United States District Court, D. South Carolina, Charleston Division
THE MUHLER COMPANY, INC., individually and as assignee of Window World of North Charleston, LLC, Plaintiff,
STATE FARM FIRE & CASUALTY CO., Defendant.
C. NORTON UNITED STATES DISTRICT JUDGE.
matter is before the court on defendant State Farm Fire &
Casualty Co's (“State Farm”) motion to
reconsider or for clarification, ECF No. 37. In addition, the
court previously granted in part and denied in part
Muhler's motion to compel based on attorney-client
privilege issues, and it now considers the remaining portion
of the motion to compel based on the work product doctrine
pursuant to State Farm's supplemental briefing, ECF No.
38. For the reasons set forth below, the court grants the
motion to reconsider or for clarification and further grants
in part and denies in part the remaining portion of the
motion to compel.
relevant facts of this case can be found in the court's
previous order on Muhler's motion to compel. ECF No. 36.
Muhler filed its second motion to compel on February 12,
2018. ECF No. 26. State Farm opposed the motion, citing
attorney-client privilege and work product doctrine. ECF No.
27 at 1. The court granted in part and denied in part the
motion to compel on September 25, 2018, identifying which
documents were or were not subject to attorney-client
privilege. ECF No. 36 at 13-18. The court also instructed
State Farm to submit supplemental briefing on the documents
that it withheld on the basis of the work product doctrine
because despite raising the protection of the work product
doctrine, neither party substantively argued why the
documents were or were not protected by the work product
Farm submitted its supplemental brief on November 7, 2018.
ECF No. 38. On the same day, State Farm also filed a motion
for reconsideration or for clarification. ECF No. 37. Muhler
responded to both the supplemental brief and the motion on
December 12, 2018. ECF No. 41. State Farm replied to both on
January 4, 2019. ECF No. 44. On April 5, 2019, the court
issued an order taking the motion to reconsider under
advisement and requesting supplemental briefing on an issue
raised in the motion to reconsider. ECF No. 47. Muhler
submitted a supplemental brief on April 18, 2019. ECF No. 50.
State Farm responded on May 1, 2019, ECF No. 51, and Muhler
replied on May 8, 2019, ECF No. 52. Now the motion to
reconsider or for clarification and the remaining portion of
the motion to compel are ripe for review.
Motion to Reconsider or for Clarification
motion for reconsideration or for clarification, State Farm
raises two main issues. First, State Farm argues that the
court improperly raised the at-issue exception to
attorney-client privilege sua sponte and reserved its ruling
on documents that may be subject to the
exception. Second, State Farm contends that it is
unclear over which documents the court reserved its ruling.
Based on Muhler's response to this argument and upon
further review of the issue, the court determined that it
needed Muhler to clarify whether or not Muhler was actually
contesting the privilege of documents containing
communication between State Farm and its coverage counsel,
which would implicate the at-issue exception. The source of
this uncertainty is explained in greater detail in the
court's April 5, 2019 order, but in short, the
uncertainty was based on Muhler challenging entries in State
Farm's privilege log that contained communication between
State Farm and its coverage counsel.
supplemental briefing, Muhler subsequently clarified that it
does not challenge the claimed attorney-client privilege
between State Farm and its coverage counsel. Muhler explained
that it inadvertently included two of the privilege log
entries containing these communications in its list of
challenged entries. Muhler also explained the other entries
containing communications with coverage counsel that it
challenged were not meant to challenge the portions of the
document containing that communication. Muhler went on to
explain that it “was and is amenable to the Court's
inquiry” into the at-issue exception, ECF No. 50 at 2;
however, because Muhler does not challenge the privilege of
communication between State Farm and its coverage counsel,
the court declines to consider the application of the
at-issue exception here. As a result, the court vacates the
portion of its September 25, 2018 order discussing the
at-issue exception, and State Farm need not produce privilege
log entries 85, 154, and the portions of entries 4, 11, 16,
17, 19, 28, 29, 32, 35, 38, 42, 44, 47, 48, 212, 246, and 250
that contain communications with State Farm's coverage
Work Product Doctrine
Farm asserts that various documents for which Muhler seeks to
compel production are protected by the work product doctrine.
Federal law governs the work product doctrine. State Farm
Fire & Cas. Co. v. Admiral Ins. Co., 225 F.Supp.3d
474, 483 (D.S.C. 2016). The doctrine protects from discovery
any “documents and tangible things that are prepared in
anticipation of litigation or for trial by or for [a] party
or its representative (including the . . . party's
attorney, consultant, surety, indemnitor, insurer, or
agent).” Fed.R.Civ.P. 26(b)(3)(A). The party claiming
work product protection has the burden of establishing
entitlement to the protection. In re Martin Marietta
Corp., 856 F.2d 619, 626 (4th Cir. 1988).
application of the work product doctrine is particularly
difficult in the context of insurance claims.”
Kidwiler v. Progressive Paloverde Ins. Co., 192
F.R.D. 536, 541-42 (N.D. W.Va. 2000). “[I]nsurance
companies have a duty to investigate, evaluate, and adjust
claims made by their insureds. The creation of documents
during this process is part of the ordinary course of
business of insurance companies, and the fact that litigation
is pending or may eventually ensue does not cloak such
documents with work-product protection.” HSS
Enters., LLC v. Amco Ins. Co., 2008 WL 163669, at *4
(W.D. Wash. Jan.14, 2008) (internal citation omitted).
“Because an insurance company has a duty in the
ordinary course of business to investigate and evaluate
claims made by its insureds, the claims files containing such
documents usually cannot be entitled to work product
protection.” Pete Rinaldi's Fast Foods, Inc. v.
Great Am. Ins. Cos., 123 F.R.D. 198, 202 (M.D. N.C.
1988); see also St. Paul Reinsurance Co. v. Commercial
Fin. Corp., 197 F.R.D. 620, 636 (N.D. Iowa 2000)
(“[A]n insurer's investigation of whether coverage
exists is required and the conduct of that much of its
investigation is assuredly in the ordinary course of its
business, not ‘in anticipation of
work product doctrine to apply in the insurance context,
“[t]he document must be prepared because of the
prospect of litigation when the preparer faces an actual
claim or a potential claim following an actual event or
series of events that reasonably could result in
litigation.” Nat'l Union Fire Ins. Co. of
Pittsburgh, Pa. v. Murray Sheet Metal Co., 967 F.2d 980,
984 (4th Cir. 1992). Indeed, “insurance claim files
generated in relation to investigating and defending against
third-party claims are generally considered work-product
because they were clearly prepared for the purposes of the
underlying litigation, rather than in the insurer's
ordinary course of business.” Smith v. Scottsdale
Ins. Co., 40 F.Supp.3d 704, 720 (N.D. W.Va. 2014),
aff'd, 2014 WL 4199207 (N.D. W.Va. Aug. 22, 2014), and
aff'd, 621 Fed.Appx. 743 (4th Cir. 2015). The proponent
of work product protection must establish that the
“driving force behind the preparation of each requested
document” is the prospect of litigation. Id.
An insurer may claim the protection of work product doctrine
without the existence of an attorney-client relationship.
State Farm Fire & Cas. Co., 225 F.Supp.3d at
are two types of work product: fact work product and opinion
work product. In re Allen, 106 F.3d 582, 607 (4th
Cir. 1997). “Fact work product can be discovered upon a
showing of both a substantial need and an inability to secure
the substantial equivalent of the materials by alternate
means without undue hardship.” In re Grand
Jury Proceedings, Thursday Special Grand Jury Sept. Term,
1991, 33 F.3d 342, 348 (4th Cir. 1994). In contrast,
opinion work product “is even more scrupulously
protected as it represents the actual thoughts and
impressions of the attorney.” Id.
Farm argues that certain documents contain both opinion
and/or fact work product and therefore protected by the work
product doctrine. In response, Muhler argues that the
documents should be produced pursuant to two exceptions.
First, Muhler argues that in the context of bad-faith
insurance litigation, opinion work product is not protected
because the mental impressions of counsel are at issue. In
the alternative, Muhler argues that State Farm's
documents that contain fact work product should be produced
because Muhler has a substantial need for them and there is
no substantial equivalent to these documents. The court finds
that neither exception applies here.
At-Issue Exception to Work Product Doctrine
work product enjoys a nearly absolute immunity and can be
discovered only in very rare and extraordinary
circumstances.” In re Allen, 106 F.3d at 607
(internal quotations omitted). The Fourth Circuit declined to
recognize an exception for discovery of opinion work product
from an earlier, terminated lawsuit that contained an
“operative fact” in a subsequent lawsuit, or in
other words, a general at-issue exception to work product
protection. Duplan Corp. v. Moulinage et Retorderie de
Chavanoz, 509 F.2d 730, 735 (4th Cir. 1974); see
also Washington v. Follin, 2016 WL 1614166, at *14 n.37
(D.S.C. Apr. 22, 2016) (explaining that the Fourth Circuit
has not recognized the at-issue exception to the work product
doctrine). However, since Duplan, some district
courts within the Fourth Circuit have permitted discovery of
opinion work product under the at-issue exception in bad
faith insurance actions. See Charlotte Motor
Speedway, Inc. v. Int'l Ins. Co., 125 F.R.D.
127, 131 (M.D. N.C. 1989) (applying the at-issue exception
for settlement documents that were claimed as work product
because whether the insurance company reached the settlement
agreement in good faith was directly in issue); MAG Mut.
Ins. Co. v. Brown, 2015 WL 13648556, at *15 (D.S.C. July
24, 2015) (“Courts have held that when the activities
of counsel are directly at issue in a case, documents
relevant to those activities are discoverable, even though
they are work product.”); Liberty Mut. Fire Ins.
Co. v. J.T. Walker Indus., Inc., 2010 WL 1345287, at *9
(D.S.C. Mar. 30, 2010), modified, 817 F.Supp.2d 784 (D.S.C.
2011) (ordering production of “internal opinion work
product to the extent it is relevant to MI Window's bad
example, in Charlotte Motor Speedway, Inc.,
Charlotte Motor Speedway entered into a directors' and
officers' liability insurance policy with the defendant.
125 F.R.D. at 128. Charlotte Motor Speedway subsequently
merged with another company, and the resulting entity was the
plaintiff. Minority shareholders objected to the merger and
filed a federal securities action and state court appraisal
action against Charlotte Motor Speedway and several others
who were involved in the merger. The plaintiff subsequently
settled the two shareholder actions and then brought an
action against the defendant to recover the amount paid in
settlement and defense of the actions. The defendant
contested whether it was obligated to do so and sought
discovery of opinion work product relevant to the settlement
agreement. Id. at 129. The U.S. District Court for
the Middle District of North Carolina agreed that the opinion
work product should be produced because “the discovery
of the nature of these activities of counsel goes to whether
[the plaintiff] met its obligations under the Policy in
constructing the settlement agreement and whether it reached
the agreement in good faith.” Id. at 130. The
court distinguished Duplan by explaining that
“the activities and advice of counsel was not an issue
in . . . Duplan. In the instant case, the activities
and advice of Plaintiff's counsel in the settlement of
the underlying action are inextricably interwoven with the
issue of International's liability under the
Policy.” 125 F.R.D. at 130. Other courts that have
applied the at-issue exception have done so when the party
claiming work product protection relies or represents that it
is going to rely on the work product in proving its claim.
See, e.g., Liberty Mut. Fire Ins. Co., 2010
WL 1345287, at *9 (finding that ...