Hosea Project Movers, LLC et al v. Waterfront Associates, Inc. et al
MEMORANDUM OPINION AND ORDER denying 61 Defendant Waterfront Associate Inc's Motion to Compel. Signed by Magistrate Judge Stephanie K. Bowman on 10/18/2017. (km)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
HOSEA PROJECT MOVERS, LLC, et al.,
Lead Case No. 1:15-cv-799
WATERFRONT ASSOCIATES, INC., et al.,
MEMORANDUM OPINION AND ORDER
This consolidated case involves multiple disputes but the same core event: the
August 5, 2014 sinking of the Waterfront Barge (hereinafter “Barge”). A primary dispute
concerns the insurance coverage for that event.
Currently pending is a motion to
compel filed by the insured, Waterfront Associates (“Waterfront”), against its insurer,
United States Fire Insurance Company (“U.S. Fire”).
For the reasons that follow,
Waterfront’s motion will be DENIED.
More than three years prior to its sinking, the sunken Barge operated as a
However, on March 11, 2011, the Barge broke away from its
moorings in Covington, Kentucky, and the restaurant closed, never to reopen.
months later in September 2011, Waterfront sought and obtained insurance on the
Barge from U.S. Fire. The insurance policy (“Policy”) was renewed in 2013, with an
effective date through October 1, 2014. (Case No. 1:15-cv-46, Doc. 1 at ¶12; Doc. 9 at
On or about February 6, 2014, ice caused the Barge to again break away from its
moorings. After that, Waterfront hired C&B Marine, LLC (“C&B”) to move the Barge
from Covington, Kentucky to Hebron, Kentucky to C&B’s facility. (Id., Doc. 35 at ¶1012).
Waterfront made a claim against U.S. Fire for damages that arose from the
February incident. Douglas Ottey was the claims handler assigned to this first claim;
Ottey also managed Waterfront’s claim six months later for the sinking of the Barge.
U.S. Fire retained a marine surveyor, Bruce Bacon, to investigate the February
claim. On June 13, 2014, U.S. Fire advised Waterfront that the Policy did not cover the
portion of its claim that sought recovery for damage to the Barge’s access ramps.
Waterfront disputed U.S. Fire’s position. On June 19, 2014, U.S. Fire retained outside
counsel from New York, James Forde, to offer legal advice in connection with the
February 2014 claim. U.S. Fire issued a formal declination of coverage for the “access
ramps” portion of Waterfront’s February claim on July 23, 2014.
Waterfront alleges in its third-party complaint that on June 26, 2014, while still
under the care, custody and control of C&B, the Barge was struck by another barge,
identified as Barge AEP 2015 (“Allision”). (Id., Doc. 1 at ¶27; Doc. 9 at ¶17; Doc. 35 at
¶17). Waterfront asserts that Ottey was notified of the June 2014 incident, but U.S. Fire,
pointing to Ottey’s deposition testimony and other documentary evidence, denies
receiving notice of the June collision until August, after the Barge sank. (See Doc. 59 at
On August 6, 2014, Waterfront reported the previous day’s discovery that the
Barge had sunk at its mooring, under what U.S. Fire asserts were normal conditions.
An August 6 email from Waterfront’s insurance agent reporting the loss to U.S. Fire
states in part:
[O]n 6/26/14 the [Barge] was hit by a crane barge being operated by
McGinnis Towing. Supposedly they had the restaurant/barge inspected
and repairs made to the damage that they caused. On 8/4/14, C&B
Marina who insured is paying to moor/care for the restaurant/barge,
moved it from original mooring location to new location mooring. It was
discovered “sinking” morning of 8/5/04.
Agent believes either McGinnis Towing or C&B Marine are either partially
[or] fully responsible for the loss.
(Case No. 1:15-cv-799, Doc. 61-1 at 2).
Almost immediately, U.S. Fire raised questions about the cause of the sinking.
U.S. Fire expressed concerns about Waterfront’s alleged failure to notify U.S. Fire of the
earlier June collision, whether Waterfront had maintained the Barge in a seaworthy
condition, and/or planned to reopen the vessel as a restaurant. Claims handler Ottey
testified that the report of the sinking raised “deep concerns” relating to the Barge’s
condition, the prior unreported collision, and the sinking in calm conditions, which Ottey
believed presumptively to be the result of an unseaworthy condition. (Doc. 59, Ottey
Dep. at 106:23-107:3, 110:23-111:16). Several emails referenced a contemporaneous
news story that apparently added to the insurer’s concerns. An email from Ottey, dated
August 6, reads in relevant part:
We have appointed a surveyor to look into the reasons why the barge
sank….The insured [Waterfront] never informed us of that [June 26]
second incident, because it is alleged that he was pursuing a claim
against the vessel that caused the collision. We are unsure of the
seaworthiness of the vessel after the collision, but our surveyor from the
2/14 incident, reported that the vessel may have sank because the water
pump may have been turned off. Our surveyor from the first [February
2014] incident also confirmed the rumor that the insured intended to scrap
(Doc. 61-2 at 1). The record reflects that two marine surveyors were engaged by U.S.
Fire to investigate: Bruce Bacon, who had previously been engaged for the February
claim, and a second surveyor identified as Armand Cuevas.
On August 15, 2014, U.S. Fire expanded Attorney Forde’s retention from the
February incident to include legal advice with respect to the August sinking. 1 Forde has
filed an affidavit attesting that he was not asked to, and did not investigate, the facts and
circumstances of the sinking. (Doc. 62-1).
After the Barge sank, U.S. Fire advanced $500,000.00 of the policy proceeds to
C&B Marine, LLC (“C&B”), to remove and dispose of the sunken vessel. However, U.S.
Fire advanced that payment under a formal reservation of rights as to coverage issues.
(Doc. 61-5). The August 20, 2014 reservation of rights letter referred to the allegedly
undisclosed June 26, 2014 collision, as well as the fact that the policy does not cover
loss “from want of due diligence.” (Id. at 2).
Also on August 20, 2014, Waterfront’s insurance agent sent an email alerting the
wholesale insurance broker who placed Waterfront’s policy with U.S. Fire that
Waterfront “is talking about filing a bad faith claim in regards to the 2/6/14 loss and the
current [August 5] loss.” (Doc. 62-5 at 3, emphasis added). The broker transmitted the
same email to U.S. Fire two days later, on August 22. Waterfront’s insurance agent
At some point that is neither clear from the current record nor relevant to the pending motion, U.S. Fire
ceased employing Forde.
testified that by August 20, Waterfront’s attorneys were involved with its claim. (Doc.
50, Berger Dep., 96:4-97:24).
As stated, U.S. Fire hired marine surveyors Cuevas and Bacon to inspect the
Barge as part of its investigation of the August claim. On August 27, 2014, U.S. Fire
had, through Attorney Forde, additionally engaged a naval architect, William Leschaeve.
At 4:41 pm that day, Claims Handler Ottey forwarded the CV of Leschaeve to Cuevas
and Bacon, indicating that U.S. Fire’s head of claims “would like you [to] consider
retaining [Leschaeve].” (Doc. 61-6 at 2). However, Leschaeve’s CV had been sent to
Attorney Forde earlier on the same day, and both Ottey and Forde unequivocally
testified and/or averred that it was Forde and not Cuevas who ultimately retained
Leschaeve. Forde’s affidavit further attests that Leschaeve reported directly to him, and
not to Ottey or any other U.S. Fire claim investigator, and that Cuevas and Bacon
likewise did not report to either Attorney Forde or Consultant Leschaeve. (Doc. 62-1, at
During the investigation, and while accompanied by both Laschaeve and by
Waterfront’s corporate maintenance manager, Danny Thomas, Cuevas and Bacon
inspected and removed a coupon (steel section) from the hull of the vessel. The section
removed was part of U.S. Fire’s investigation into a section of the hull that had been
previously repaired. On September 10, 2014, an email from Forde to Leschaeve directs
Laschaeve to “make sure you and [Cuevas] maintain a chain of custody for any hull
material cropped out and have the divers if possible take pictures as they are
cropping…. We want to avoid spoliation issues as we progress.” (Doc. 61-9 at 40).
Despite the removal and examination of the coupon section of the hull, Waterfront’s
corporate manager testified that, to his knowledge, the divers did not find a cause for
the sinking. (Doc. 48, Thomas Dep., at 109:8-18).
Subsequently on September 17, Cuevas communicated to U.S. Fire Claims
Handler Ottey that C&B Marine may be responsible for the sinking, and U.S. Fire wrote
to Waterfront demanding that it put C&B on notice that it may be potentially responsible
for the loss. (Docs. 61-10, 61-11).
The communications did not ascribe a definite
cause for the sinking, and Ottey and others testified that no definite cause was ever
On November 10, 2014, U.S. Fire notified Waterfront of its “Named Peril”
defense, stating that it “is the burden of the Assured to show what named peril triggered
coverage….and that such loss or damage was not as a result of want of due diligence
by the Assured.” (Doc. 61-14). In November and December 2014, Claims Handler
Ottey exchanged emails with Waterfront that referred to the ongoing investigation and
Ottey’s need to review a report by U.S. Fire’s “forensic engineer.” The meaning of the
reference to a “forensic engineer” is unclear.
Ottey testified that U.S. Fire did not
determine the cause of the sinking, and that Leschaeve’s advice was not considered or
used in reaching the decision to deny coverage. (Doc. 59, Ottey Dep., 104:20-22 and
149:6-11; see also id. at 151-152).
On December 10, 2014, Laschaeve issued a draft report that was addressed
solely to Forde, but that was shared with U.S. Fire as an attachment to an email
between Forde and the head of claims of U.S. Fire.
On January 21, 2015, U.S. Fire simultaneously issued its formal denial of
Waterfront’s claim and filed suit against Waterfront, seeking a judgment to declare its
insurance policy to be void ab initio, or in the alternative, to declare that there is no
coverage and ordering Waterfront to repay U.S. Fire $500,000.00 plus interest, costs,
and attorney’s fees.
U.S. Fire maintains that the policy is void in part because
Waterfront failed to disclose or misrepresented “the full condition” of the vessel namely, that “it was in a state of advanced deterioration and wastage and was not in a
serviceable or …seaworthy condition.” (See Case No. 1:15-cv-46, U.S. Fire Complaint
U.S. Fire further alleges that Waterfront misrepresented its intentions to
reopen the Barge as an operating restaurant. (Id. at ¶¶`19-20).
Waterfront filed a Counterclaim against U.S. Fire for breach of its contract of
insurance. Waterfront alleges bad faith, and seeks a judgment “of Waterfront’s actual
losses and attorney’s fees and expenses and punitive damages in the amount of
$3,400,000.” (Waterfront’s Counterclaim at 14).
Waterfront also filed a third party complaint against C&B, alleging that C&B’s
actions caused the Barge to sink. 2 U.S. Fire followed suit with a cross-claim against
C&B, contingent upon U.S. Fire being subrogated to Waterfront for the claimed loss of
the Barge. If C&B is responsible for the sinking, U.S. Fire seeks to hold C&B liable for
the $500,000 in insurance proceeds that U.S. Fire previously advanced to pay for the
disposal of the sunken Barge.
Waterfront alleges both that the Barge was struck in June 2014 while under C&B’s care, custody, and
control, and that C&B was negligent when it repositioned the Barge the day before the Barge sank.
On September 6, 2017, U.S. Fire filed a motion seeking summary judgment, in
which it argues that:
i) the policy issued to Waterfront was voidable ab initio due to Waterfront’s
misrepresentation and/or non-disclosure of material information; and/or, ii) in the
alternative, that Waterfront cannot carry its burden to prove the loss of the Barge
was caused by an insured Peril; and/or iii) that Waterfront breached the policy
provisions against change in ownership, management or transfer/assigning or
pledging the Barge…voiding coverage and releasing U.S. Fire from any obligation to
indemnify Waterfront…; and iv) that Waterfront is obligated to reimburse U.S., Fire
the $500,000 advanced to pay C&B Marine, LLC; and v) grant such other and further
relief the Court deems appropriate.
(Doc. 52 at 1-2).
On September 19, 2017, the undersigned conducted a telephonic hearing to
discuss a discovery dispute that arose in connection with U.S. Fire’s motion for
summary judgment. Based upon the informal telephonic arguments of the parties, the
undersigned determined that written briefs were appropriate. In accordance with the
expedited briefing schedule set by the Court, Waterfront filed its motion to compel
additional discovery on September 27, 2017. U.S. Fire filed its response in opposition
on October 4, 2017, and Waterfront filed a reply on October 9, 2017.
Waterfront’s Motion to Compel Discovery
Waterfront’s motion is based upon its position that U.S. Fire is refusing to
disclose relevant facts concerning the cause of the sinking and U.S. Fire’s investigation,
based upon overbroad assertions of the attorney-client and work product privileges that
encompass the work of Consultant Leschaeve and coverage counsel Attorney Forde.
Waterfront contends that the information is particularly relevant to U.S. Fire’s “Insured
Peril” defense to payment of the policy, which places the obligation on the insured to
identify that the loss was a covered event under the Policy.
Waterfront complains that after identifying its claims file as responsive, U.S. Fire
“refused to produce discoverable information related to the cause of the sinking.” (Doc.
61 at 5, citing Doc. 61-18). For its part, U.S. Fire maintains that its surveyors, Cuevas
and Bacon, never determined the cause for the sinking. Suggesting that even if Bacon
and Cueves did not find a cause, consultant Leschaeve may have factual information
relating to the cause, Waterfront identifies the following three items as the focus of its
1. Redacted email correspondence dated September 5, 8, and 9, 2014,
between Attorney Forde, and Consultant Leschaeve (Doc. 61-9);
2. Answers to questions posed to U.S. Fire’s Claims Handler, Douglas Ottey
(Doc. 61-20) concerning whether he ever received Leschaeve’s report (in
September 2014 or otherwise), whether it was ever part of the claims file, who
directed Leschaeve to issue his report to Forde, and whether Leschaeve
revised his report; and
3. An in camera review of all other emails identified by U.S. Fire as “attorney
advice” to determine whether Forde “was acting simply as a claims handler”
and/or whether the emails otherwise relate to Waterfront’s bad faith claims
against its insurer.
(Doc. 61 at 6-7).
Waterfront argues that U.S. Fire “never disclosed any of the facts it discovered
related to the sinking of the Waterfront Barge or the opinions issued by anyone who
examined the barge.” (Doc. 61 at 4). However, Waterfront’s assertion ignores that U.S.
Fire has disclosed the unredacted files of Cuevas and Bacon; all communications with
Cuevas and Bacon (including the reports from the divers retained by those two marine
surveyors), and its claims files from both the February and August 2014 claims.
parties’ real dispute, then, is disclosures that U.S. Fire withheld concerning Attorney
Forde and Consultant Leschaeve.
U.S. Fire maintains that Forde was hired as counsel to offer legal advice
regarding coverage issues, that Forde anticipated litigation, and that any and all
information relating to Leschaeve is protected by the attorney-client and work product
privileges, as well as by Rule 26(b)(4)(B), because Leschaeve was specifically retained
as a “litigation consultant.”
A. Federal Law and the Scope of the Asserted Privileges
The insurance policy that underlies the dispute between U.S. Fire and Waterfront
is a marine insurance policy, and the parties agree that this case falls within this Court’s
original Admiralty jurisdiction, pursuant to 28 U.S.C. § 1333. See generally Wilburn
Boat Co. v. Fireman’s Fund Ins. Co., 348 U.S. 310, 313-14 (1955). Therefore, to the
extent that state and federal law may disagree, any questions concerning privilege are
to be determined by federal common law. Reed v. Baxter, 134 F.3d 351 (6th Cir. 1998)
(citing Fed. R. Evid. 501). Even when pendent state claims are involved, case authority
suggests that federal common law would be controlling to the extent that federal and
state law privilege law diverge. See Hancock v. Dobson, 958 F.2d 1367, 1373 (6th Cir.
1992); see also Freed v. Grand Court Lifestyles, Inc., 100 F. Supp.2d 610, 612 (S.D.
Ohio 1998); Hartford Fire Ins. Co. v. Garvey, 109 F.R.D. 323, 327 (N.D. Ca. 1985)
(federal common law applied to determine privilege issues presented under admiralty
law). Moreover, federal law, not state law, governs the work product doctrine even in
diversity cases. See In re Prof’ls Direct Ins. Co., 578 F.3d 432, 438 (6th Cir. 2009).
In support of its motion to compel, Waterfront relies most heavily upon cases
under Ohio law that support a broad “exception” to the attorney-client privilege doctrine,
and arguably to work product, when an insured asserts a first party claim of bad faith.
As the undersigned has previously recognized, Ohio law appears to be somewhat
distinctive in this respect. See generally RLI Ins. Co v. Fifth Third Bankcorp, 2016 WL
8201161 at **3-4 (S.D. Ohio July 27, 2016) (discussing Ohio Supreme Court’s holding
in Boone v. Vanliner Ins. Co., 744 N.E.2d 154 (Ohio 2001) and its progeny concerning
In part because of difficult issues involving the scope of
privilege, it is not uncommon for courts to bifurcate a bad faith claim from the underlying
breach of contract claim against an insurer. Id. Waterfront has not cited any cases
under federal common law that align with Ohio’s somewhat expansive view on the
exception to traditional privileges when a bad faith claim is made against the issuer of a
marine insurance policy. 3
U.S. Fire challenges the application of Ohio law to discern attorney-client privilege even if this were not
an admiralty case, pointing out that Forde was a New York attorney communicating with his New York
based insurance client. Having determined that federal common law controls, the undersigned finds no
need to wade into choice of state law issues.
Despite Waterfront’s failure to cite to more persuasive case law, the undersigned
recognizes that U.S. Fire, as the party asserting a privilege, has the burden to prove the
applicability of any claimed privilege. Moreover, federal law does not differ from state
law in holding that privileges are to be construed narrowly.
See In re Grand Jury
Investigation No. 83-2-35, 723 F.2d 447, 450-451 (6th Cir. 1983).
The attorney-client privilege generally protects confidential communications
between a lawyer and a client, but can also apply to agents of a lawyer who are
employed in order to provide legal advice.
“The privilege applies to factual
investigations conducted by counsel at a corporate client’s request (to provide legal
advice to that client), and also to agents of an attorney who are assisting in rendering
legal advice to the client.” In re Behr Dayton Thermal Products, LLC, 298 F.R.D. 369,
373 (S.D. Ohio 2013). Specifically, this Court has held that the following criteria must
be satisfied to be protected under the attorney-client privilege:
(1) Where legal advice of any kind is sought (2) from a professional legal
advisor in his [or her] capacity as such, (3) the communications relating to
that purpose, (4) made in confidence (5) by the client, (6) are at his instance
permanently protected (7) from disclosure by himself [or herself] or by the
legal advisor, (8) unless the protection is waived.
Id. (quoting Reed v. Baxter, 134 F.3d 351, 355-56 (6th Cir. 1998)). U.S. Fire maintains
that it hired Forde to obtain legal advice over coverage issues, and that Laschaeve was
hired by Forde, such that Laschaeve’s communications with Forde, including his draft
report, are protected by attorney-client privilege. Forde’s affidavit supports that position.
In addition, U.S. Fire argues that Laschaeve’s communications are protected by
the work product privilege under Rule 26(b)(3), which protects any document or tangible
thing that has been “prepared in anticipation of litigation… by or for another party or its
representative (including the other party’s attorney, consultant, surety, indemnitor,
insurer, or agent).” Last but not least, U.S. Fire contends that Laschaeve’s investigation
and opinions are protected from disclosure under Rule 26(b)(4)(D), which separately
defines a privilege for litigation consultants. As U.S. Fire points out, other courts have
recognized Rule 26(b)(4)(D)’s applicability to marine surveyors and investigators. See
e.g., B.M.I. Interior Yacht Refinishing, Inc. v. M/Y CLAIRE, 2015 WL 4316929 (S.D. Fla.,
July 15, 2015) (finding rule applicable to marine surveyor’s report).
B. The Purpose For Which Leschaeve Was Hired
Waterfront disputes the contention that Leschaeve was hired by Forde to assist
him in providing legal advice, and asserts that Leschaeve was instead hired by U.S. Fire
as part of its factual investigation of the underlying claim. Waterfront repeatedly lumps
Leschaeve in with Cuevas and Bacon as if U.S. Fire and/or Ottey retained all three
solely to investigate the claim.
Waterfront maintains that the “Bacon-Cuevas-
Leschaeve investigation is not protected” by either attorney-client or work product
privileges. (Doc. 64 at 2).
Based on the totality of exhibits submitted by both parties, however, the
undersigned concludes that there were two separate investigations.
investigation was conducted by Cuevas and Bacon for U.S. Fire and its claims handler,
Ottey. At the same time, the record supports U.S. Fire’s position that Leschaeve was
independently engaged by Attorney Forde in a separate but near-contemporaneous
investigation undertaken by outside coverage counsel.
Forde was already engaged by U.S. Fire as counsel on the dispute over the
February claim, which had been formally denied on July 23, less than two weeks prior to
the date the Barge sank. By August 15, U.S. Fire had expanded its retention of Forde
to provide legal advice about the August claim. On August 20, 2017, U.S. Fire issued
its first formal reservation of rights letter.
Waterfront alleges, citing Ottey’s deposition testimony, that the decision to have
Forde retain Leschaeve “was a tactical afterthought to prevent…discoverability” of any
report that would be generated by Leschaeve.
(Doc. 64 at 2, citing Doc. 64-22).
Although Ottey’s limited testimony can be interpreted as suggesting that U.S. Fire was
intentional about separating Forde’s retention of Leschaeve as a consultant from the
underlying claims investigation, 4 in part to avoid any future discovery of any report he
might produce, it followed through on that intention from the outset of its retention of
Leschaeve on August 27. The only suggestion that U.S. Fire ever considered hiring
Leschaeve for purposes of its underlying claims investigation prior to his retention,
rather than as an independent consultant to Attorney Forde is the fleeting (and
disregarded) suggestion in an email from Ottey to Cuevas and Bacon that they retain
Forde’s affidavit and Ottey’s testimony both confirm that Forde hired
Ottey was repeatedly directed not to answer questions on grounds of privilege.
Some evidence suggests that Leschaeve’s name was first identified by U.S. Fire’s head of claims to
Attorney Forde, but the fact that U.S. Fire may have identified Laschaeve as a potential expert to its
counsel is not probative evidence on whether U.S. Fire itself hired Laschaeve to conduct an investigation
Waterfront cries foul, arguing that U.S. Fire “deceived Waterfront as to its
intentions” because U.S. Fire gave the appearance of assisting Waterfront by hiring
Cuevas and Bacon to investigate the cause of the sinking. However, both Waterfront
and U.S. Fire appeared extremely wary of each other’s positions from the outset of the
claims investigation. Waterfront argues that “[i[t was not until November 10 when Ottey
raised the named perils defense that there was any indication that Waterfront and [U.S.
Fire] were adverse to each other.” (Doc. 61 at 10). But ample evidence suggests that
by the time the reservation of rights letter was issued on August 20, a week prior to the
retention of Leschaeve by Forde, the parties were aware of the likelihood that they
would be adverse. By August 20, 2014, when U.S. Fire issued its first reservation of
rights letter, Waterfront’s own attorneys also were involved. In addition to the threat of
bad faith litigation by Waterfront that was conveyed to U.S. Fire on August 22,
correspondence from Forde discussing the potential retention of Leschaeve refers to his
regular hourly rates, and adds “trial is 340 per hour.” (Doc. 61-6 at 1, emphasis added).
Citing Indianapolis Airport Authority v. Travelers Property Cas. Co. of America,
2014 WL 7360049 (S.D. Ind., Dec. 23, 2014), Waterfront argues that a reservation of
rights letter alone is not sufficient to place the insured and insurer adverse to each
other. See id. at *4 (holding that determining whether primary purpose of document is in
anticipation of litigation or for ordinary claims evaluation must be determined on caseby-case basis, but noting “presumption” that documents created prior to claim denial are
not work product). However, unlike the facts of that case, in this case a very short
period of time elapsed between the hiring of outside counsel (the same counsel who
of the claim.
was already engaged in ongoing legal advice regarding the partial denial of a different
claim), the reservation of rights letter, and the final formal denial and initiation of suit just
five months later. Even Waterfront concedes that it was aware by November 10, when
notified of the insured peril defense, that its interests were adverse to those of its
Based upon Forde’s affidavit and the course of conduct between the parties
within days of the sinking of the Barge, the undersigned concludes that concern over
possible litigation prompted U.S. Fire to engage Forde to provide it with additional legal
advice concerning coverage issues. In addition to the reference by Waterfront’s agent
on August 20 to its consideration of a bad faith claim, Ottey for U.S. Fire immediately
raised questions about the June 26 (allegedly unreported) collision. Surveyor Cuevas
suggested in a September 17, 2014 email that “C&B may be held responsible” but also
wondered if notice was “premature” since no conclusion as to the cause had been
reached.” (Doc. 61-10).
Another indication of the parties’ increasingly adverse positions appears in
correspondence dated September 23-24, 2014, when Waterfront’s insurance agent
abruptly informed Ottey that “Mr[.] Ruby’s lawyer…does not want your lawyer [Forde] or
yourself to be included in tomorrow’s meeting.” Ottey expresses dismay at Waterfront’s
position, but informs Waterfront that “the surveyors [Cuevas and Bacon] cannot meet
the insured until they have completed their report on cause.” (Doc. 64-1).
Based on the fact that Laschaeve accompanied the two surveyors during their
inspection of the Barge, Waterfront repeatedly asserts that the two surveyors hired
Laschaeve. 6 However, the fact that Laschaeve conducted his investigation at the same
time does not mean that it was the same investigation.
In fact, an email dated
September 3, 2014 from Ottey to his surveyors, Cuevas and Bacon, asks whether
Laschaeve will “be on site” at the time that the surveyors had scheduled a dive, “or has
he already conducted his investigation?” (Doc. 61-8 at 1, emphasis added). While the
parties’ mutual course of conduct should have made clear to Waterfront that U.S. Fire
had serious concerns about the claim from the outset of its investigation, whether or not
Waterfront was caught off guard that Forde (and not Ottey or the surveyors) had hired
Leschaeve and would claim privilege for his work is not relevant to the underlying issue
of whether Leschaeve was in fact hired by Forde.
C. The Role of Attorney Forde
Obviously, a closely related dispute concerns whether Forde himself acted as
U.S. Fire’s attorney and/or as litigation counsel, or – as Waterfront puts it – Forde was
acting simply as another claims handler, investigating the factual underpinnings of the
claim. If Forde acted primarily as a claims handler in the same manner as Ottey, then
the fact that Forde is a licensed attorney does not shield his emails or other documents
under the claim of attorney-client or work product privileges unless/until the parties
became adverse and his role changed. See generally St. Paul Reinsurance LTD v.
Commercial Fin. Corp., 197 F.R.D. 620 (N.D. Iowa 2000) (holding that when counsel
was only investigating whether factual basis existed, documents remained discoverable
up until the date that insurer attempted to rescind policy). And of course, if Forde only
As indicated in the above facts, Waterfront’s maintenance manager, Danny Thomas, also was present.
Waterfront recently scheduled depositions of both surveyors.
hired Laschaeve in his capacity as a claims handler, just as Ottey hired Cuevas and
Bacon to investigate the claim, then communications between Laschaeve and Forde
also could not be withheld under either attorney-client or work product privileges.
Contrary to Waterfront’s position, I conclude that U.S. Fire has put forth sufficient
evidence to show that Forde was hired to provide legal advice, not as a glorified claims
handler. (See Doc. 62-1, Forde Affidavit). While privilege issues in cases involving a
breach of insurance contract claim admittedly pose special difficulties, a party does not
lose its right to claim an attorney-client privilege merely because it is an insurance
Cases in which an attorney is found to be acting as a claims handler for his/her
insurance client often involve in-house counsel who act in more than one capacity, and
whose involvement is clear from the claims file. By contrast, in this case there is no
dispute that U.S. Fire first retained Forde to address legal issues relating to coverage
issues soon after Waterfront was notified of the likely denial of a significant portion of its
February claim. A formal declination of coverage was subsequently issued, and the
February claim remained open at the time that the Barge sank. U.S. Fire expanded
Forde’s duties soon after, at a time that the record suggests that the potential for future
litigation was rapidly increasing.
Still, U.S. Fire’s position that it “reasonably anticipated litigation” with Waterfront
for the August claim even before the Barge sank, based on the February claim alone,
goes a bit too far. The fact that the parties were arguably adverse concerning the
February incident does not mandate a conclusion that U.S. Fire anticipated litigation
over the wholly separate August 2014 claim. Instead, the existing dispute between the
parties over the partial denial of the February 2014 claim is but one piece of a larger
contextual picture that informs the Court on whether (and at what point) U.S. Fire
reasonably anticipated litigation over the August 2014 claim.
As discussed above, Waterfront relies heavily on Ohio case law concerning the
scope of privilege in the context of bad faith insurance claims in order to argue that U.S.
Fire cannot claim attorney-client (or work product) privileges for any work performed by
Forde up until the date that U.S. Fire denied Waterfront’s claim in January 2015, when it
However, no similar controlling cases appear to exist under the federal
common law, and even the cases on which Waterfront relies do not fully support its
position. For example, in Indianapolis Airport Auth. v. Travelers Prop Cas. Co. of Am.,
the court found evidence that “counsel’s purpose was to interpret the policy, and
investigate and evaluate the claim, [and] not [to] prepare for litigation….” in part
because suit was not filed until six years after outside coverage counsel was engaged
by the insurer. Id., 2014 WL 7360049 at *4, objections overruled 2015 WL 1013952
(S.D. In. Mar. 9, 2015).
However, even there, the court determined that the work
product doctrine began to apply when the insured first threatened litigation eleven
months prior to the insurer’s formal denial of the claim. Id. at *5. While U.S. Fire’s
expansion of Forde’s duties and issuance of its first reservation of rights letter five days
later may not be sufficient alone to show that Forde was preparing for litigation, in this
case Waterfront itself threatened litigation on August 20, 2014. Thus, both Forde’s
affidavit and the parties’ entire course of dealing strongly support U.S. Fire’s position
that it engaged Forde for the purpose of obtaining legal advice, and that it anticipated
litigation months before it formally denied the claim and filed suit.
D. In Camera Review Not Required
Based on little more than a bald assertion that Forde was acting as a claims
handler, Waterfront invites the undersigned to conduct a broad in camera review of
every document concerning Forde as to which U.S. Fire has claimed a privilege.
Conducting a large-scale in camera review of documents as to which an objectively
reasonable privilege has been asserted is highly disfavored, both for obvious reasons of
judicial economy, and because neither the parties nor the public interest are well-served
by increasing litigation costs relating to discovery disputes.
See generally William
Powell Co. v. National Indemn. Co., 2017 WL 4315059 (S.D. Ohio Sept. 26, 2017)
(declining suggestion that standard for in camera review under Ohio law is binding on
federal courts); Rugero v. U.S. Dep’t of Justice, 257 F.3d 534, 543-44 (6th Cir. 2001)
(noting that in camera review under FOIA should be used “sparingly,” and encouraging
alternative procedures such as use of detailed affidavits to describe the content of the
material withheld and its grounds for nondisclosure).
If upcoming depositions provide Waterfront with more concrete evidence to
support its hypothesis that Laschaeve was not hired by Forde, 7 or that Forde (contrary
to his affidavit and other evidence of record) actually acted as a claims handler rather
than as legal counsel, then Waterfront remains free to renew its motion for in camera
review. On the record currently presented, however, there is no basis for such review.
Waterfront also will have ample opportunity to discover Laschaeve’s opinions if U.S. Fire decides to
identify him as a testifying expert, as opposed to a mere consulting expert.
Conclusion and Order
For all the reasons stated herein, IT IS ORDERED THAT Waterfront’s motion to
compel (Doc. 61) is DENIED.
s/ Stephanie K. Bowman
Stephanie K. Bowman
United States Magistrate Judge
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