WISEMAN OIL CO., INC. et al v. TIG INSURANCE COMPANY

Filing 56

ORDER granting 39 Motion to Bifurcate; granting 39 Motion to Stay; granting in part and denying in part 45 Motion to Compel discovery/production. Signed by Magistrate Judge Lisa Pupo Lenihan on 05/22/12. (jer, )

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA

WISEMAN OIL CO., INC.,
ESTATE OF JOSEPH WISEMAN,
ESTATE OF RUTH N. WISEMAN,
EILEEN FANBURG, AS
EXECUTRIX
Plaintiffs,
v.
TIG INSURANCE CO. F/K/A
TRANSAMERICA INSURANCE
CO.
Defendant.

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Civil Action No. 011-1011
Chief Magistrate Judge Lisa Pupo Lenihan
ECF Nos. 39, 45

MEMORANDUM ORDER

Pending before the court is a Motion to Bifurcate and Stay filed by the Defendant, as well
as a Motion to Compel Discovery filed by the Plaintiffs. In support of its Motion to Bifurcate,
the Defendant argues that no bad faith claim can be raised until the Plaintiffs prove either the
existence of an insurance policy, and/or, that if a policy existed, it would have provided coverage
to Plaintiffs under the circumstances alleged. If there is either no policy or no coverage, then
there can be no bad faith. Defendant argues that discovery on the bad faith claim has been and
will continue to be extensive and burdensome and asks, in the interest of judicial economy, to
bifurcate the case and first decide the prerequisite issues before reaching the issue of bad faith.
Plaintiffs argue that the issues are inextricably linked and that the Motion is simply an
attempt to prolong and obstruct discovery. Plaintiffs have also filed a Motion to Compel

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Discovery responses, some of which the Court addressed at Oral Argument on the Motion for
Judgment on the Pleadings, and some of which remain pending and will be addressed below.
The Court agrees that bifurcation, in the form of staying the bad faith claim until the
prerequisite issues are decided, would better serve the interests of judicial economy. Defendant
has proposed a phasing of motions in this case. The proposal is to, for the sake of argument (and
without waiving the defense), admit the existence of a policy for the Plaintiffs. Defendant
proposes to further assume that it would have been the standard policy form for comprehensive
general liability insurance. The parties would conduct necessary discovery on that issue, and
dispositive motions would then be filed.
In accordance with the case proceedings to date, Defendant’s dispositive motion should
be predicated (for summary judgment purposes) on an assumption that Defendant had issued
policies for the years of coverage claimed and (a) provide Defendant’s support for its contention
that, under usual practices, any particular policy form was or would have been the policy form
used; and (b) address defenses to coverage under the terms of that policy, or any policy forms
identified by Plaintiff as potentially applicable. The Court expects Defendant’s briefing to
address its contentions regarding a pollution exclusion and issues related to the identities of the
persons sued, and any other coverage issues it wishes to interpose as a complete defense to this
action, obviating consideration of a bad faith claim. If it is Defendant’s position that the absence
of coverage was, under the applicable standard of law, sufficiently clear at the time of tender (or
any other relevant time) to excuse it from a duty to defend as well as an ultimate duty of
indemnification, its pleading should address this contention.
Plaintiffs should, conversely, present – under the potentially applicable policy/ies
identified, evidence that a particular policy is the applicable policy and that its terms encompass

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coverage in the underlying case or, alternatively, that the question of coverage was sufficiently
possible to give rise to a duty to defend. The Court expects Plaintiffs’ briefing to address, among
other matters, their contentions regarding estoppel based on Defendant’s communications with
the Pennsylvania Insurance Department.1
In accordance with the above ruling, Plaintiffs’ Motion to Compel is granted in part and
denied in part. The Court has already ruled that the deposition of Carol Salvatore may proceed. It
also ruled that the Defendant should produce its Claims Manual; however, Defendant requested
an in camera review of the claims manual and is objecting to its production on the basis of
relevance and privilege. The Court will address that below. That portion of the Motion to
Compel requesting discovery on an issue other than the bad faith claim (i.e., the above noted
deposition and Manual) is granted. The remainder of the Motion to Compel is denied without
prejudice. Discovery will be stayed except as narrowly necessary to the briefing ordered above.
Should plaintiff survive the summary judgment motions, the bad faith claim may then be pursued
and discovery on that issue will be reopened.
The Court will now address Defendant’s arguments regarding the Claims Manual. In the
Defendant’s Motion for in camera review, Defendant argues, first, that the Claims Manual is
irrelevant to any issue in the case and second, that it is subject to privilege on the basis that it was
prepared by its attorneys and contains certain mental impressions and opinions of its attorneys.
ECF No. 52 ¶9. The Court will first address the relevancy argument. The Manual contains a
number of chapters detailing how certain portions of claims are to be handled. These chapters
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Cf. Simon Wrecking, 350 F.Supp.2d at 641 (discussing determination of whether regulatory estoppel should apply
in interpreting coverage of insurance policies, including effect of insurers’ alleged representations to Pennsylvania
Insurance Department that revised language in comprehensive general liability policies would not result in any
significant decrease in coverage, and questions of agency reliance); UTI Corp., 896 F.Supp. at 371-72 (noting
genuine issue of equitable estoppel as to asserted pollution exclusion based on insured’s reasonable expectations and
insurers representations that exclusion was intended to clarify coverage previously afforded by other policies, i.e., to
maintain coverage for pollution damage arising from unexpected or unintended events).

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include a portion on the definition of latent claims, including hazardous waste claims, which are
involved in this case; confirmation of coverage including whether or not a policy was issued;
what documents are sufficient to establish the existence of a policy; and whether or not the
policy itself provides coverage for a claim. At minimum, these portions appear to be very
relevant to the claims in this case. Coverage is the issue that will be decided preliminarily, and,
should the claim survive, the determination of whether or not a policy exists and how to make
that determination is relevant to the bad faith claim. Although the Court is agreeing to bifurcate,
it sees no reason to carve out portions of the Claims Manual that would be relevant now as
opposed to those that would be relevant later.
To address the second argument of attorney-client privilege, the document, entitled
"Claims Handling Guidelines 2006" is stamped on every page with the following: "Privileged
and Confidential Contains Attorney Work Product." The purpose of attorney-client privilege is to
“encourage full and frank communication between attorneys and their clients and thereby
promote broader public interests in the observance of law and the administration of justice.”
Upjohn Co. v. United States, 449 U.S. 383, 389 (1981). The person who asserts the privilege
bears the burden of proving it applies to a given document. Martin Marietta Materials, Inc. v.
Bedford Reinforced Plastics, Inc., 227 F.R.D. 383, 390 (W.D. Pa. 2005). “A corporation may
claim the privilege for communications between counsel and its employees who have authority
to act on its behalf.” In re Ford Motor Co., 110 F.3d 954, 965 (3d Cir. 1997) (overturned on
other grounds). In order for the attorney–client privilege to apply, the communication must be
for the purpose of obtaining legal advice. Id. It does not appear, however, that the document must
deal solely with legal advice. In the Ford case, the documents in question dealt with both
business and legal issues and the Court found that they were protected. Id. at 966. For purposes

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of this review, the Court will apply what it will call the “primarily legal” test: the document
must deal primarily - but not solely- with legal issues, as opposed to business issues. Conversely,
the privilege does not shield documents just because they were “transferred to or routed through
an attorney,” or because an attorney was copied on a document. Smithkline Beecham Corp.v.
Apotex Corp.,232 F.R.D. 467, 478 (E.D. Pa. 2005).
As stated above, the attorney-client privilege stamp appears on every page of the
document. If this were an acceptable method of claiming privilege then a company could simply
instruct its employees to mark every document in this manner and thereby not produce anything.
The rule of this Circuit is that the document must, at minimum, be “infused with legal concerns
and…reached after securing legal advice.” Ford Motor at 966. In its review, the Court did not
see anything that constituted pure legal advice. The majority of the Manual is simply procedural
instructions for claims managers as to how to handle claims, including term definitions. It does
provide guidance on coverage decisions, investigations and evaluations of claims, but again, the
guidance does not contain privileged legal advice; it is more of a blueprint for the claims
managers as to how to do their job. Based upon this, the Court stands by its earlier ruling that the
Claims Manual should be produced. See, e.g., Platt v. Fireman’s Fund Ins. Co., 2011 WL
5598359 (E.D. Pa. Nov. 16, 2011) (granting Motion to Overrule Objections and Compel
Response to Request for Production, including insurer’s claims manual); id. at *2 (collecting
cases); Robertson v. Allstate Ins. Co., 1999 WL 179754, *6 (E.D. Pa. Mar. 10, 1999) (ordering
production of “claims or procedure manuals setting forth company practices or policies”
regarding handling of related claims).

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Therefore,
IT IS HEREBY ORDERED that the Motion to Bifurcate at ECF No. 39 is GRANTED;
IT IS FURTHER ORDERED that the Motion to Compel at ECF No. 45 is GRANTED
in part and DENIED in part as set forth above. A scheduling order will follow.

Dated: May 22, 2012
______________________________
Lisa Pupo Lenihan
United States Chief Magistrate Judge

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