has
waived the attorney-client privilege but disputes the scope
of that waiver. United Fire argues that the waiver only
applies "up until that point in time at which the
[underlying] claim .. . was settled," id. at
296, which it proposes was December 8, 2017. High Country rejects a
temporal limitation, rather insisting on a subject-matter
waiver circumscribed only by "considerations of
fairness." (Doc. 43 at 22-23.) Given the circumstances
of this case, High Country's position is more persuasive.
Nevertheless, the documents were reviewed in camera. C.f.
Palmer, 861 P.2d at 908 (discussing the consequences
when discovery is "erroneously compelled").
Fire's proposes December 8, 2017, the date United Fire
paid the $3 million in policy limits, as the waiver cut-off
date. (Doc. 22 ¶ 3(x), (y).) But, High Country did not
independently settle with the third-party claimants until
almost two months later, during which time United Fire
continued to provide a defense. Moreover, the circumstances
under which United Fire settled were unique and High Country
maintained that United Fire was required to pay any
additional settlement amount. United Fire was first told by
in-house counsel Katherine Huso that it need not pay the full
amount without a release under Montana law. (See
Doc. 32-7.) Guy Rogers then recommended they do so,
(see Doc. 32-1 at 6), and Ms. Huso ultimately
agreed, (id. at 7-9). Thus, which "advice of
counsel" United Fire relied upon is very relevant to its
defense. December 8, 2017, is therefore rejected as the
cut-off date for United Fire's attorney-client privilege
next possible waiver cut-off date is February 5, 2018, the
date that High Country settled with the third-party claimants
for an additional payment of $1, 275 million. (Doc. 22 at
¶ 3(ee).) This date marks the final release and end of
the third-party claimants' action against High Country.
Thus, consistent with United Fire's own argument, this is
a better estimation of the point in time at which the
underlying claim was settled. See Dion, 185 F.R.D.
at 296. But, in Dion, the insurer did not assert an
"advice of counsel" defense. Id. at 295.
If it had, the court indicated that "any and all
communication with its attorney would clearly ...