By Brian E. Roof and Lindsey Carr Siegler
As we know, the attorney-client privilege generally prevents the opposing side from discovering your client’s privileged information. However, this is not necessarily the case when it comes to privileged
documents in an insurer’s claims file. Since the mid-1980s, the Supreme Court of Ohio has slowly chipped away at the protections afforded to an insurer’s claims file in three opinions. In Peyko v. Frederick, the Supreme Court allowed discovery of non-privileged documents in an insurer’s claims file as part of a prejudgment interest
proceeding.1 In Moskovitz v. Mt. Sinai Medical Center, the Court extended the Peyko decision and concluded that the attorney-client
privilege does not protect the insurer’s claims file from discovery in a prejudgment interest proceeding.2 In Boone v. Vanliner Insurance Company, the Court expanded Moskovitz to allow a plaintiff in a bad faith claim against an insurer to discover privileged information in the insurer’s claims files that existed prior to the denial of coverage.3
With the addition of R.C. 2317.02(A), the Ohio General Assembly attempted to modify the scope of the Peyko, Moskovitz and Boone decisions by requiring judicial review of the attorney-client privilege. Despite the revised statute, there are still unanswered questions regarding the privilege protection afforded an insurer’s claims file.
The Peyko decision
In Peyko, the Supreme Court of Ohio addressed whether a plaintiff can issue a subpoena to a defendant’s insurer in a prejudgment interest proceeding to determine whether defendant made a good faith effort to settle. The Court held that once a plaintiff obtained a judgment and sought prejudgment interest, the plaintiff, on a showing of “good cause” under Civ. R. 26(B)(3), was entitled to access those portions of the insurer’s claims file that are not attorney-client communications.4 If the defense asserted the attorney-client privilege with regard to the contents of the file, then the trial court was to determine by in-camera inspection which portions of the file were privileged.5 The plaintiff then was entitled to access only the nonprivileged portions.6
The Moskovitz decision
In Moskovitz, the Court again took on the issue of whether a plaintiff in a prejudgment interest proceeding can have access to documents in the insurer’s claims file that are protected by the attorney-client privilege. The Moskovitz Court expanded the Peyko decision and concluded that “[d]ocuments and other things showing the lack of a good faith effort to settle by a party or the attorneys acting on his or her behalf are wholly unworthy of the protections afforded by any claimed privilege.”7 Specifically, the Court declared that in a proceeding for prejudgment interest, “neither the attorney-client privilege nor the so-called work product exception precludes discovery of an insurer’s claims file. The only privileged matters contained in the file are those that go directly to the theory of defense of the underlying case in which the decision or verdict has been rendered.”8
The Boone decision
In Boone, the Court extended the Moskovitz holding when it addressed the issue of whether an insurer can obtain privileged documents from an insurer’s claims files in a case alleging bad faith against the insurer. The Court ruled in the affirmative that “the rationale behind our
holding in Moskovitz is applicable to actions alleging bad faith denial of coverage. That is, claims file materials that show an insurer’s lack of good faith in denying coverage are unworthy of protection.”9
However, in defining the scope of that exception, the Court explained “the only attorney-client and work-product documents that would contain information related to the bad faith claim, and, thus, be unworthy of protection, would have been created prior to the denial of coverage.”10 Therefore, the policyholder could not obtain attorney-client communications that post-dated the denial of coverage.
The Ohio legislature's attempt to modify court decisions
In 2007, in an express attempt to limit Peyko, Moskovitz, and Boone, the Ohio legislature modified R.C. 2317.02 by adding subpart (2). The explanatory notes to the amendment state:
SECTION 6. The General Assembly declares that the attorney-
client privilege is a substantial right and that it is the public policy of Ohio that all communications between an attorney and a client in that relation are worthy of the protection of privilege, and further that where it is alleged that the attorney aided or furthered an ongoing or future commission of insurance bad faith by the client, that the party seeking waiver of the privilege must make a prima facie showing that the privilege should be waived and the court should conduct an in camera inspection of disputed communications. The common law established in Boone v. Vanliner Ins. Co. (2001), 91 Ohio St.3d 209, Moskovitz v. Mt. Sinai Med. Ctr. (1994), 69 Ohio St.3d 638, and Peyko v. Frederick (1986), 25 Ohio St.3d 164, is modified accordingly to provide for judicial review regarding the privilege.
The legislature attempted to implement this change by adding Subpart (2) to R.C. 2317.02. The new subpart requires that the insured must first establish a prima facie showing of bad faith, fraud or criminal conduct before the insurer’s attorney can be compelled to testify regarding attorney-client communications. R.C. 2317.02(A) states:
The following persons shall not testify in certain respects:
(2) An attorney, concerning a communication made to the attorney by a client in that relationship or the attorney’s advice to a client, except that if the client is an insurance company, the attorney may be compelled to testify, subject to an in camera inspection by a court, about communications made by the client to the attorney or by the attorney to the client that are related to the attorney’s aiding or furthering an ongoing or future commission of bad faith by the client, if the party seeking disclosure of the communications has made a prima facie showing of bad faith, fraud, or criminal misconduct.
The Northern District of Ohio’s interpretation
The district court in Little Italy Development, LLC v. Chicago Title Insurance Co., which involved a bad faith claim against the defendant for failure to defend the plaintiff in an underlying lawsuit, recently
analyzed R.C. 2317.02(A)(2) and its impact on Boone.11 In this case, the issue was whether the law applies to only testimony or testimony and documents. Chicago Title argued the amendment should apply
to both. The court disagreed, stating:
Like the language in subpart (A)(1), the language contained in subpart (A)(2) is directed at persons “testifying.” Moreover, the exception to the statute, which requires the party seeking disclosure of the communication to make a prima facie showing of bad faith, applies in determining when an “attorney may be compelled to testify.” Thus, on its face, the statutory provision creates a testimonial privilege.12
Because R.C. 2317.02(A)(2) is clear on its face, the district court concluded that:
The amendment to O.R.C. §2317.02 provides that the Boone exception cannot be applied to the testimonial privilege. Thus, while the exception may apply to the production of documents, it cannot be applied to the testimonial privilege absent a prima facia showing of bad faith. Accordingly, the Court finds that the amendment to O.R.C. §2317.02 did not overrule Boone. Because LID seeks the production of documents, as opposed to attorney testimony, O.R.C. §2317.02(A) does not apply.13 Under Little Italy, an insured need not establish a prima facie case of bad faith before it can discover documents protected by the attorney-client privilege. In other words, Boone (no prima facie requirement) applies to document productions, while R.C. 2317.02(A)(2) (prima facie requirement) applies to testimony.
The unresolved issues
On its face, the Little Italy opinion appears to conflict with the Supreme Court of Ohio’s interpretation of the scope of R.C. 2317.02(A) in Jackson v. Greger.14 In considering a waiver of the attorney-client privilege argument in a legal malpractice claim, the Jackson court held
R.C. 2317.02(A) provides the exclusive means by which privileged communications can be waived.15 In reaching this holding, the Court concluded that R.C. 2317.02(A) applies to both testimony and written discovery:
A testimonial privilege applies not only to prohibit testimony at trial, but also to protect the sought after communications during the discovery process. The purpose of discovery is to acquire information for trial. Because a litigant’s ultimate goal in the discovery process is to elicit pertinent information that might be used as testimony at trial, the discovery of attorney-client communications necessarily jeopardizes the testimonial privilege. Such privileges would be of little import were they not applicable during the discovery process.16
Little Italy and Jackson appear to be in direct conflict regarding whether R.C. 2317(A) applies to both documents and testimony or just testimony. However, the Sixth Circuit Court of Appeals purportedly reconciled these principles by distinguishing between “exceptions” to the attorney-client privilege and “waivers” of the attorney-client privilege. In concluding that R.C. 2317.02(A) was not applicable to discovery of privileged documents in the context of a bad faith claim against an insurer, the Sixth Circuit reasoned that “Jackson was a privilege waiver case interpreting the scope of §2317.02(A). It did not involve the common law exception to the applicability of §2317.02(A) that was established in Boone… . Because §2317.02(A) does not apply to Boone claims, Jackson is not relevant.”17
The problem with this analysis is that the Sixth Circuit ignored Jackson’s express conclusion that R.C. 2317.02(A) applies to both testimony and documents.18 Whether the privilege issue involved a “waiver” or an “exception” argument was irrelevant to the court’s conclusion; the statute applies to both testimony and documents.19 So the issue then is whether Jackson or In re Professionals should apply to R.C. 2317.02(A)(2). Little Italy followed In re Professionals, not Jackson, and concluded that R.C. 2317(A)(2) applies only to testimony. However, another court could easily justify applying Jackson instead.20
While the interplay among Boone, Jackson, In re Professionals and R.C. 2317(A) will inevitably be subject to further interpretation by the courts, insurers should keep in mind this potentially significant exception to the attorney-client privilege as they draft communications that will be included in the claims file. At the same time, counsel for insureds should consider this issue in seeking discovery in bad faith actions against insurers.
Brian E. Roof is an attorney with Frantz Ward LLP in Cleveland, where his practice is devoted to commercial litigation and business disputes, including insurance coverage litigation, contract disputes and business torts.
Lindsey Carr Siegler is an attorney with Frantz Ward LLP in Cleveland, and focuses on commercial and lender litigation,
business disputes and product liability.
1 Peyko v. Frederick
(1986), 25 Ohio St.3d 164.2 Moskovitz v. Mt. Sinai Med. Ctr.
(1994), 69 Ohio St.3d 638.3 Boone v. Vanliner Ins. Co.
(2001), 91 Ohio St.3d 209.4 Peyko v. Frederick
at syl. ¶1.5
Id. at syl. ¶2.6
Id. at 661.8
Id. at syl.9
Id. at 213.10
Id.11 Little Italy Development, LLC v. Chicago Title Insurance Co.
, Case No. 1: 11CV112, 2011 U.S. Dist. Lexis 119698 (N.D. Ohio Oct. 17, 2011).12
Id. at *5.13
Id. at *7.14 Jackson v. Greger
(2006), 110 Ohio St. 3d 488.15
Id. at syl. ¶1.16
Id. at ¶7, fn 1.17 In re Professionals Direct Ins. Co.
, 578 F.3d 432, 441, fn 6 (6th Cir. 2009) (applying the statute to only attorney testimony) (emphasis added).18
, 110 Ohio St.3d at ¶7, fn 1.19
See Squire, Sanders & Dempsey, L.L.P. v. GivaudanFlavors Corp.
(2010), 127 Ohio St.3d 161 at ¶18 (in a case involving an “exception” to the attorney-client privilege, the Court reiterated its conclusion in Jackson
that O.R.C. §2317.02(A) applies to both
testimony and documents).20
See, e.g., Galion Community Hosp. v. Hartford Life and Accident Ins. Co.
, Case No. 1:08CV1635, 2010 U.S. Dist. LEXIS 7727 (N.D. Ohio Jan. 29, 2010) (applying O.R.C. §2317.02(A)(2) to documents, without analyzing Jackson
or In re Professionals