HATTIESBURG, Aug. 15 — A federal magistrate judge in Mississippi has ruled Nationwide Insurance must produce documents and that the insurer’s former counsel must produce billing records in a bad faith case related to the handling of an uninsured/underinsured motorist’s claim, finding the insurer waived protections under the attorney-client privilege and the attorney work product doctrine, even though it did not formally assert the advice of counsel defense.
In Craig Flanagan, et al. v Nationwide Property and Casualty Insurance Company, U.S. Magistrate Judge Michael T. Parker found that while Nationwide did not formally assert the advice of counsel defense opening the door to prior counsel’s work product and communications, it did pick and choose certain potentially privileged documents to produce in aid of its defense in the case, thereby waiving attorney – client and work product protections.
Nationwide’s insured, Craig Flanagan was severely injured in a motor vehicle accident on May 31, 2014 while driving a vehicle owned by owned by Flanagan Construction Co. and insured by Nationwide Property and Casualty Insurance Co. The Nationwide Policy provided UM/UIM Coverage, out of which Nationwide paid $1 million statutory limits for noneconomic damages and $1.5 million for the medical expenses. After Nationwide failed to pay the remaining $4.15 million in remaining UM/UIM limits, Flanagan, his wife, and Flanagan Construction sued Nationwide in the U.S. District Court for the Southern District of Mississippi. In the suit, the Plaintiffs sought the remaining UM/UIM limits , and also alleged fad faith, for which they sought punitive damages.
During the course of the case the Plaintiff’s filed a motion to compel production of a number of Nationwide claims documents, including investigative documents, and the files of outside counsel, Bill McDonough of Copeland Cook Taylor and Bush, relating to the claims. The Plaintiffs also sought the billing records of McDonough and the Copeland firm, which was retained initially by Nationwide to investigate the claim, but was later retained to represent Nationwide in the UM/UIM claim as well.
In granting the motion to compel, Judge Parker wrote:
“Plaintiffs argue that Nationwide is relying upon the advice and actions of McDonough as a defense despite Nationwide’s insistence that it is not asserting an ‘advice of counsel’ defense. According to Plaintiffs, ‘Nationwide has produced a number of communications between Nationwide and Copeland Cook in support of its defense to the bad faith allegations, but has chosen to cherry-pick which communications to produce in discovery and which communications to withhold on a claim of privilege.’ . . . Plaintiffs also point to the fact Nationwide identified McDonough as a witness in its initial disclosures and point to Nationwide’s interrogatory response.”
Nationwide opposed the motion to compel, and argued that did not plead advice of counsel. It also argued that the documents it did produce showing communication between Nationwide and McDonough contained only “objective facts,” and neither legal advice nor attorney work product.
Judge Parker disagreed, however, writing:
“review of the documents produced by Nationwide . . . reveals that Nationwide did not simply disclose ‘objective facts’ as it alleges, but also disclosed McDonough’s opinions regarding Flanagan’s evidence supporting his loss of income claim, Flanagan’s ability to prove cognitive impairment, the need to hire experts, the benefits and risks involved in scheduling a medical examination, and the timeliness of Nationwide’s investigation and payment to Flanagan…
An insured cannot force an insurer to waive the protections of the attorney-client privilege merely by bringing a bad faith claim. Nationwide’s prior production, however, has put at issue Nationwide’s confidential communications with McDonough. Nationwide has voluntarily injected its counsel’s advice into this case by purposely disclosing, inter alia, its counsel’s opinion that Nationwide has not ‘unnecessarily delayed payment of [Flanagan’s] claim. . . .
To allow Nationwide to use the attorney-client privilege to withhold additional information related to counsel’s advice ‘would be manifestly unfair’ to Plaintiffs.”
Judge Parker also found that Nationwide’s disclosure of certain documents containing McDonough’s opinions and impressions constituted waiver of the work product doctrine as well, and ordered the documents to be produced.
Editor’s Note: The price of asserting the Advice of Counsel Defense in a bad faith case is always waiver of attorney – client privilege and the attorney work product doctrine. The calculus of the costs and benefits of asserting the defense must therefore always be done thoroughly and carefully. Insurers and their lawyers must be mindful that there are many ways to assert Advice of Counsel, and few, if any, to try to put it back in to the bottle once it has been let out. Formal assertion of the defense is but one way to waive the protections of attorney – client privilege and the attorney work product doctrine. The defense can be asserted by conduct as well, leading to inadvertent waivers of privilege and work product protection.
badfaithadvisor.com 