The insurers' resistance to discovery requests was before the court in Cummins, Inc. v. Ace Am. Ins. Co., et al., 2011 U.S.Dist. LEXIS 46984 (D. Ind. May 2, 2011).
The factual background involved coverage Cummins sought for severe flood damage at its main corporate campus. The insurers had paid over $91 million on Cummins' claims. Discovery was pursued as the parties argued over additional coverage. The insurers withheld documents from production based on attorney-client privilege and work product. Other documents were withheld on relevancy grounds.
The magistrate judge made a meticulous review of each of the grounds relied upon by the insurers to withhold documents. The insurers resisted producing documents generated by the outside counsel who were hired to provide counsel and advice, and who never provided an claims adjustment services. The court held that the insurers' privilege objections were well-founded as to many of the documents that were withheld. The privilege did not exist for other documents which the court ruled should be produced.
Turning to documents withheld on work product grounds, the court noted that applying the work product doctrine in first-party insurance coverage disputes was challenging because it was difficult to separate documents that were prepared in the normal course of business from those prepared for purposes of litigation with its insured. The court adopted presumptions to determine the purposes of preparing particular documents. A document prepared before an insurer made a final decision on a claim and was part of the factual inquiry or evaluation of the claim was not work product because anticipation of litigation was presumed unreasonable before a final decision was reached on a claim. A document prepared after a claim was denied, however, was presumed to be work product. Under this test, the documents withheld by the insurer were not protected by work product and were ordered to be produced.
Finally documents relating to the adjustment and payment of Cummins' claim were withheld on relevancy grounds. The insurers offered no arguments in support of their relevance theory. Therefore, the insurers were ordered to produce these documents, as well.