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Adelman v. Coastal Select Insurance Co.

United States District Court, D. South Carolina, Beaufort Division

February 6, 2019




         The 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.

         I. BACKGROUND

         This is 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, [1] 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.

         The 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 produced it.

         The 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.[2] 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 to compel.

         The 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.

         II. STANDARD

         The 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)).


         Coastal 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 convincing.

         A. Relevance of Post-Denial Entries

         The 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 irrelevant.

         As an 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 ...

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