Burnett, Joseph et al v. Country Mutual Insurance Company

Filing 104

ORDER on disclosure of documents submitted to the court in camera. Not later than 8/2/2013, defendant Country Mutual Insurance Company must disclose to plaintiffs the documents submitted for in camera review, dkts. 94 , 95 and 96 . Signed by Magistrate Judge Stephen L. Crocker on 7/26/2013. (arw)

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

JOSEPH BURNETT and
TAMMY BURNETT,
Plaintiffs,

ORDER

v.
12-cv-0019-slc
COUNTRY MUTUAL INSURANCE
COMPANY,
Defendant.

This order addresses a strand of plaintiffs’ June 25, 2013 motion to compel discovery,
dkt. 84. The Burnetts, who are proceeding toward trial on a bad faith claim against Country
Mutual, contend they are entitled to production from Country Mutual of its entire claim file;
Country Mutual responds that certain documents need not be produced on grounds of privilege.
This dispute was the subject of telephonic hearings on July 8 and July 16, 2013. At the July 16,
2013 hearing, I directed Country Mutual to submit ex parte for in camera review the documents
it was withholding on a claim of privilege. I have now reviewed those documents and conclude
that, pursuant to applicable state law, all of them are discoverable. Although I telegraphed my
reasoning at the telephonic hearings, I provide this brief recapitulation:
Under Wisconsin common law, a claim of bad faith against an insurer entitles the
claimant to the insurer’s work product and attorney-client privileged documentation. As the
Wisconsin Supreme Court stated in Brethorst v. Allstate Property and Cas. Ins. Co., 2011 WI 41,
¶75 n. 7, 334 Wis. 2d 23, 54 n. 7, 798 N.W.2d 467, 483 n.7:
Because a plaintiff must show that the insurer did not have a
reasonable basis for its actions in order to prove bad faith, internal
information that would otherwise be privileged is subject to
discovery. A plaintiff bringing a bad faith claim is entitled to the
insurer’s work product as well as attorney-client material related to
how the claim was handled.

(citing Dahmen v. American Family Mut. Ins. Co., 247 Wis. 2d 541, 549-550, 635 N.W. 2d 1, 5
(Wis. App. 2001)). Accord Tackett v. State Farm Fire and Casualty, 558 A.2d 1098, 1103 (Del.
Sup. Ct. 1988) (where plaintiff alleges bad faith and insurer takes position that claim was
handled without bad faith, “the trial is the file.”).
Federal law in this circuit is to the same effect. In Logan v. Commercial Union Ins. Co., 96
F.3d 971, 977 (7th Cir.1996), the court recognized that “allowing a plaintiff to overcome an
insurer's work product privilege may be particularly appropriate in an action for bad faith, in
light of the insurer's virtual monopoly over the evidence required to support such an action.”
(citing Holmgren v. State Farm Mut. Auto. Ins. Co., 976 F.2d 573, 576–78 (9th Cir. 1992)).
Quoting Holmgren, the court explained that
In a bad faith insurance claim settlement case, the strategy, mental
impressions and opinion of [the insurer's] agents considering the
handling of the claim are directly at issue, and thus it is clear that
[u]nless the information is available elsewhere, a plaintiff may be
able to establish a compelling need for evidence in the insurer's
claim file regarding the insurer's opinion of the viability and value
of the claim.
Id. (internal citations and quotations omitted). Although a “naked” claim of bad faith would
not be enough to allow a plaintiff to overcome the work product privilege, discovery of the
insurer’s claim file was warranted so long as the plaintiff could show a possibility that the claim
documents contain evidence of bad faith. Id. (emphasis added).
Country Mutual’s refusal to pay the Burnetts the full value on their claim in the face of
the raze order raises a sufficient possibility that Country’s Mutual’s claim file will contain
evidence of bad faith.

2

The Burnetts are entitled to discover all documents pertaining to Country Mutual’s
investigation and assessment of their claim up until the claim was denied on May 15, 2012,
notwithstanding that suit was filed in October 2011 and served in December 2011. By Country
Mutual’s representation, its investigation of plaintiffs’ claim was still ongoing at that time.
Although documents relevant to the insurance company’s handling of the plaintiff’s claim
are discoverable, documents prepared solely in defense of the bad faith suit would not be. In the
usual bad faith lawsuit, it ought to be easy to separate the two simply by the date on which the
suit was filed, which typically occurs at some point after the insurance company has completed
its investigation. This case is unusual because the suit was filed before Country Mutual had
completed its investigation of the Burnetts’ claim on their policy. Given this overlap of the claim
investigation phase with the litigation phase, it was possible that some of Country Mutual’s
withheld communications were prepared in specific defense of this lawsuit and not in connection
with Country Mutual’s determination whether to deny the Burnetts’ claim. It is because of this
possibility that I ordered Country Mutual to submit its withheld documents in camera.1
I have review each of the documents submitted for court review. All of them–including
dkt. 96–pertain to Country Mutual’s internal determination whether to grant or deny the

1

M y remarks at the July 16 hearing may have led the parties to infer that I intended to review the
documents to determine whether any of them “would support an argument of bad faith,” as the district
court did in Logan, 96 F. 3d at 977. That inference would be incorrect. Although the court of appeals in
Logan did not criticize the district court for reviewing the documents for this purpose, its earlier remarks
suggest that the plaintiff would have been entitled to discovery of the claim file merely upon a showing
that it was possible that it contained evidence of bad faith and that no in camera review was necessary.
M y intent always has been merely to ensure against disclosure of any documents relating solely to the
defense of this lawsuit, given the overlap between Country M utual’s investigation and the Burnetts’ filing
of this lawsuit. Neither side should infer that this disclosure order is based on a court finding that the
documents support plaintiffs’ argument of bad faith.

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Burnetts’ claim for the policy limits on their dwelling. Therefore, in accordance with Brethorst
and Logan, these documents all must be disclosed to the Burnetts.

ORDER
IT IS ORDERED that, not later than August 2, 2013, defendant must disclose to
plaintiffs the documents submitted to the court in camera at dkts. 94-96.

Entered this 26th day of July, 2013.

BY THE COURT:
/s/
STEPHEN L. CROCKER
Magistrate Judge

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