Outside Coverage Counsel’s File Discoverable in Bad Faith Litigation

Case: Willis v. Allstate Ins. Co.,
Federal Court for the Southern District of Mississippi
2014 U.S. Dist. LEXIS 64963

Plaintiff, Sandra Willis, asserted breach of contract and bad faith claims against Allstate Insurance Company arising from Allstate’s denial of Plaintiff’s first party claim for insurance proceeds relating to a house fire on June 14, 2012. During the investigation of the insurance claim, Allstate sought the services of Attorney David Waldrop. Allstate requested that Attorney Waldrop opine on the coverage issues relating to Plaintiff’s claim.

During the subsequent bad faith suit brought by the insured, Allstate’s representatives indicated that their coverage position was based in part outside counsel’s coverage opinion. Allstate then agreed to provide the coverage opinion letter in discovery, but Allstate withheld the remainder of the outside attorney’s file, claiming attorney-client privilege and work product.

Allstate agreed that it had waived privilege as to the coverage opinion letter but not as to the remainder of outside counsel’s file. The court noted that Allstate sought to use the coverage opinion itself to advance an advice-of-counsel defense but also sought to invoke the attorney-client privilege to deny Plaintiff access to additional information that could provide important context for understanding the coverage opinion. The court rejected Allstate’s approach, finding the waiver doctrine entailed the result not only of the claim for the particular document, but for any other document relating to the same subject matter. The court reasoned that other parts of outside counsel’s file would be important to understanding the coverage opinion. The Court thus found that Allstate had waived the attorney-client privilege for all communications between it and Attorney Waldrop regarding insurance coverage advice or opinions related to Plaintiff's claim for insurance proceeds.

The court further rejected Allstate’s anticipation of litigation defense. The court noted Allstate had the burden to show that outside counsel’s file was prepared in the anticipation of litigation. In this case, Allstate could not clearly delineate when Allstate’s “routine investigation of a possible resistible claim” switched to anticipation of litigation.

The Court did note that outside counsel did not need to produce copies of cases, research, or other notes he prepared, unless the notes referenced correspondence with Allstate, while rendering or forming his opinion, as such documents would have no bearing on the issue of Allstate’s reliance on the advice of counsel and were beyond the scope of discovery.