Opinion
CV116009339.
12-24-2012
William RIDGAWAY, Sr. et al. v. MOUNT VERNON FIRE INSURANCE COMPANY.
UNPUBLISHED OPINION
MARTIN, J.
FACTS
On June 3, 2011, the plaintiffs, William Ridgaway, Sr., individually and as administrator of the estate of William Ridgaway, Jr., and Rita Grant, commenced the present bad faith insurance action by service of process on the defendant, Mount Vernon Fire Insurance Company. In their three-count revised complaint, the plaintiffs allege the following facts. On April 15, 2000, and April 16, 2000, Silk, LLC, maintained " an excess and umbrella liability protection claims made policy" with the defendant. Silk, LLC, doing business as Silk Stockings Bar, operated a bar located at 403 Route 12, Groton, Connecticut. The bar served liquor. As a result of the negligent and reckless dispensing of liquor to Anthony Sulls on the evening of April 15, 2000, through the early morning of April 16, 2000, the plaintiffs' decedent, William Ridgaway, Jr., suffered fatal injuries. The underlying insurance policy provided adequate coverage to satisfy the contractual obligation of the defendant to provide excess coverage. The policy issued by the defendant provided excess liability coverage to Silk, LLC, for claims made against it by the estate of the plaintiff's decedent.
The plaintiffs further allege that the defendant wilfully and fraudulently altered the policy limits from three million dollars to one million dollars after receiving notice of the claim. The defendant issued an endorsement of the reduction in coverage retroactive to April 7, 2000, in wilful bad faith. The defendant refused to offer any funds to settle the wrongful death claim, exposing Silk, LLC, to continued litigation and liability for nearly nine years.
On March 22, 2011, the plaintiffs entered into a stipulated judgment with Silk, LLC, in favor of the plaintiffs in the amount of one million dollars. Silk, LLC, assigned all of its rights in the insurance policy issued by the defendant to the plaintiffs. The plaintiffs have brought this action pursuant to common law and General Statutes § 38a-321. The plaintiffs claim that the defendant, by repeatedly denying coverage, has breached its duty of good faith and fair dealing, engaged in practices that violated the Connecticut Unfair Insurance Practices Act (CUIPA), General Statutes § 38a-815 et seq., and the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110b et seq.
General Statutes § 38a-321 provides in relevant part: " Upon the recovery of a final judgment against any person, firm or corporation by any person, including administrators or executors, for loss or damage on account of bodily injury or death or damage to property, if the defendant in such action was insured against such loss or damage at the time when the right of action arose and if such judgment is not satisfied within thirty days after the date when it was rendered, such judgment creditor shall be subrogated to all the rights of the defendant and shall have a right of action against the insurer to the same extent that the defendant in such action could have enforced his claim against such insurer had such defendant paid such judgment."
On November 23, 2011, the defendant filed notice of its objections to the plaintiffs' October 25, 2011 interrogatories and requests for production as well as its objections. The defendant filed notice of its compliance on February 17, 2012. On March 5, 2012, the court, Parker, J., scheduled argument for March 12, 2012, on the plaintiffs' motion for sanctions and the defendant's motion for extension of time to respond to the motion for sanctions. On March 12, 2012, the court, Cosgrove, J., ordered counsel to appear on March 15, 2012, to have good faith discussions regarding the outstanding motions. On March 16, 2012, the court, Cosgrove, J., ordered counsel to file briefs on the definition of a claim and denied the motion for sanctions. The parties filed simultaneous memoranda of law on the definition of a claim on April 16, 2012. The plaintiffs filed a reply on April 23, 2012, and the defendant filed a reply on May 2, 2012. On July 31, 2012, the parties requested that the court schedule argument on all outstanding motions, objections and disputes, which the court, Devine, J., granted on August 3, 2012. The court, Martin, J., heard argument at short calendar on August 13, 2012. The plaintiffs filed supplemental exhibits to their memorandum regarding the definition of a claim on August 14, 2012. The defendant filed an objection to the supplemental exhibits on August 15, 2012, and the court, Cosgrove, J, took the papers on the defendant's objection on August 27, 2012.
DISCUSSION
On August 13, 2012, the parties argued the issue of whether the defendant's claims file is discoverable. The plaintiffs are seeking the defendant's claim file up to March 22, 2011, which is when the stipulated judgment was entered against Silk, LLC. The plaintiffs argue that they are entitled to discovery of the claims file because the underlying action has been resolved and the defendant cannot assert the attorney-client privilege while also alleging a counterclaim. The plaintiffs argue that the burden rests with the defendant to prove that the attorney-client privilege exists. The defendant counters that the claims file is subject to attorney-client privilege because it contains communications related to the defense of the lawsuits brought against the defendant.
Furthermore, the defendant argues that under the standard set forth in Hutchinson v. Farm Family Casualty Ins. Co., 273 Conn. 33, 867 A.2d 1 (2005), the plaintiffs have failed to establish probable cause that they are entitled to discovery of the claims file. The plaintiffs counter that Hutchinson v. Farm Family Casualty Ins. Co., supra, 273 Conn. at 33, is distinguishable because the underlying action has been resolved here and this is a claim for excess liability coverage not uninsured motorist coverage.
" As to whether the claims file is discoverable, [a] claim file typically contains many things. Some of the items may be subject to attorney-client privilege. These, most typically, are communications involving counsel for the insured and concern the defense of the underlying action. These items are subject to the attorney-client privilege, though there are some twists. In general, the privilege belongs to the client, who is the insured. See, e.g., Rienzo v. Santangelo, 160 Conn. 391, 395, 279 A.2d 565 (1971)." (Internal quotation marks omitted.) US Bank National Assn. v. Lawyers Title Ins. Corp., Superior Court, judicial district of New Britain, Docket No. CV 09 5013702 (March 22, 2010, Swienton, J.) (49 Conn. L. Rptr. 686, 690).
" In Connecticut, the attorney-client privilege protects both the confidential giving of professional advice by an attorney acting in the capacity of a legal advisor to those who can act on it, as well as the giving of information to the lawyer to enable counsel sound and informed advice ... It is undisputed that the privilege was created to encourage full and frank communication between attorneys and their clients and thereby promote broader public interests in the observation of law and administration of justice ... Exceptions to the attorney-client privilege should be made only when the reason for disclosure outweighs the potential chilling of essential communications." (Citations omitted; internal quotation marks omitted.) Metropolitan Life Ins. Co. v. Aetna Casualty & Surety Co., 249 Conn. 36, 52, 730 A.2d 51 (1999).
" Because of the important public policy considerations that necessitated the creation of the attorney-client privilege, the ‘ at issue, ’ or implied waiver, exception is invoked only when the contents of the legal advice is integral to the outcome of the legal claims of the action ... Such is the case when a party specifically pleads reliance on an attorney's advice as an element of a claim or defense, voluntarily testifies regarding portions of the attorney-client communication, or specifically places at issue, in some other manner, the attorney-client relationship." (Citation omitted.) Id., at 52-53. " When privileged communications are not at issue, the opposing party cannot destroy the attorney-client privilege by merely claiming a need for the documents." Id., at 56-57.
" [W]here legal advice of any kind is sought from a professional legal advisor in his [or her] capacity as such, the communications relating to that purpose, made in confidence by the client, are at [the client's] instance permanently protected from disclosure by [the client] or by the legal advisor, except the protection may be waived." (Internal quotation marks omitted.) Shew v. Freedom of Information Commission, 245 Conn. 149, 157, 714 A.2d 664 (1998).
In Hutchinson v. Farm Family Casualty Ins. Co., supra, 273 Conn. at 35, the Supreme Court addressed the proper standard for a trial court to apply in a bad faith action when determining whether an in camera review of alleged privileged documents was warranted in a discovery dispute. Id., at 42-43. The Supreme Court was unpersuaded by the plaintiffs' argument " that the need for disclosure of privileged materials in cases in which an insured has made an allegation of bad faith is sufficient, in and of itself, to justify the disclosure of relevant privileged materials without any additional threshold evidentiary requirement." Id., at 43. The Supreme Court did not see a practical need for an exception to the attorney-client privilege; it reasoned that " [w]hen an insured has alleged that the insurer has engaged in bad faith conduct in its handling of a claim, e.g., that it improperly delayed payment, the insurer may either simply deny that the conduct was in bad faith, without alleging any facts in support of its conduct, in which case it takes the risk that the fact finder will find that it had no reasonable basis to act as it did, or it may raise some form of a ‘ routine handling’ defense, in which case the ‘ at issue’ exception would apply ... In other words, in a typical claim of bad faith, disclosure of privileged materials is necessary for the resolution of the claim precisely because the materials have been placed ‘ at issue’ by the insurer, in which case the privilege is waived." (Citation omitted; emphasis in original.) Id., at 44.
In determining whether an in camera review is necessary, the proper standard is " whether the plaintiffs have established, on the basis of nonprivileged materials, that there is probable cause to believe that (1) the defendant has acted in bad faith and (2) the defendant sought the advice of its attorneys in order to conceal or facilitate its bad faith conduct." Id., at 48-49. Reviewing the record before it, the Supreme Court determined " that the plaintiffs have not even alleged that the defendant gave information to or sought the advice of its attorneys for the purpose of concealing or facilitating its alleged bad faith conduct." (Emphasis in original.) Id., at 49.
The court stated further that " nothing in the record suggests that the defendant had any purpose in communicating with its attorneys except to obtain complete and accurate legal advice. The plaintiffs allege only that the defendant sought the good faith legal advice of its attorneys and then failed to follow it. Even if we assume the truth of that allegation, that would not bring the communications within the bad faith exception." Id. " Although the defendant's refusal to follow its attorneys' advice might be relevant for purposes of establishing its state of mind in handling the plaintiffs' claim, we have concluded that the relevance of privileged communications, in and of itself, does not justify abrogating the attorney-client privilege. Accordingly, we conclude that the trial court improperly determined that the plaintiffs were entitled to an in camera review of the privileged materials. A fortiori, the court improperly determined that the plaintiffs were entitled to disclosure of the materials." Id., at 50.
In the present case, the plaintiff's arguments that Hutchinson is distinguishable are unpersuasive and do not provide any material distinctions. Accordingly, the court will apply the Hutchinson test. The plaintiffs have alleged that the defendant acted in bad faith in various ways when denying coverage. The plaintiffs have failed, however, to allege that the defendant sought the advice of its attorney in order to conceal or facilitate its alleged bad faith conduct. See Hutchinson v. Farm Family Casualty Ins. Co., supra, 273 Conn. at 43. Moreover, the defendant has not waived the attorney-client privilege by placing the advice of counsel at issue because it has not asserted a special defense of " routine handling, " nor do any of the special defenses reference or rely on the advice of counsel. Accordingly, the plaintiffs have failed to satisfy the second part of the Hutchinson test, and therefore, are not entitled to an in camera review of the documents.
The plaintiffs also argue that the attorney-client privilege has no application in the present case because the underlying action has been settled. The defendant counters that there has been no determination on the issue of whether coverage existed and the attorney-client communications relate to the defense of the other litigation. " While Silk settled with the plaintiffs/estates in the underlying personal injury actions, those settlements do not bind Mount Vernon. [T]he right of the insurer to challenge the settlement entered into by its insured on grounds of fraud, collusion or unreasonableness provides it with ample opportunity to contest the propriety of such a settlement. Black v. Goodwin, Loomis & Britton, Inc., 239 Conn. 144, 155, 681 A.2d 293 (1996)." (Internal quotation marks omitted.) Ridgaway v. Mount Vernon Fire Ins. Co., Superior Court, complex litigation docket at Hartford, Docket No. X04 CV 02 4034738 (April 20, 2011, Shapiro, J.). The defendant has challenged the propriety of the plaintiffs' settlement with Silk, LLC, through its counterclaim in the present action. The counterclaim seeks a declaration as to whether coverage existed, and does not put at issue the advice of counsel or otherwise put the privileged attorney-client communications from the claims file at issue.
At short calendar, the plaintiffs also argued that they were seeking an unredacted version of the defendant's underwriting file. The defendant indicated that it believed the entire underwriting file had been produced and did not recall any redactions. Based on the record before the court, the defendant is ordered to disclose the entire underwriting file. To the extent, however, that the defendant believes any documents are immune from discovery because of a privilege, it may raise such arguments through the appropriate filing.
CONCLUSION
Based on the foregoing reasons, the defendant's claims file is not discoverable. The defendant's underwriting file shall be disclosed.