Anderson v. Mountain States Insurance Group, Inc. et al

Filing 49

ORDER by Magistrate Judge Nina Y. Wang on 04/28/16. It is ordered that Defendant Mountain States Mutual Casualty Company will produce reserve and settlement authority information being currently withheld no later than May 5, 2016; To the extent that it intends to continue invoking privilege with respect to any other documents, Defendant Mountain States Mutual Casualty Company will provide an amended privilege log no later than May 5, 2016; and To the extent that any dispute remains with respect to the privileged documents, the Parties will contact the chambers of the undersigned Magistrate Judge no later than May 12, 2016 to schedule an informal discovery dispute conference. (nmarb, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO

Civil Action No. 15-cv-01316-RM-NYW
MARSHALL ANDERSON,
Plaintiff,
v.
MOUNTAIN STATES MUTUAL CASUALTY COMPANY,
Defendant.

ORDER
Magistrate Judge Nina Y. Wang
This matter is before the court on various discovery disputes raised in “Plaintiff’s [sic]
Marshall Anderson Written Material Submitted for April 15th, 2016 Conference” [#44, filed
April 14, 2016] and “Defendant Mountain States Mutual Casualty Company’s Written Materials
Submitted for April 14, 2016 at 1:30 p.m. Discovery Conference” [#47, filed April 15, 2016].
These discovery issues are referred to this court pursuant to 28 U.S.C. § 636(b)(1)(A) and the
Order Referring Case dated June 19, 2015 [#7].
BACKGROUND
Plaintiff Marshall Anderson (“Plaintiff or “Mr. Anderson”) asserts three claims for
Underinsured Motorist Benefits, Breach of Contract, and Violation of the Insurance Fair Conduct
Act resulting from the denial of his claim for underinsured motorist (“UIM”) insurance benefits
by Defendant Mountain States Mutual Casualty Company (“Defendant” or “Mountain States”),

associated with an automobile collision involving Plaintiff and non-parties to this action. [#4].
In his Complaint, Mr. Anderson contends that Defendant has “unreasonably delayed and/or
denied payment of the [underinsured motorist] benefits for the damages incurred,” and that as a
result of the unreasonable delay, he is entitled to recover “the covered benefit owed…plus
statutory damages of two times the covered benefit, plus reasonable attorney fees and court
costs.” [#4 at 7]. A Scheduling Order was entered in this case on July 17, 2015, and provides
for discovery closing on March 14, 2016. [#17]. By Order dated March 17, 2016, the deadline
for discovery was extended until May 30, 2016. [#38].
Mr. Anderson now seeks an unredacted claims file, an evaluation, settlement authority,
and reserve information from Defendant. Specifically, Plaintiff requests that the court “order
that Defendant produce all of its claims information regarding reserve information in an unredacted format, and produce all other documents listed in its Supplemental Privilege Log for an
in camera review for the court.” [#44 at 3]. Defendant contends that the information sought by
Mr. Anderson is not discoverable, either because it is not reasonably calculated to lead to
admissible evidence or because it is protected from disclosure by the attorney-client privilege.
[#47]. The court addresses each of these issues in turn.
ANALYSIS
I.

Reserve and Settlement Authority Information
Mr. Anderson asserts that Defendant should be required to produce all of its claims

information regarding reserve information in an unredacted format, because it is relevant to his
claims of bad faith. [#44 at 3]. Mr. Anderson also seeks information regarding the settlement
authority. [#44 at 1]. “Reserves are the funds insurance companies set aside to cover future

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expenses, losses, claims, or liabilities associated with a particular case….settlement authority
generally refers to an insurance agent’s ability to accept an offer of settlement that binds the
principal up to and including a certain amount of money.” See Sunahara v. State Farm Mut.
Auto. Ins. Co., 280 P.3d 649, 656 (Colo. 2012) (internal quotations and citations omitted).
Reserve information and settlement authority do not typically reflect a thorough factual or legal
evaluation of the case at hand. Id. Rather, they reflect a basic evaluation of the value of the
claim and the risk of an adverse judgment. Id.
Rule 26(b)(1) governs the discoverability of information in this action,1 and provides in
pertinent part:
Unless otherwise limited by court order, the scope of discovery is as follows:
Parties 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,
considering the importance of the issues at stake in the action, the amount in
controversy, the parties’ relative access to relevant information, the parties’
resources, the importance of the discovery in resolving the issues, and whether the
burden or expense of the proposed discovery outweighs its likely benefit.
Information within this scope of discovery need not be admissible in evidence to
be discoverable.
Fed. R. Civ. P. 26(b)(1) (eff. Dec. 1, 2015).2 In this case, Plaintiff seeks the reserve and
settlement authority information not for the purposes of assigning a value to the claim, but to
1

Under the Erie doctrine, a federal court sitting in diversity applies state substantive law, but
federal procedural law. See Erie R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S. Ct. 817, 822, 82 L.
Ed. 1188 (1938).
2

Pursuant to 28 U.S.C. § 2074(a) and the Order of the Supreme Court dated April 29, 2015, the
amendment shall govern all civil cases commenced after December 1, 2015 and “insofar as just
and
practicable,
all
proceedings
then
pending.”
See
http://www.supremecourt.gov/orders/courtorders/frcv15(update)_1823.pdf.
Because this court concludes that these obligations were attendant on Parties before the
amendments to the Rules, see Cartel Asset Mgmt. v. Ocwen Fin. Corp., No. 01-CV-01644-REBCBS, 2010 WL 502721, at *10 (D. Colo. Feb. 8, 2010), this court applies Rule 34, as effective
December 1.
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ascertain whether Defendant acted in good faith while handling his claim. [#44]. Defendant does
not contend that this information is privileged, but, relying upon the Colorado Supreme Court’s
holding in Sunahara v. State Farm, objects to its production based on lack of relevance.
Like Sunahara, this case involves a first-party claim brought by an insured against an
insurer for UIM benefits. Unlike Sunahara, Mr. Anderson has also brought a claim for bad faith
against Mountain States. The Colorado Supreme Court in Sunahara observed:
[W]e noted in Silva that reserves and settlement authority—and, under our
reasoning in this case, the liability assessments and fault evaluations underlying
those figures as well—might be relevant and reasonably calculated to lead to
admissible evidence when a first-party plaintiff sues his or her insurance company
for bad faith or for a declaratory judgment. Silva, 47 P.3d at 1193. In bad faith and
declaratory judgment actions, evidence of reserves and settlement authority could
shed light on whether the insurance company adjusted a claim in good faith, or
promptly investigated, assessed, or settled an underlying claim. Id.
Sunahara, 280 P.3d at 657-58. As discussed above, Plaintiff contends that Mountain States has
unreasonably delayed and/or denied benefits to him that are payable under the UIM policy. [#4
at ¶¶ 47-48]. Plaintiff further alleges that Defendant “has not thoroughly and fairly evaluated the
Plaintiff’s claims and has not complied with the terms and agreements set forth in the Policy that
covers the Plaintiff. The Defendant has been evasive in not timely responding to the Plaintiff’s
claims” and that Defendant has “been unreasonable and negligent in the handling of the
Plaintiff’s claims.” [Id. at ¶¶ 70, 71]. In the description of his claims as reflected in the
Scheduling Order, Mr. Anderson further explains that “[a]fter numerous attempts to settle with
the Defendant, a settlement was unsuccessful and Plaintiff was forced to dilute his policy and
pursue litigation.” [#17 at 2].
In light of these allegations, this court finds that Mr. Anderson should be permitted to
discover information, currently withheld, that reflects the Defendant’s reserves and settlement
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authority relevant and proportional to Plaintiff’s asserted bad faith claim. See Toy v. Am. Family
Mut. Ins. Co., No. 12-cv-01683-PAB-MJW, 2014 WL 485962, at *2 (D. Colo. Feb. 6, 2014);
Seabron v. Am. Family Mut. Ins. Co., 862 F. Supp. 2d 1149, 1158 (D. Colo. 2012), order
clarified on reconsideration (June 26, 2012) (“the court finds that evidence of reserves and
settlement authority, or other ‘values’ applied to the claim in monetary terms, are discoverable in
a case like this and Defendants may not redact such information from the claims and legal files
produced pursuant to this Order. For the same reasons, information about reserves and settlement
authority, or other ‘values’ applied to the named plaintiff's claims in monetary terms, that was
redacted in the named plaintiffs' claim and legal files previously produced shall be provided”);
Colorado Mills, LLC v. Philadelphia Indem. Ins. Co., No. 12-CV-01830-CMA-MEH, 2013 WL
1340649, at *8 (D. Colo. Apr. 2, 2013) (“Here, the Plaintiff brings claims for breach of the
covenant of good faith and fair dealing/insurer bad faith with respect to Defendant's denial of its
first-party claim. Defendant contends that reserves are intended to satisfy statutory and
regulatory requirements and, thus, are not evidence of an insurer's valuation of a claim. [].
However, the Court finds that reserve information may be relevant for the purposes set forth in
Sunahara and Silva.”).
Accordingly, Defendant must produce the information related to reserves and settlement
authority currently being withheld on the basis of relevance, including MS-001418-001421 and
MS 001612-001623. [#44-1 at 1; #47-1 at 1].
II.

Privilege
In its privilege logs, Defendant invokes the attorney-client privilege and attorney work

product doctrine to preclude discovery on at least MS-001410-001413 and MS-001422,

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MS001624-001639. [#44-1, #47-1]. Plaintiff requests that the court review these documents in
camera to determine whether they are appropriately protected from disclosure by either the
attorney-client privilege or the attorney work product doctrine.3 [#44 at 3]. Defendant argues
that it has properly invoked the attorney-client privilege and attorney work product doctrine to
shield disclosure of documents created prior to the inception of this litigation, as counsel was
retained on March 20, 2013 to start a pre-litigation defense. [#47 at 2].
Before the court can reach the substance of the dispute, it must examine Defendant’s
privilege logs [#44-1, #47-1]. In doing so, this court concludes that the privilege logs are
deficient. The very purpose of a privilege log is to provide information sufficient for a party and
the court to ascertain whether a privilege may attach, even without in camera review.
Accordingly, privilege logs should identify the document, its nature, its author or origin, all
recipients, the dates associated with the creation and/or communication of the document, the
general topic without disclosing the substance that is privileged but sufficiently detailed as to
indicate why the privilege was invoked, and the privilege invoked. See Wildearth Guardians v.
U.S. Forest Service, 713 F. Supp. 2d 1243, 1266–1267 (D. Colo. 2010). Privilege log entries
may be deemed insufficient when they are missing “a descriptive indication as to why the
document fits the elements of the privilege—for example, that it was not shared with a larger
group and therefore not confidential.” Id. Privilege logs like Defendant’s, which merely reflect
the bates numbers of the documents and include generic descriptions like “additional claim
notes” simply do not amount to a proper privilege log.
3

While Plaintiff refers to a Supplemental Privilege Log attached as Exhibit 2, it does not appear
that any such privilege log was attached, see [#44-2], and it is unclear to the court whether the
Second Privilege Log attached by Defendant at [#47-1] is the Supplemental Privilege Log to
which Plaintiff refers in his filing.
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Upon review of certain of the redacted materials, see e.g., [#44-5 at 2; #47-6], it appears
that some entries are likely privileged [#47-9 at 1, 4/21/2015 claim note] while it is impossible to
ascertain whether other redactions are proper due to the large amount of redaction and the lack of
a sufficient privilege log. [#44-5 at 2]. To the extent that Defendant intends to invoke privilege
on any document or redaction, it must propound updated privilege logs no later than May 5,
2016, which conform to the foregoing requirements set forth in Wildearth Guardians.
Otherwise, the documents currently withheld by Defendant on the grounds of attorney-client
privilege or work product doctrine should be produced no later than May 5, 2016. After Plaintiff
has an opportunity to review the amended privilege logs and meet and confer regarding any
ongoing dispute about privileged documents, the Parties will contact the court no later than May
12, 2016 for an informal discovery conference on that limited issue.
CONCLUSION
Accordingly, IT IS ORDERED that:
(1)

Defendant Mountain States Mutual Casualty Company will produce reserve and
settlement authority information being currently withheld no later than May 5,
2016;

(2)

To the extent that it intends to continue invoking privilege with respect to any
other documents, Defendant Mountain States Mutual Casualty Company will
provide an amended privilege log no later than May 5, 2016; and

(3)

To the extent that any dispute remains with respect to the privileged documents,
the Parties will contact the chambers of the undersigned Magistrate Judge no later
than May 12, 2016 to schedule an informal discovery dispute conference.

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DATED: April 28, 2016

BY THE COURT:

s/Nina Y. Wang__________
United States Magistrate Judge

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