In recent years, plaintiffs’ attorneys have begun serving non-party discovery directly to insurance companies as a matter of common practice. Requests can range from broad and expansive (any and all documents contained in the claims file), to case-specific (identification of all times an insurer has retained a specific expert and the amounts paid to that expert), to policy driven (any and all policies, procedures, protocols, or rules regarding claims investigations).
Under each scenario, a non-party request for discovery must be taken seriously by claims professionals, as a failure to either respond or timely object can result in sanctions, including an order to produce all responsive documents without respect to privilege. What follows are five important steps a claims professional needs to know when non-party discovery is served directly to an insurer.
#1: Retain Separate Counsel
When an insurance company receives a request for non-party discovery, it may seem easiest to simply ask the defense counsel already defending the insured to handle the response on the insurer’s behalf. Certainly, defense counsel is already familiar with the claim and may even have a copy of the requested documents in its possession.
However, under the tripartite relationship, the defense attorney in liability cases is hired by the insurance company to represent the insured as the defendant. Therefore, defense counsel’s client is the insured defendant, not the insurer. Because the interests and objections of the insured are not necessarily the same as the interests and objections of the insurer, the insurer should retain separate counsel to respond in order to protect its interests.
#2: Know Your Deadlines
Depending on the type of discovery served and the procedural statute utilized, the insurer will likely have a deadline to serve objections and/or a deadline to seek a protective order, which may be different from the response deadline. Because the failure to submit timely objections or seek a protective order could result in objections being waived, and because procedural statutes and deadlines for non-party discovery requests vary from state to state, it is important the insurer retain counsel in the state where the case is pending.
#3: Know What Is Privileged
Common privileges applicable to non-party discovery to insurers include the attorney-client privilege, the common interest privilege, and the work product doctrine. While the rules for these privileges may vary slightly from state to state, it is important to understand what each privilege encompasses.
The attorney-client privilege refers to a legal privilege that keeps communications between an attorney and her client secret. The claims file likely includes attorney-client privileged communications between the insured and retained defense counsel. The claims file may also include attorney-client privileged communications between the insurer and its own counsel.
The common interest privilege protects communications made in the furtherance of a common interest among parties, even in the absence of an attorney-client relationship. For example, the common interest privilege protects the insurer’s communications with the attorney representing the insured. Because defense counsel and the insurer hold a common interest in their defense of the insured, their communications are privileged.
As a general rule, the work product doctrine shields from discovery materials that were prepared in anticipation of litigation. However, claims professionals often begin investigating a claim in the ordinary course of business long before litigation is anticipated.
The important question to ask is, when did the claims evaluation shift to a reasonable anticipation of litigation? Did the claimant say she was going to sue at the scene? Did the insured receive a letter of representation just a few days after the accident? This is a case-specific inquiry.
It is important to determine the date when the insured and the insurer anticipated litigation as the work product doctrine only applies after that date. Of note, it is possible the insured and insurer have different dates that they anticipated litigation, as they are separate entities.
Some pertinent questions in determining whether a document is privileged or not include:
• Does the document reflect a communication with an attorney?
• When was the document created?
• Has there been notice that litigation will arise out of the incident?
• Was the document created in the ordinary course of business?
#4: Be Specific with Your Objections
While being overbroad and unduly burdensome are valid reasons to object to non-party discovery, simply indicating that a request is overbroad and unduly burdensome is unlikely to persuade the court to strike the request. Be sure your counsel is specific in why and how the request is objectionable. If responding to the request would require the review of a company-wide email database, then say so. If the response would require the use of an outside document management company, then notify the court of the estimated cost. The court is more likely to find a request objectionable if it understands exactly what is involved in responding to the request.
#5: Be Consistent
When receiving these discovery requests, it is important for an insurer to internally decide what it is willing to produce and to what it wants to object. Plaintiffs’ counsel talk, and they know when an insurer produced some documents in one case but objected in another. An insurer’s failure to be consistent does little to advance its position before the court. That said, it helps to err on the side of caution and retain separate counsel to review a non-party request served directly to an insurer to analyze any possible objections.