United States District Court, D. South Carolina, Beaufort Division
C. NORTON, UNITED STATES DISTRICT JUDGE
following matter is before the court on plaintiffs David and
Caroline Adelman's (“the Adelmans”) motion to
compel, ECF No. 37. For the reasons set forth below, the
court grants the motion.
an insurance bad faith case related to water damage in the
Adelmans' house. The Adelmans own a house on Hilton Head
Island and have a homeowner's insurance policy
(“the Policy”) with defendant Coastal Select
Insurance Company (“Coastal Select”). In July
2017, a water supply line under the Adelmans' house
either exploded or had been continuously leaking,
causing substantial water damage. The Policy covers water
damage caused by explosions but not by pipe age and
corrosion, and because Coastal Select believes that pipe age
and corrosion created a leak and caused the water damage, it
has refused to extend coverage to the damage.
Adelmans filed the instant case on December 13, 2017,
alleging breach of the Policy, bad faith refusal to provide
coverage under the Policy, and promissory estoppel based on
Coastal Select's agents' representation that the
damage would be covered by the Policy. The current dispute
before the court is related to the production of a claim
journal (“Claim Journal”) kept by James Edwards
(“Edwards”), a Coastal Select desk adjustor.
Edwards used the Claim Journal to document activity related
to the Adelmans' claim. The Adelmans deposed Edwards on
August 29, 2018, and during the deposition, Edwards used the
Claim Journal to refresh his memory. Prior to the deposition,
despite the fact that the Claim Journal was responsive to the
Adelmans' first discovery request, the Claim Journal had
not been produced nor did the Adelmans know of its existence.
The Claim Journal was marked as an exhibit to the deposition.
After the deposition, Coastal Select's counsel determined
that the Claim Journal had not been produced and subsequently
Claim Journal contained entries with the initials of Coastal
Select employees who communicated with Edwards about the
Adelmans' claim. The Adelmans requested that Coastal
Select identify the people to whom the initials belonged as
well as their role in processing the Adelmans' claim in
letters sent on September 12, 2018, October 2, 2018, October
16, 2018, and November 29, 2018. In the meantime, on October
25, 2018, Coastal Select obtained new counsel. Then, on
December 14, 2018, Coastal Select asserted for the first time
that the Claim Journal was covered by attorney-client
privilege and work-product protection and requested that the
Claim Journal be clawed back. The Adelmans' counsel called
Coastal Select's counsel on December 18 and left a
voicemail requesting a return phone call, but before Coastal
Select's counsel did so, the Adelmans filed their motion
motion to compel was filed on December 19, 2018. ECF No. 37.
Coastal Select responded on January 2, 2019, ECF No. 38, and
the Adelmans replied on January 9, 2019, ECF No. 40. The
motion is ripe for review.
Federal Rules of Civil Procedure provide that a party
“may obtain discovery regarding any nonprivileged
matter that is relevant to any party's claim or defense
and proportional to the needs of the case.”
Fed.R.Civ.P. 26(b)(1). “Information within this scope
of discovery need not be admissible in evidence to be
discoverable.” Id. “The court may, for
good cause, issue an order to protect a party or person from
annoyance, embarrassment, oppression, or undue burden or
expense.” Fed.R.Civ.P. 26(c)(1). “The scope and
conduct of discovery are within the sound discretion of the
district court.” Columbus-Am. Discovery Grp. v.
Atl. Mut. Ins. Co., 56 F.3d 556, 568 n.16 (4th Cir.
1995) (citing Erdmann v. Preferred Research, Inc. of
Ga., 852 F.2d 788, 792 (4th Cir. 1988)).
Select argues that it should not be compelled to produce the
Claim Journal or information related to the initials within
the Claim Journal and requests that the court order its claw
back. Specifically, Coastal Select argues that (1) the Claim
Journal entries after the denial of the claim are not
relevant; (2) the post-denial entries are attorney-client
privileged; (3) the post-denial entries are protected by the
work-product doctrine; (4) Coastal Select used proper claw
back procedure to secure inadvertently disclosed privileged
material; (5) Coastal Select's inadvertent disclosure did
not waive the Claim Journal's privilege; and (6) even if
the Claim Journal's privilege was inadvertently waived,
the Adelmans may not use any information derived from the
Claim Journal. The court finds none of these arguments
Relevance of Post-Denial Entries
Claim Journal contains entries from July 5, 2017, the date on
which the Adelmans filed their claim, to March 5, 2018.
Coastal Select denied the Adelmans' claim on September
27, 2017, and it appears that Coastal Select concedes that
the claims from July 5, 2017 to September 27, 2017 are
relevant. However, Coastal Select argues that any entries
after Coastal Select denied the Adelmans' claim are
initial matter, the Claim Journal has already been produced.
While there may be a legal basis to claw back documents
produced in discovery that are subject to attorney-client
privilege or work-product production, see
Fed.R.Evid. 502, Coastal Select cites no legal basis to claw