EMC Insurance Companies v. Mid-Continent Casualty Company
ORDER. This matter is before the Court on Plaintiff's oral Motion to Compel Responses to Requests for Production Six through Eleven and Motion to Compel Deposition of Ivan Sarkissian. IT IS HEREBY ORDERED that the Motions are GRANTED, by Magistrate Judge Kristen L. Mix on 10/3/12. (lygsl, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Civil Action No. 10-cv-03005-LTB-KLM
EMC INSURANCE COMPANIES, an Iowa corporation,
MID-CONTINENT CASUALTY COMPANY, an Oklahoma corporation,
ENTERED BY MAGISTRATE JUDGE KRISTEN L. MIX
This matter is before the Court on Plaintiff’s oral Motion to Compel Responses to
Requests for Production Six through Eleven and Motion to Compel Deposition of
Ivan Sarkissian (collectively, the “Motions”). In compliance with the Court’s procedures
for resolving discovery disputes, the parties contacted the Court to set a hearing on the
Motions. The Court held a telephonic discovery hearing on the Motions on September 27,
2012. Appearing telephonically at the hearing were John D. Mereness, counsel for Plaintiff,
Lawrence M. Brooks, counsel for Defendant, and Dennis Polk, counsel for Interested Party
McConaughy & Sarkissian, P.C. At the end of the hearing, the Court took the matter under
advisement and stated it would issue a written order. For the reasons below, the Court
GRANTS the Motions.
This is an action involving two insurance companies in which the first, Plaintiff,
The Court’s summary of the facts in this section is drawn largely from the Background
section of the summary judgment Order [#51] issued on August 2, 2012.
alleges that the second, Defendant, failed to adequately defend Hans Nielsen, Inc. (“HNI”)
and improperly refused to defend Nanna Nielsen Smith (“Smith”) in an underlying
construction and design defect case.
In the underlying litigation, the homeowner’s
association of a condominium development sued HNI, Smith, BVPC, LLC (“BVPC”) and
N.J. Orr Construction Company (“Orr”), among others. HNI and BVPC were the developers
of the condominium project. Smith was an officer of HNI and served as BVPC’s manager
during the pertinent time periods. Orr was the project’s general contractor.
HNI was the named insured in a commercial general liability policy issued by
Plaintiff. Orr was the named insured in a commercial general liability policy issued by
Defendant. Pursuant to two endorsements, BVPC and HNI were additional insureds under
the policy issued by Defendant.
When the homeowner’s association initiated the underlying litigation in January
2008, Plaintiff provided a defense for HNI and Smith, and hired the law firm of Lambdin &
Chaney to defend them. Defendant agreed to defend HNI and BVPC under a reservation
of rights and hired the law firm of McConaughy and Sarkissian, PC, to defend them.
Defendant refused to provide a defense for Smith. The underlying litigation settled prior
Plaintiff alleges in this action, inter alia, that it paid the entire portion of the
settlement that resolved the underlying litigation as to HNI and Smith. Plaintiff further
alleges that it paid all of their defense costs. Plaintiff contends that the two liability policies
together required Defendant to defend HNI and Smith and to contribute to the costs of their
defense and settlement. Plaintiff therefore seeks indemnification from Defendant for these
On August 2, 2012, Judge Babcock issued an Order [#51] resolving the parties’
motions for summary judgment in which he ruled that Defendant had no duty to defend or
indemnify Smith in the underlying litigation, nor did Defendant have a duty to indemnify
HNI. Judge Babcock further ruled that Defendant had a duty to defend HNI in the
underlying litigation and that genuine issues of material fact exist regarding whether
Defendant breached that duty. Accordingly, Judge Babcock determined that because
Defendant had no duty to indemnify HNI or Smith, Defendant is not responsible for any of
the settlement costs Plaintiff paid, nor is Defendant responsible for any of Smith’s defense
costs paid by Plaintiff. Defendant may by responsible, however, for the costs Plaintiff paid
to defend HNI, depending on whether Defendant breached its duty to defend HNI. With
that background, the Court turns to Plaintiff’s Motions.
Plaintiff’s Request for Production (“RFP”) No. Six seeks “communications, reports,
status reports, updates, analyses [and] summaries” received by Defendant from
McConaughy & Sarkissian (“M&S”) that address matters pertaining to HNI in the underlying
litigation. Plaintiff’s Discovery Requests at 8. RFP No. Seven requests every document
In preparation for the telephonic discovery hearing on September 27, 2012, counsel for
Plaintiff e-mailed four documents to the Court: (1) Plaintiff’s First Set of Written Discovery
Requests to Defendant Mid-Continent Casualty Company (“Plaintiff’s Discovery Requests”); (2)
Defendant’s Response to Plaintiff’s First Set of Written Discovery Requests to Defendant MidContinent Casualty Company (“Defendant’s Discovery Responses”); (3) Defendant MidContinent Casualty Company’s Amended Privilege Log; and (4) a letter dated May 15, 2012
from Plaintiff’s counsel to Defendant’s counsel. Additionally, following the hearing, Plaintiff’s
counsel e-mailed to the Court a copy of the May 21, 2009 letter containing the common interest
agreement (“Common Interest Agreement”). Defendant’s counsel was copied on both e-mails.
in Defendant’s possession that was addressed from M&S to Smith and/or HNI on which
Defendant was copied. Id. RFP No. Eight seeks every communication from Defendant to
M&S regarding HNI’s defense, including the cost, in the underlying litigation. Id. RFP No.
Nine requests every budget submitted by M&S to Defendant for HNI’s defense in the
underlying litigation. Id. RFP No. Ten requests all the legal fee invoices submitted by M&S
to Defendant for its defense of HNI in the underlying litigation. Id. RFP No. Eleven seeks
all communications in Defendant’s possession addressing Defendant’s authorized
settlement offers for the benefit of HNI. Id.
For each of these requests, Defendant responded that the documents sought are
“attorney-client privileged and work-product protected.” Defendant’s Discovery Responses
at 24. Defendant asserts that the privilege is held by HNI and absent a waiver from HNI,
Defendant cannot produce the documents because they were received subject to those
privileges and protections. Id. The Court notes that with regard to RFP No. Eight,
Defendant, without waiving its objection, produced a letter. Id. In addition, in response to
RFP No. Eleven, Defendant produced some “non-privileged, non-work-product protected
documents” related to the communications requested. Id. at 25.
As presented at the hearing, Plaintiff also seeks to compel the deposition of Ivan
Sarkissian, an attorney at M&S. Defendant again argues that the attorney-client privilege
and work-product protection would significantly limit Mr. Sarkissian’s deposition testimony.
M&S contends that it is impossible to decide in the abstract whether Mr. Sarkissian can be
deposed and that application of the attorney-client privilege and work-product protection
would need to be decided on a question-by-question basis.
Attorney Client Privilege
In diversity jurisdiction cases such as this, state law governs issues of privilege.
Frontier Refining, Inc. v. Gorman-Rupp Co., Inc., 136 F.3d 695, 699 (10th Cir. 1998)
(stating that “state law supplies the rule of decision on privilege in diversity cases”). In
Colorado, the attorney-client privilege “is established by the act of a client seeking
professional advice from a lawyer and extends only to confidential matters communicated
by or to the client in the course of gaining counsel, advice, or direction with respect to the
client’s rights or obligations.” People v. Tucker, 232 P.3d 194, 198 (Colo.App. 2009). The
privilege applies only to statements made under circumstances in which there is a
reasonable expectation that the statements will be treated as confidential. Id. (citing Wesp
v. Everson, 33 P.3d 191, 197 (Colo. 2001)).
In Colorado insurance cases, “an attorney retained by the insurance carrier owes
a duty to the insured only; there is no attorney-client relationship between an insurance
carrier and the attorney it hires to represent the insured. Essex Insurance Company v.
Tyler, 309 F.Supp.2d 1270, 1272 (D.Colo. 2004). Colorado Formal Ethics Opinion 91
(January 16, 1993), on which the Court in Essex relied, states:
A lawyer retained by a liability insurance carrier to defend a claim against the
company’s insured must represent the insured with undivided fidelity. For
purposes of this opinion, that retention does not create an attorney-client
relationship between the lawyer and the carrier. . . .
[T]he insured is the client to whom the lawyer’s duty of loyalty is owed.
Similarly, Colorado Formal Ethics Opinion 107 (September 18, 1999) provides in
The Ethics Committee recognizes that the insurer has a legitimate interest
in obtaining information needed to monitor the costs of defense. But the
attorney may not allow the interests of the insurer to interfere with the
interests of the insured. Accordingly, the attorney must ensure that any
communication with the insurer or the third party auditor does not breach the
duty of confidentiality owed to the insured.
Work Product Protection
As stated in Fed. R. Civ. P. 26(b)(3)(B), the “mental impressions, conclusions,
opinions, or legal theories of a party’s attorney or other representative concerning the
litigation” are protected from disclosure to opposing parties in discovery. However, such
work product may be discovered if it is relevant to any party’s claim or defense and if that
party “shows that it has substantial need for the materials to prepare its case and cannot,
without undue hardship, obtain their substantial equivalent by other means.” Fed. R. Civ.
The work product doctrine is “broader than and distinct from the attorney-client
In re Foster, 188 F.3d 1259, 1272 (10th Cir. 1999).
impressions are broadly protected in order to further “society’s interest in protecting the
adversary system by shielding litigants’ work-product from their opponents, and thus freeing
lawyers to create such materials without fear of discovery and exploitation.” Id. (citing
Hickman v. Taylor, 329 U.S. 495, 510-11 (1947)). “The protection provided by the work
product doctrine is not absolute, and it may be waived.” In re Qwest Commc’ns Int’l Inc.,
450 F.3d 1179, 1186 (10th Cir. 2006) (citation omitted).
Common Interest Doctrine
“In Colorado, the joint defense (or common interest) doctrine is an exception to the
general rule that the attorney-client privilege is waived when privileged information is
disclosed to third parties.” The Marianist Province of the United States, Inc. v. Century
Indemnity Company, No. 08-cv-01760-WYD-MEH, 2010 WL 3938355, at *2 (D.Colo. Oct.
5, 2010) (unreported decision) (citing Black v. Southwestern Water Conservation Dist., 74
P.3d 462, 469 (Colo.App. 2003).
The doctrine includes “pre-existing confidential
communications and documents that are shared during a common enterprise.” Id. “The
privilege applies only to communications given in confidence and intended and reasonably
believed to be part of an on-going and joint effort to set up a common legal strategy.”
Black, 74 P.3d at 469 (citations omitted).
However, when parties who previously shared a common interest become adverse
in subsequent litigation, one cannot invoke the attorney-client privilege against the other
to preclude the other from seeking information related to the underlying matter. Roberts
Aircraft Co. v. Kern, No. 96-N-1214, 1997 WL 524894, at *3 (D.Colo. March 20, 1997)
(unpublished decision); Matter of Quantum Chemical/Lummus Crest, No. 90 C 778, 1992
WL 71782, at *3-4 (N.D.Ill. April 1, 1992). The rationale behind the subsequent litigation
exception is that pursuant to their common interest, the parties had no expectation of
confidentiality regarding disclosure of information to each other in the underlying matter.
Requests for Production Nos. Six Through Ten
The Court finds that the documents sought by Plaintiff in these five requests for
production are not protected by the attorney-client privilege.
As Judge Babcock
determined, Defendant had a duty to defend HNI. Defendant hired M&S for that purpose,
among others. Pursuant to Ethics Opinion 91, the attorney-client relationship was between
HNI and M&S. There was no attorney-client relationship between Defendant and M&S.
Consequently, the documents sent by M&S to Defendant in the underlying litigation are not
protected by the attorney-client privilege.
In its response to the document requests, Defendant argued that the attorney-client
privilege is held by HNI and that Defendant received documents from M&S subject to that
privilege. Defendant’s Discovery Responses at 24. Thus, Defendant claims it cannot
disclose these documents absent a waiver of the attorney-client privilege from HNI.
However, pursuant to Ethics Opinion 107, in order for M&S to have disclosed the
documents to Defendant, HNI must have already explicitly waived the privilege, or it has
now done so implicitly. See Wesp, 33 P.3d 191, 198 (“[I]f a communication to which the
privilege has previously attached is subsequently disclosed to a third party, then the
protection afforded by the privilege is impliedly waived.”) (citations omitted). If HNI waived
the privilege to allow disclosure of the documents by its attorneys to Defendant, Defendant
may not attempt to enforce the privilege here. Once waived, the privilege as to those
communications is gone. See People in Interest of E.H., 837 P.2d 284, 292 (Colo.App.
1992). The Court therefore finds no basis to conclude that the documents Defendant
received from M&S related to HNI were subject to HNI’s attorney-client privilege, and this
argument is rejected as a basis to deny Plaintiff’s motion to compel responses to its
requests for production.
In the alternative, the Court finds that the requested documents are not covered by
the attorney-client privilege because they were not “confidential matters communicated by
or to the client in the course of gaining counsel, advice, or direction with respect to the
client’s rights or obligations.” Tucker, 232 P.3d at 198. There was no reasonable
expectation that the documents sent from M&S to Defendant would remain confidential
because there was no attorney-client relationship between these entities. In fact, M&S had
a duty to HNI to ensure that its communications with Defendant did not breach the duty of
confidentiality owed to HNI. See Ethics Opinion 107 at ¶ (I)(B)(2). Absent an attorney-client
relationship between M&S and Defendant, the Court finds that the documents sent by M&S
to Defendant in the underlying litigation are not protected from disclosure in this action by
the attorney-client privilege.
Moreover, even if the Court agreed with Defendant that it received the documents
from M&S subject to HNI’s attorney-client privilege, the Common Interest Agreement
among the parties in the underlying litigation establishes that there was no expectation of
confidentiality regarding disclosure of such information among the parties to the agreement.
Plaintiff was a party to the Common Interest Agreement.
Among the terms of the
agreement was that M&S and the other law firm would “prepare and submit joint litigation
status reports” to be distributed to the insurers. Common Interest Agreement at 4. Thus,
by its own terms, the agreement provided for the exchange of information between the law
firms representing the insureds and the insurance carriers.
Because there was no
expectation of confidentiality at the time M&S provided documents to Defendant in the
underlying litigation, Defendant may not now assert that those documents are subject to
HNI’s attorney-client privilege.
Defendant argued at the hearing that the common interest was between the three
insureds in the underlying litigation, not between Plaintiff and Defendant. Defendant
claimed, therefore, that the common interest doctrine is inapplicable.
Defendant, however, were both parties to the agreement that clearly contemplated the free
exchange of information among all the parties to the agreement. Because the information
from M&S to Defendant was supplied in that environment, without an expectation of
confidentiality as to the parties to the agreement, the Court finds that the rationale behind
the subsequent litigation exception to the common interest doctrine applies here.
Defendant may not, therefore, rely on the attorney-client privilege to preclude Plaintiff from
now obtaining information pertaining to the underlying matter. For these reasons, the Court
finds that the documents sought by Plaintiff in Requests for Production Nos. Six through
Ten are not protected by the attorney-client privilege.
Similarly, the Court finds that because the Common Interest Agreement in the
underlying litigation also covered “work product communications between defense counsel
and the insurers,” the documents sought are not covered by the work product protection.
Without addressing whether the requested documents constitute the “mental impressions,
conclusions, opinions, or legal theories” of M&S attorneys, the Court finds that because the
documents sent by M&S to Defendant in the underlying litigation were sent with no
expectation of confidentiality among the parties to the agreement, the documents are not
protected. Having determined that the documents sought by Plaintiff in Requests for
Production Nos. Six through Ten are not protected by the attorney-client privilege or as
attorney work-product, the motion to compel as to these requests is granted.
Request for Production No. Eleven
In this request, Plaintiff seeks all communications in Defendant’s possession
regarding Defendant’s authorized settlement offers for the benefit of HNI. In its response,
Defendant objected “to the extent that it calls for the production of materials that are
protected by the attorney-client privilege, the attorney work-product protection, or other
relevant privilege.” For the same reasons set forth above, the Court finds that documents
responsive to this request are not protected by the attorney-client privilege or as attorney
At the hearing on the Motions, Defendant argued that because Judge Babcock
determined it had no duty to indemnify HNI, the documents sought are not relevant to the
remaining claims. The Court disagrees. As Judge Babcock also determined, Defendant
had a duty to defend HNI. In discussing the requirements for discharging that duty, Judge
Babcock cited Signature Development Companies v. Royal Insurance Company of
America, 230 F.3d 1215 (10th Cir. 2000). In Signature, the Court held that the defendant
breached its duty to defend by failing, among other things, to respond to settlement
overtures and to fully cooperate in settlement negotiations. Id. at 1220. Thus, the duty to
defend extends to participating in settlement negotiations. See id. The Court therefore
finds that the documents sought in Request for Production No. Eleven are relevant to
Defendant’s duty to defend HNI in the underlying litigation. The motion to compel as to this
request is granted.
Deposition of Ivan Sarkissian
Lastly, Plaintiff seeks an order compelling the deposition of Ivan Sarkissian, an
attorney at M&S. To the extent that Plaintiff’s questions to Mr. Sarkissian are limited to
matters between M&S and Defendant, including any documents produced as a result of the
Court’s above rulings, the Court finds that answers to such questions are not protected by
the attorney-client privilege or as attorney work product for the same reasons set forth
above. Beyond that, Defendant may, as it sees fit, assert a privilege in response to any
questions that seek protected information. If there is a dispute as to whether the asserted
privilege applies, the parties can seek Court intervention. Thus, Plaintiff’s motion to compel
Mr. Sarkissian’s deposition is granted, subject to the foregoing conditions.
For the foregoing reasons, the Court finds that the information sought by Plaintiff in
Requests for Production Nos. Six through Eleven is not protected by the attorney-client
privilege or as attorney work-product. Accordingly,
IT IS HEREBY ORDERED that the Motions are GRANTED.
IT IS FURTHER ORDERED that on or before October 24, 2012, Defendant shall
produce to Plaintiff documents responsive to Requests for Production Nos. Six through
IT IS FURTHER ORDERED that Defendant shall promptly make available Attorney
Ivan Sarkissian for a deposition, subject to the conditions set forth above.
Dated: October 3, 2012
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?