Mogadam v. Liberty Mutual Fire Insurance Company et al

Filing 40

MEMORANDUM DECISION AND ORDER granting in part and denying in part 18 Motion to Compel. Signed by Judge Candy W. Dale. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (cjs)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO

ROBERT MOGADAM, an individual,
Case No. 2:14-cv-00224-EJL-CWD
Plaintiff,
MEMORANDUM DECISION AND
ORDER

v.
LIBERTY MUTUAL FIRE
INSURANCE CO., a foreign company
(aka: LIBERTY MUTUAL
INSURANCE CORPORATION, aka
LIBERTY MUTUAL) and JOHN DOE
ENTITIES I-X,
Defendants.

INTRODUCTION
Pursuant to the Court’s Order (Dkt.36), Defendant Liberty Mutual Fire Insurance
Co. lodged documents with the Court for in camera review to determine if the
documents, or redacted portions of the documents, are protected from disclosure by the
defendant/insurer in this bad faith action filed by the plaintiff/insured. The Court ordered
in camera review after both parties submitted briefing on the issues raised regarding the
attorney-client privilege in connection with Plaintiff’s motion to compel, (Dkt. 18), and
the Court conducted a hearing on the matter. For the reasons explained below, the Court
MEMORANDUM DECISION AND ORDER—1

finds that some redactions contained within the produced documents at issue are
protected by the attorney-client privilege, while other redactions must be disclosed (or
un-redacted).
BACKGROUND
This lawsuit involves claims of breach of contract and bad faith arising from
Defendant Liberty Mutual’s investigation and denial of Plaintiff Robert Mogadam’s
claim for stolen property under his home owner’s policy.
Mogadam owns a home located in Coeur d’ Alene, Idaho, where he lived with his
girlfriend Nancy Greene. In early 2012, while Mogadam was out of the country, Greene
informed Mogadam she was leaving him and moving back to California. Upon
Mogadam’s return to his home, he found numerous items missing; primarily his antique
furnishings. Mogadam contacted his insurer, Liberty Mutual, and made a claim for theft
under his homeowner’s policy.
Liberty Mutual assigned the handling of Mogadam’s claim to Special
Investigations Unit (SIU) investigator, Greg Mason. As part of Mason’s investigation, he
requested Mogadam submit to an Examination Under Oath (EUO). Mason retained the
Thenell Law Group and Jillian Hinman to conduct EUO. The EUO took place April 2,
2013. Then, on April 18, 2013, the Thenell Law group provided Liberty Mutual with an
evaluation of Mogadam’s claim. See Thenell Final Status Report. (Dkt. 18-1 at 16.)
In June of 2013, Liberty Mutual denied Mogadam’s claim in its entirety and
cancelled Mogadam’s Deluxe Policy due to “material misrepresentation in regards to
filing a claim.” See Complaint at XVII, (Dkt. 1-1 at 4.) Mogadam contends Liberty
MEMORANDUM DECISION AND ORDER—2

Mutual refused to provide any information, documentation, or clear explanation to
support the denial of his claim and the cancellation of his insurance coverage.
On April 11, 2014, Mogadam filed this suit and later sought the production of
Liberty Mutual’s claim file, and all other documents related to the investigation,
handling, and denial of Mogadam’s claim. 1 In response, Liberty Mutual produced
documents from the claim file, but redacted portions of the file, asserting the attorneyclient privilege. In addition, Liberty Mutual withheld documents regarding its SIU unit
and Mason, asserting lack of relevance, privacy, and burdensomeness. The parties met
and conferred regarding the discovery dispute, but were unable to reach a full resolution.
On August 31, 2015, Mogadam filed a Motion to Compel the disputed documents
at issue. (Dkt. 18.) On September 29, 2015, The Court conducted a hearing on the
motion, and relying largely upon the decision in Hilborn v. Metropolitan Group Property
& Casualty Insurance Co., 2013 WL 6055215 (D. Idaho Nov. 13, 2013), the Court
directed Liberty Mutual to submit un-redacted copies of the disputed documents to the
Court for an in camera review to determine whether the redactions were properly made. 2
ANALYSIS
In their briefs, both parties relied upon the Court’s decision in Hilborn to support
their respective positions of whether the redacted portions of the documents at issue are

1

Mogadam filed his Complaint in the First Judicial District of Idaho state court. On June 5,
2014, Liberty Mutual removed the case to the United States District Court for the State of Idaho.
2
The Motion to Compel (Dkt. 18) also requested the Court to compel other documents withheld
by Liberty Mutual, specifically documents in Mason’s personnel file. With regard to those
documents, the parties recently informed the Court they reached a resolution and no longer need
the Court to take up the issue.

MEMORANDUM DECISION AND ORDER—3

protected from disclosure by the attorney-client privilege. 2013 WL 6055215. In Hilborn,
the Court relied upon Cedell v. Farms Ins. Co. of Wash., 295 P.3d 239 (Wash. Sup. Ct.
2013), which set forth the presumption that “there is no attorney-client privilege relevant
between the insured and insurer in the claims adjusting process….” Id. at 246. However,
“the insurer may overcome the presumption of discoverability by showing its attorney
was not engaged in the quasi-fiduciary tasks of investigating and evaluating or processing
the claim, but instead in providing the insurer with counsel as to its own potential
liability; for example, whether or not coverage exists under the law.” Id. And, “upon such
a showing, the insurance company is entitled to an in camera review of the claims file,
and to the redaction of communications from counsel that reflected the mental
impressions of the attorney to the insurance company, unless those mental impressions
are directly at issue in its quasi-fiduciary responsibilities to its insured.” Id.
At issue here are redacted portions of documents contained in Liberty Mutual’s
claim file, including communications in Mason’s claims log and two letters from Liberty
Mutual’s attorneys. Two attorneys assisted Liberty Mutual in the denial of Mogadam’s
claim—Liberty Mutual’s outside counsel, the Thenell Law Group, and its in house
counsel, John Hartman. Because the presumption of discoverability first requires the
Court to determine whether the attorney engaged in a quasi-fiduciary role in connection
with investigating or responding to the insured’s claim, the Court will analyze the
redacted documents separately as they relate to each attorney.

MEMORANDUM DECISION AND ORDER—4

I. Thenell Law Group
It is undisputed the Thenell Law Group engaged in a quasi-fiduciary role by
evaluating and investigating Mogadam’s claim and by providing legal analysis to Liberty
Mutual. See Opp. to Pl. Motion to Compel at 5. (Dkt. 20-5) (“…the Thenell Law Group
did engage in the ‘quasi fiduciary’ tasks of investigating and evaluating or processing the
claim…”). However, Liberty Mutual asserts, even though the Thenell Law Group
engaged in a quasi-fiduciary role, the information redacted in the documents related
exclusively to Thenell Law Group’s “legal analysis and opinions regarding whether or
not coverage existed under the policy.” Id. Mogadam argues the entire claim file,
including information provided by the Thenell Law Group to Liberty Mutual’s claims
examiners, is presumptively discoverable. Mogadam asserts all factual information
directly at issue in his claim, including facts derived from Thenell Law Group’s
investigation of his claim, and the mental impressions and opinions of coverage provided
in connection with the investigation, are discoverable and not protected by the attorneyclient privilege.
“Documents that discuss both coverage and factual matters are [] discoverable,
although their coverage discussion is subject to redaction if it has nothing to do with the
bad faith claim.” Stewart Title Guar. Co. v. Credit Suisse, Cayman Islands Branch, 2013
WL 1385264, at *6 (D. Idaho Apr. 3, 2013). Accordingly, the Court will order the
disclosure of the content of documents which is (1) sufficiently related to Mogadam’s
bad faith claim; and (2) related to Liberty Mutual’s investigation and evaluation of

MEMORANDUM DECISION AND ORDER—5

Mogadam’s claim of loss, which Liberty Mutual denied. See Johnson v. Allstate Prop. &
Cas. Ins. Co., 2014 WL 4293967, at *6-7 (W.D. Wash. Aug. 29, 2014).
The Court conducted an in camera review of three documents containing
information from the Thenell Law Group. First, the Court reviewed documents Bates
stamped LM 366 and LM 367. These documents contain entries in Liberty Mutual’s
internal log of Mogadam’s claim. Liberty Mutual redacted portions from entries dated
April 10, 2013 and April 20, 2013. The entries were made by Mason and summarized
conversations he had with an attorney from the Thenell Law Group, which included
certain results from their investigation and legal analyses relating to Mogadam’s claim.
Because the Thenell Law Group performed quasi-fiduciary duties, these documents are
presumed discoverable. These entries were generated as part of the claims adjusting
process, and the opinion or strategy relates to that process as well as the investigation of
the claim. Accordingly, these entries must be un-redacted.
Next, the Court reviewed document Bates stamped LM 579-584. This document,
dated April 18, 2013, is a final status report from the Thenell Law Group to Mason
regarding Thenell’s investigation of Mogadam’s claim, including the Examination Under
Oath of Mogadam, conducted by an attorney with the Thenell Law Group. Because the
Thenell Law Group performed quasi-fiduciary duties, this document is presumed
discoverable. And, the Thenell Law Group’s mental impressions are directly at issue
regarding Liberty Mutual’s duty to Mogadam. The Court finds Liberty Mutual has
mischaracterized the redactions as Thenell’s legal advice regarding coverage under the
policy. However, Thenell’s opinions in this document are not provided as an analysis of
MEMORANDUM DECISION AND ORDER—6

the policy issued to Mogadam. In fact, the report indicates the Thenell Law Group did not
have or review a copy of the policy issued to Mogadam. Although the redactions include
certain analyses of Idaho law, they are relevant to the issues in Mogadam’s bad faith
complaint and do not provide advice specific to Liberty Mutual’s own liability in this
matter. The Court finds, therefore, the presumption of discoverability is not rebutted; this
document must be produced in its entirety.
2. John Hartman
Liberty Mutual argues it can overcome the presumption of discoverability because
Hartman was not engaged in any quasi-fiduciary role in handling Mogadam’s claim;
rather Hartman’s sole role was to provide Liberty Mutual with legal advice as to whether
coverage existed under the law applicable to the policy language. Mogadam does not
argue that Hartman engaged in a quasi-fiduciary role: instead, he contends the redacted
portions of the documents (Bates stamped 363 and 576-577) contain information which
the Thenell Law Group provided to Hartman. This information, Mogadam asserts, is
discoverable if the Court determines the document contains summaries of Thenell Law
Group’s mental impressions directly at issue with the denial of Mogadam’s claim.
The Court finds Liberty Mutual has succeeded in overcoming the presumption of
discoverability of documents prepared by and attributed to Hartman “by showing its
attorney was not engaged in the quasi-fiduciary tasks…, but instead in providing the
insurer with counsel as to its own liability.” Cedell, 295 P.2d at 246. Unlike the Thenell
Law Group that actually investigated Mogadam’s claim, Hartman played no role in the
investigation. Hartman’s involvement appears to be limited to providing Liberty Mutual
MEMORANDUM DECISION AND ORDER—7

with advice as to whether coverage existed under the law and the applicable policy
language, based on Mason’s and the Thenell Law Group’s investigation. Accordingly, if
Liberty Mutual can demonstrate the attorney-client privilege applies to the letter and the
portion of the adjuster’s claim log, Liberty Mutual is entitled to redact them. The Court
must continue its analysis to determine if the redacted documents are protected by the
attorney client privilege.
A party is entitled to redact or withhold documents pursuant to the attorney client
privilege by demonstrating the documents contain “confidential communications made
for the purpose of facilitating the rendition of professional legal services to the client
which were made…between the client or the client representative and the client’s
lawyer…” I.R.E. 502. “A communication is ‘confidential’ if not intended to be disclosed
to third persons other than those whom disclosure is made in furtherance of the rendition
of professional legal services to the client or those reasonably necessary for the
transmission of the communication.” Id.
The Court finds, upon review, the documents at issue which Hartman created or
reference his opinion fall within the purview of the attorney-client privilege. The first
document, Bates stamped LM 576-577, is a letter dated May 22, 2013, from Hartman to
Mason, titled “response to your May 14, 2013 request for legal coverage opinion.” The
header of the document states in bold: “ATTORNEY CLIENT COMMUNICATION
PRIVILEGED AND CONFIDENTIAL DO NOT DISTRIBUTE OR DISSEMINATE.”
Liberty Mutual redacted portions containing information regarding legal advice on
whether coverage exists under the law, details of policy provisions, coverage analysis,
MEMORANDUM DECISION AND ORDER—8

and legal recommendations. The header clearly indicates the communication was
intended to be confidential, and the information unquestionably relates to Hartman’s
provision of legal services and advice to his client, Liberty Mutual. Though Hartman
makes reference to a portion of the Thenell Law Group’s legal analysis in this
communication, the reference does not waive the attorney client privilege as it pertains to
that communication—the communication was intended to be confidential and there is no
indication that the communication was distributed to an outside third-party, which would
otherwise waive the privilege. Accordingly, because the redacted portion of the letter,
Bates stamped LM 576-577, is protected from disclosure by the attorney-client privilege,
the Court will not compel Liberty Mutual to produce an un-redacted copy of the letter.
The second document, Bates stamped LM 363, is an internal log created by
Liberty Mutual, which tracked the processing of Mogadam’s claim. Redacted is a portion
of an entry dated June 10, 2013, made by Mason which summarized a communication he
had with Hartman regarding Hartman’s legal conclusion and advice on Mogadam’s
claim—specifically his opinion on whether coverage existed under the policy language
and applicable law. The information in this log entry references information contained
within the letter from Hartman discussed above (Bates stamp LM 576-577). The
communication was intended to be confidential and was made between Hartman, an
attorney, and Mason, a representative of his client, Liberty Mutual. 3 Accordingly, the
redacted portion of the document Bates stamped LM 363 is protected by the attorney-

3

Mogadam does not challenge Mason’s role vis a vis the attorney-client privilege.

MEMORANDUM DECISION AND ORDER—9

client privilege and the Court will not compel Liberty Mutual to produce an un-redacted
copy of the document.
CONCLUSION
It its September 29, 2015 hearing, the Court directed Liberty Mutual to submit unredacted copies of documents at issue to the Court for an in camera review. Now that the
in camera review has been completed, the Court will grant the motion in part and deny it
in part in accordance with the rulings summarized above.
ORDER
NOW THEREFORE IT IS HEREBY ORDERED, that the Motion to Compel
(Dkt. 18) is GRANTED IN PART AND DENIED IN PART as explained above. Liberty
Mutual must disclose un-redacted copies of the documents Bates stamped LM 366, LM
367, and LM 579-584 to Mogadam within ten (10) days of the date of this order.

October 28, 2015

MEMORANDUM DECISION AND ORDER—10