Picking Cotton: Ordinary Business Records Doctrine as Applied to Insurer’s Privilege Claims
(Editor’s note: Endnote 1 corresponds to the title)
The revised opinion of the Fourth District Court of Appeal in State Farm Florida Ins. Co. v. Aloni, 101 So. 3d 412 (Fla. 4th DCA 2012), illustrates the conflict among Florida’s district courts in analyzing the application of privileges to an insurer’s claim file in a coverage action by an insured. Courts uniformly recognize that work product must be produced “in anticipation of litigation” for an attorney work product privilege to arise; however, Florida courts have differed in their analysis of that standard in the context of defining when an insurer’s claim file is subject to discovery in a coverage action. In analyzing the attorney work product privilege accruing to an insurer’s claims file, the Fourth District Court of Appeal previously required in Cotton States Mut. Ins. Co. v. Turtle Assoc., Inc., 444 So. 2d 595 (Fla. 4th DCA 1984), that the threat of litigation be “substantial and imminent.” Painting the Fourth District’s approach as the minority position, the other districts have, however, adopted a more expansive interpretation of the privilege, extending it to insurer claims files en toto, permitting such discovery only in a subsequent bad faith action. While the Fourth District’s opinion in Aloni does not expressly overrule Cotton States, the court has nonetheless moved disturbingly closer toward the absolutist approach embraced by the other districts. The First, Second, Third, and Fifth districts have created what is in essence a new “insurer claims file” privilege, making the entire insurer claim file absolutely privileged in first party coverage disputes. The Aloni opinion does not go that far; instead it moves half-way between Cotton States and the approach of the other districts by creating a rebuttable presumption that an insurer’s claims file is privileged and not subject to discovery in a coverage dispute while making specific documents subject to in camera inspection to determine if each satisfies the elements for invoking a privilege.
This article argues that the Cotton States fact-based approach, as refined in subsequent federal case law, labeled by other districts as the minority approach (and implicitly an aberration), is in fact the position of Florida federal courts, as well as the majority of federal courts, and should be adopted as binding precedent in Florida. The fact-based analysis in Cotton States is more consonant with Florida’s ordinary business records doctrine and the policy underlying the attorney-client and attorney work product privileges. In creating an “insurer claims file” privilege, the other districts have afforded unwarranted and unprecedented protection to the ordinary business records of insurers. Insofar as courts insulate insurance claims files from discovery, without requiring the proponent of the privilege to prove facts supporting any cognizable privilege, the courts have departed from the precedent governing privileges in all other areas, applicable to all other litigants. Barring discovery into an insurer’s claim file may have a more insidious effect in that it may invite insurers to deny what an insurer acknowledges in its files to be valid claims, knowing that the facts and admissions reflected in the insurer’s business records are insulated from discovery.
Elements of Attorney Work Product Privilege
The attorney work product doctrine, first enunciated by the U.S. Supreme Court in Hickman v. Taylor, 329 U.S. 495 (1947),2 was specifically intended to prevent unwarranted inquiries into counsel’s files and mental impressions.3 The doctrine, codified in Fed. R. Civ. P. 26(b)(3), protects a lawyer’s research, analysis, legal theories, mental impressions, and notes and memoranda of witnesses’ statements prepared “in anticipation of litigation or for trial” from disclosure to opposing counsel.4 Rule 26(b)(3) does not require that the work product be prepared by an attorney to be protected as it makes specific reference to the “party or its representative (including the other party’s attorney, consultant, surety, indemnitor, insurer, or agent),” and, thus, the work product doctrine is not inapplicable merely because the material was prepared by or for a party’s insurer or agents of the insurer.5 Material prepared by or for a party’s insurer has been accorded work product protection, even when the insurer is not a party in the action.6
Florida courts, consistent with the federal rule, recognize that work product can take two forms: 1) “opinion work product,” which consists of “the attorney’s mental impressions, conclusions, opinions and theories concerning litigation”; and 2) “fact work product,” which consists of “information which relates to the case and is gathered in anticipation of litigation.”7 Under federal and Florida law, “opinion work product” is absolutely protected against disclosure,8 while “ordinary work product” is protected only until the adversary can demonstrate some necessity or justification for obtaining the materials, such as the unavailability of the information through normal discovery devices.9
The conflict among the Florida districts with regard to analyzing the privileges applicable to insurance claims files arises from different interpretations of what is meant by the phrase “in anticipation of litigation.” Any such interpretation must, however, be considered in the context of precedent related to burden of proof and the ordinary business records doctrine.
Deason: Claimant’s Burden
The Florida Supreme Court set forth the framework for analyzing both the attorney-client and attorney work product privileges in Southern Bell Tel. & Tel. Co. v. Deason, 632 So. 2d 1377 (Fla. 1994). Its analysis started with the premise that the burden of establishing that a document is protected from discovery by any privilege rests upon the party asserting the privilege.10 Thus, a party cannot withhold documents from discovery on the basis of privilege without producing factual evidence giving rise to a claim of privilege.11 As the burden of establishing all the elements of the privilege rests with the party asserting the privilege, any doubt or ambiguity as to whether a document is privileged, or the absence of proof establishing the existence of a privilege should result in the document being deemed subject to production.12
The Deason court distinguished between materials prepared in anticipation of litigation that are subject to a work product immunity and ordinary business records created for business purposes, which are not. While acknowledging that the line between law-related communications and business communications may be especially “blurry,” the Florida Supreme Court ruled that personnel managers’ summaries of interviews that had been initiated by counsel in anticipation of litigation with the Public Service Commission were not attorney work product.13 Noting that the company’s investigation of a legal problem led to the discovery of a potential company business problem, the Deason court ruled that recommendations containing the thoughts and impressions of personnel managers based on counsel’s communication to them were not protected under the attorney work product rule.14 While employee interviews were conducted in anticipation of litigation, it had not been proven that the panel recommendations were prepared for anything other than management’s business decision regarding disciplining its employees.15 Since disciplining employees was in the ordinary course of business, the documents were discoverable; that the recommendations were based on work product did not convert them into work product.16
Insofar as the purpose of the attorney work product privilege is to protect attorney work product, the accrual of a privilege within the Deason framework often hinges on the characterization of the nature of the work product produced; not all product produced by an attorney is in fact “attorney” work product. “If a communication with a lawyer is not made with him in his professional capacity as a lawyer, no privilege attaches.”17 For instance, Bankers Ins. Co. v. Florida Dept. of Ins. and Treasurer, 755 So. 2d 729 (Fla. 1st DCA 2000), stands for the proposition that when an attorney merely acts as a “conduit” for the client, rather than as legal counsel, no privilege attaches to documents created in the course of that relationship.
The Lack of Privilege Under Florida Federal Precedent
In Florida, insurers are statutorily required to undertake a good-faith investigation of their insureds’ claims.18 Insofar as insurers are required to do so, such investigations may be considered business functions. Moreover, Florida federal district courts do not recognize claims adjusting as an attorney function. “In an insurance context, the attorney-client privilege only attaches when an attorney performs acts for an insurer in his professional capacity and in anticipation of litigation.”19 In Cutrale Citrus Juices USA, Inc. v. Zurich American Ins. Group, 2004 WL5215191 (M.D. Fla. Sept. 10, 2004), the Middle District, applying Florida law starting with the criteria in Deason,20 concluded that no attorney-client privilege attaches to an insurance claims file, even when an attorney performs the claims investigation:
In the insurance context, “no privilege attaches when an attorney performs investigative work in the capacity of an insurance claims adjuster, rather than as a lawyer, [but] simply because [the attorney’s] assigned duties were investigative in nature” does not preclude an assertion of the attorney-client privilege….Therefore, “[t]he relevant question is not whether [the attorney] was retained to conduct an investigation, but rather, whether this investigation was related to the rendition of legal services. If it was…the privilege is not waived….”
[T]o the extent that an attorney acted as a claims adjuster, claims process supervisor, or claim investigations monitor, and not as a legal adviser for Defendants, the attorney-client privilege would not apply and any documents responsive to Plaintiff’s request to produce would have to be disclosed.21
In interpreting federal law as to the attorney work product doctrine, the Cutrale Citrus court reasoned that no work product privilege attaches to documents reflecting the ordinary business function of adjusting insurance claims:
The work product doctrine was not intended to protect from general discovery materials prepared in the ordinary course of business such as factual investigations prepared by insurance companies.. . . An insured seeking documents and reports in its insurers’ claims files presents a special problem for the application of the work product rule because it is the very nature of an insurer’s business to investigate and evaluate the merits of claims. In such instances, most courts have held that documents constituting any part of a factual inquiry into or evaluation of a claim, undertaken in order to arrive at a claim decision, are produced in the ordinary course of an insurer’s business and, therefore, are not work product.22
Acknowledging that “there is no bright line rule in the insurance context marking the boundary between documents protected under the work product privilege and documents produced in the ordinary course of business,” the Cutrale Citrus court adopted the date the insurer denies coverage as the proper date after which it is fairly certain there is an anticipation of litigation, and, thus, only documents generated after the denial of a claim would be protected as work product.23 Therefore, Florida federal courts have adopted the rebuttable presumption “that documents or things prepared before the final decision on an insured’s claim are not work product, and that documents produced after claims denial are work product.”24 Accordingly, “[d]ocuments or testimony that relates to the investigation, processing and analysis of an insured’s claim are discoverable in a first-party insurance coverage case.”25 Other jurisdictions have likewise held that claims adjusting is not legal work, and, thus, documents reflecting such ordinary business activities are not subject to an attorney-client or work product privilege.26
Conflicting Approaches of Florida District Courts
As noted above, the work product privilege only attaches to statements and materials prepared in anticipation of litigation. For purposes of analyzing whether this definition had been met in the context of an insurer’s claims file, the Fourth District, at least until the Aloni opinion, followed the holding established in Cotton States, which provides: “Mere likelihood of litigation does not satisfy this qualification.”27 Consistent with the federal courts’ understanding that initial claims investigation is an ordinary business function of insurers, Cotton States held: “[A]n insurance company’s claims investigation in its early stages is conducted in the ordinary course of business; the object is to determine whether to honor the claim or resist it, and whether to seek subrogation against a third party.”28
As initial investigations are performed in the ordinary course of business, the documents related to the preliminary investigations are not deemed to be privileged work product.29 This is because prior to determining whether to honor or deny a claim, no more than a “mere likelihood” of litigation exists. Thus, all documents generated by an insurer before making this determination are ordinary business records that are discoverable. Cotton States instructs that on the issue of an insurer’s privilege claim, “the files…be inspected and a determination made consonant with the federal case law cited herein.”30 In making the date of claim denial the focal point for analyzing the attorney work product privilege, Cotton States essentially states the same standard that the Middle District of Florida would endorse some 20 years later in Cutrale Citrus.
Other Florida district courts, however, have ruled differently. The Third District Court of Appeal has expressly rejected Cotton States in favor of a more expansive privilege standard:
In this district, as well as in other district courts, the standard to be applied when determining whether an incident report is protected by the work product doctrine, is whether the document was prepared in response to some event which foreseeably could be made the basis of a claim in the future.. . . While the First, Second, Third, and Fifth [d]istrict [c]ourts apply this foreseeability standard, the Fourth District applies a somewhat stricter standard requiring that when the documents are prepared, the probability of litigation must be “substantial and imminent.”31
The Second District also expressly rejected Cotton States in Florida Cypress Gardens, Inc. v. Murphy, 471 So. 2d 203 (Fla. 2d DCA 1985),32 thus, affording an absolute privilege to the investigation file of an insurer concerning an accident involving its insured in the action on coverage. Likewise, in Zirkelbach Constr., Inc. v. Rajan, 93 So. 3d 1124 (Fla. 2d DCA 2012), the Second District, after acknowledging Cotton States as binding precedent in the Fourth District, held that its own standard of foreseeability was less stringent:
On the work product issue,. . . the Fourth District’s approach to this subject differs from the approach adopted by Florida’s four other district courts of appeal. The district courts differ concerning the meaning of “prepared in anticipation of litigation.” In the Fourth District, materials do not constitute protected work product unless they were prepared when the probability of litigation was “substantial and imminent.” Liberty Mut. Fire Ins. Co. v. Bennett , 883 So. 2d 373, 374 (Fla. 4th DCA 2004).. . ; see also Cotton States Mut. Ins. Co. v. Turtle Assoc., Inc. , 444 So. 2d 595, 596 (Fla. 4th DCA 1984).. . . However, the Second District applies a less stringent foreseeability standard.. . .
Consistent with the Second District’s absolute privilege doctrine as to insurer claims filed in first-party coverage actions, in Nationwide Insurance Co. of Florida v. Demmo, 57 So. 3d 982 (Fla. 2d DCA 2011), the Second District reversed a trial court order requiring production of an insurer’s entire claim file. In Demmo, the insurer had paid out one claim, but had denied a second claim. In ruling on the insurer’s claim to a work product privilege as to documents from its file, the trial court ordered the production of all documents created before the denial of the second claim.33 On certiorari review, the Demmo court quashed the order requiring the production of the entire file, but nonetheless noted that specific documents in the file might be subject to production: “[W]e emphasize that [o]ur opinion should not be read as precluding appropriate discovery to the extent specific materials are discoverable.. . . Although a claims file is generally not discoverable, to the extent that materials contained therein are relied on at trial, those items may be discoverable.”34 Thus, Demmo addressed the discoverability of the insurance company’s claim file, not the privilege accruing to specific documents within it.
In Aloni, the Fourth District faced a case factually similar to Demmo in that both involved a late-filed claim. In Demmo, the claimant filed one claim that was approved and paid out and then filed a second claim more than a year later. In Aloni, the hurricane claims had not been filed until years after the event causing loss. Thus, each case involved an unusual or, at least arguably, inherently suspect claim. In Aloni, the Fourth District articulated a rebuttable presumption analysis that focused on the nature of the document itself; however, it reversed the presumptions set forth in Cotton States. Instead of requiring the proponent of the asserted privilege to come forth with evidence to prove its applicability, consistent with the burden of proof analysis in Deason, the Fourth District in Aloni imposed a rebuttable presumption that a privilege applies to insurer claims files unless evidence is proffered to disprove it. The Fourth District also shelved the presumption analysis of Cotton States, which had designated the date of a claim denial as the pivotal date. While the Aloni opinion has moved toward resolving the conflict among the district courts, it has widened the gulf between Florida state and federal courts that espouse the majority position, according no privilege to documents reflecting an insurer’s initial claims investigation or claims adjusting.
Refined Cotton: Harper’s Causation and “Reasonable Anticipation” Analysis
While Florida courts, including the Fourth District, have evolved toward an absolute privilege insulating insurer’s claims files from discovery, the trend among federal courts has gone in the opposite direction. In Cotton States, the Fourth District had adopted the rationale set forth in Carver v. Allstate Ins. Co., 94 F.R.D. 131 (S.D. Ga. 1982), which articulated a fact-specific analysis of the attorney work product privilege claim in terms of when an insurer decided to deny the claim, but subsequent federal cases critiqued this singular focus. Under a Carver / Cotton States (and Cutrale Citrus ) analysis, the test is whether the document was generated before or after an insurer’s activity shifted from investigation and evaluation of a claim to preparation for litigation, which is presumed to be when the claim is denied. In a seminal case in the analysis of the privilege apposite to insurer claim files, Harper v. Auto-Owners Ins. Co., 138 F.R.D. 655 (S.D. Ind. 1991),
the U.S. District Court for the Southern District of Indiana noted that Carver’s singular focus on “anticipation of litigation” ignored the “causation” requirement of the privilege.35 The Harper court described the two components necessary to satisfy the work product standard as follows:
The first is what may be called the “causation” requirement. This is the basic requirement of the [r]ule that the document in question be produced because of the anticipation of litigation, i.e., to prepare for litigation or for trial. The second component is what may be termed a “reasonableness” limit on a party’s anticipation of litigation. Because litigation can, in a sense, be foreseen from the time of occurrence of almost any incident, courts have interpreted the [r]ule to require a higher level of anticipation in order to give a reasonable scope to the immunity. This second component is more of a practical tool to assist a court in applying the fundamental causation test of the [r]ule. Proper application of the work product rule requires both components, yet some courts have appeared to apply the “reasonable anticipation” test exclusively: they determine at what point in time litigation could reasonably have been anticipated and find that all documents subsequently produced are work product, without inquiring into whether the documents were produced for litigation or non-litigation purposes.36
In describing the causation component, the Harper court (like Deason) noted that if documents and materials are produced in the ordinary and regular course of a party’s business, and not to prepare for litigation, they are outside the scope of work product.37 As to the “reasonable anticipation” requirement, the Harper court recited Carver/Cotton States’ standard that a proponent demonstrate that the probability of litigation is “substantial and imminent.”38 That a party had consulted or retained an attorney, undertaken an investigation or engaged in negotiations over the claim, are insufficient to establish “a reasonable anticipation of litigation under the [r]ule.”39 The Harper court started from the premise that “since insurance companies have a routine duty to investigate accidents, such materials are not prepared in anticipation of litigation but are prepared in the ordinary course of business absent unique circumstances showing the contrary.”40 The Harper court then refined the analysis in Cotton States / Carver by requiring a factual analysis of both the causation and the “reasonable anticipation” components in reviewing work product privilege claims as to insurers’ claims files:
[A] document or thing produced or used by an insurer to evaluate an insured’s claim in order to arrive at a claims decision in the ordinary and regular course of business is not work product regardless of the fact that it was produced after litigation was reasonably anticipated. It is presumed that a document or thing prepared before a final decision was reached on an insured’s claim, and which constitutes part of the factual inquiry into or evaluation of that claim, was prepared in the ordinary and routine course of the insurer’s business of claim determination and is not work product. Likewise, anticipation of litigation is presumed unreasonable under the [r]ule before a final decision is reached on the claim. The converse, of course, is presumed for documents produced after claims denial. To overcome these presumptions, the insurer must demonstrate, by specific evidentiary proof of objective facts, that a reasonable anticipation of litigation existed when the document was produced, and that the document was prepared and used solely to prepare for that litigation, and not to arrive at a (or buttress a tentative) claim decision.41
T he Harper court reasoned that because the attorney work product rule does not prevent discovery of documents prepared for nonlitigation purposes, it would be an unwarranted extension of the federal privilege rule to prevent access to such a broad range of documents merely because of the inherent importance of such documents to several interests, one of which happens to be litigation. Thus, a document having any nonlitigation purpose should be deemed discoverable: “Documents prepared for concurrent purposes, therefore, should not be classified as work product. Such an approach is consistent with the purposes of the work product rule and avoids the impossibility of weighing the asserted motives behind the creation of a document to determine which one is primary.”42
In contrast to the Harper court’s allowing discovery of any document having an arguably nonlitigation purpose, some courts have narrowed the scope of discovery by applying a “dominant purpose” test whereby the attorney-client privilege would not be applicable if the insurer’s dominant purpose in engaging legal counsel was to provide business advice or act as a claims adjuster.43 Nonetheless, courts applying a “dominant purpose” test also presume that documents “that would have been created in essentially similar form irrespective of the litigation are not protectable as work product.”44 Moreover, “it can be presumed that ‘documents which were produced by an insurer for concurrent purposes before making a claims decision would have been produced regardless of litigation purposes….’”45
Florida’s federal district courts have adopted the framework established in Harper to analyze work product claims in the insurance context.46 In 1550 Brickell Associates v. Q.B.E. Ins. Co., 597 F. Supp. 2d 1334 (S.D. Fla. 2009), the insurer argued that the Harper framework was too clumsy a tool for broad use because when arbitration is required, it pushes insurance companies to prematurely deny claims. In rejecting that argument, the Brickell court explained that the Harper analysis merely requires that an insurance company present evidence of the point at which it began to prepare documents in anticipation of litigation; the Harper framework still applied because “the mere undertaking of arbitration does not, by itself, demonstrate that documents are created in anticipated litigation.”47 As the insurer had not denied the claim, under the Harper presumptions, none of the documents that the insurer prepared before the insured filed suit was deemed to be work product. To rebut the presumption, the insurer submitted an affidavit of its senior claims consultant, which stated that he thought litigation was likely based on the extent of the damages he saw and the amount of damages sought. According to the Brickell court, this failed to rebut the Harper presumptions: “To argue that it is altogether misses the point of the Harper framework, which rejects the idea that demonstrating that an insurance company began an investigation with the understanding that litigation is possible establishes work-product immunity.”48
The Brickell court, applying Florida law, thus, denied any attorney-client privilege as to documents in which counsel’s role was to act as a mere conduit for records generated in the ordinary claims adjusting process. Accordingly, while Florida’s district courts insulate insurer claims files with either a rebuttable presumption of privilege (as in Aloni ) or irrebuttable presumption (as in Demmo ), the federal courts interpreting Florida’s attorney-client privilege49 through the lens of Deason and Bankers Ins. have defined claims adjusting as a nonattorney function, thus, giving rise to a presumption that no privilege arises until an insurance claim is denied.
Cotton/Harper Should Be Adopted as Florida’s Approach
In affording an absolute privilege to an insurer’s entire claims file, the reasoning of the majority of Florida’s district courts can be summarized as follows: Insurers can reasonably anticipate litigation arising over the coverage of claims; claim files were created in anticipation of litigation; and, thus, all claims files created to document claims are subject to a work product privilege. This reasoning is flawed in that Florida law recognizes only two privileges associated with litigation activities: 1) attorney-client privilege; and 2) attorney work product privilege. Claims adjusting is not an “attorney” function subject to either privilege, as an insurer does not inherently investigate claims in anticipation of litigation; rather an insurer has both contractual and statutory duties to do so.50 In Deason, the Florida Supreme Court held that ordinary business records, or documents created to discharge an ordinary business function or otherwise reflecting such ordinary activities, are discoverable. Insofar as insurers have a statutory duty to investigate and handle claims in good faith, Deason would find those portions of an insurer’s claims files reflecting the initial claims investigation as discoverable.
Cotton States and Florida Cypress Gardens preceded Deason by 10 years; however, only the rationale of Cotton States, as further refined in Harper, is consonant with Deason ’s fact-based analysis of the business (as opposed to litigation) purpose underlying the creation of the document at issue.51 In analyzing the privileges accruing to insurer claims files in first-party actions, all the districts recognize that insurers are essentially in an inherently litigious business; however, the fact that a particular industry is prone to litigation (a premise inherent in the rationale for extending a privilege) does not clothe the ordinary business records of that industry in an immutable cloak of privilege. Thus, the Fourth District in Cotton States, consistent with Deason ’s ordinary business records doctrine, rendered the ordinary business records generated in the ordinary course of an otherwise litigious industry discoverable.
The First, Second, Third, and Fifth districts have in effect created an expansive new privilege to insulate nonattorney documents from discovery. In Aloni, the Fourth District has moved in that direction. The attorney work product privilege was created to protect attorney work product; however, the absolute privilege afforded by the First, Second, Third, and Fifth districts creates an entirely new privilege for insurers’ investigative files that arises without reference to the actual purpose or timing of the creation of the document. This “insurer claims file” privilege improperly insulates from discovery the ordinary business records generated by an insurer in performing its ordinary business functions. Claims adjusting and investigation do not require legal training; no jurisdiction recognizes these as attorney functions. In all jurisdictions but Florida, “[i]t is well-settled that reports generated in the course of general investigations, even if litigation is arguably anticipated, are not entitled to work product protection.”52 What the First, Second, Third, and Fifth districts couch as the majority position is in fact an oddity that even the Florida federal courts analyzing Florida law have rejected.
Further, the all-encompassing privilege granted to insurer claims files defeats the policy of fostering liberal discovery without affording any meaningful protection to attorney thought processes and strategies that are properly the subject of the attorney work product privilege:
[T]he work product doctrine becomes an all-encompassing shroud of secrecy that is at once at odds with the federal rules’ liberal discovery policy and the protection of attorney’s thought processes and strategies the doctrine was designed to be. Rather than using the doctrine to immunize these strategies and opinions from discovery, some discovery opponents seem to use the doctrine to relieve themselves of the burden of producing factual information accumulated in what appears to be routine investigations. Accordingly, we have found it helpful to express the elements of the work product doctrine into the concepts of “causation” and “reasonable anticipation” of litigation.53
Like the Harper court and Florida’s federal courts, Florida state courts should adopt concepts of “causation” and “reasonable anticipation” in analyzing the attorney work product and attorney client privilege claims apposite to documents within an insurer’s files. Only by doing so, can the attorney work product and attorney client privileges be meaningfully accorded their proper and intended purpose. Florida should pick Cotton, or rather Cotton as refined in Harper and articulated by Florida’s federal courts in interpreting Florida’s attorney-client privilege.
1 The title of this article echos that of a recent best seller written by J. Thompson Cannino and R. Cotton with E. Torneo, Picking Cotton, styled as Our Memoir of Injustice and Redemption. That memoir recounts the wrongful conviction and incarceration of Ronald Cotton for rape based on the incorrect identification by the victim, Jennifer Thompson Cannino, and his later exoneration based on DNA evidence after being wrongfully imprisoned for 11 years. That memoir, which recounts the personal tragedy and redemption of both the falsely accused and the rape victim that arose from a faulty criminal process, has no apparent or obvious relevance to the topic of this article. Nonetheless, the faulty criminal process described in that memoir may bare a remote structural similarity to the juridical process of Florida courts in creating a per se category of privilege. In both processes, the facts yield to a foregone conclusion and a pre-established identity. Ronald Cotton was labeled a rapist before he was even put in the line up; Jennifer Thompson Cannino simply affirmed that already established identity. The so-called majority position among Florida districts has named insurer files privileged, without reference to the specific facts. After initially denying any pre-determined label in favor of scrutinizing the facts, the Fourth District has shown itself inclined to succumb to the so-called majority position ( i.e., applying a label, without independently verifying the truth of that identification) for no apparent reason other than that it is represented to be the majority position. That so-called majority position is, however, neither supported by the facts nor really the majority position. Stated more simply, both exemplify an institutionalized legal process in which facts inexorably yield to irrefutable presumptions based on labels without foundation in fact.
2 The Florida Supreme Court ascribed this origination to the privilege in Northup v. Acken, 865 So. 2d 1267, 1269 (Fla. 2004).
3 The Florida Supreme Court envisioned the work product privilege as an element of the adversarial system: “The rationale supporting the work product doctrine is that ‘one party is not entitled to prepare his case through the investigative work product of his adversary where the same or similar information is available through ordinary investigative techniques and discovery procedures.’” Southern Bell Tel. & Tel. Co. v. Deason, 632 So. 2d 1377, 1384 (Fla. 1994) (citing Dodson v. Persell, 390 So. 2d 704, 708 (Fla.1980)).
4 Upjohn Co. v. United States, 449 U.S. 383, 398 (1981).
5 See Railroad Salvage of Conn., Inc. v. Japan Freight Consolidators (USA), Inc., 97 F.R.D. 37 (E.D.N.Y. 1983), aff’d, 779 F.2d 38 (2d Cir. 1985) (correspondence between defendant and its liability insurance carriers protected); Home Ins. Co. v. Ballenger Corp., 74 F.R.D. 93 (N.D. Ga. 1977) (report to plaintiff insurer’s home office made by plaintiff’s regional claims supervisor protected by work product privilege and, thus, not discoverable by defendant). Cf. Holgren v. State Farm Mut. Auto Ins. Co. 976 F.2d 573 (9th Cir. 1992) (work product doctrine applicable, but allowing discovery due to compelling need).
6 United Coal Cos. v. Powell Const. Co., 839 F.2d 958 (3d Cir. 1988); see also Basinger v. Glacier Carriers, Inc., 107 F.R.D. 771 (M.D. Pa. 1985)
(in holding that files were protected by work product privilege, court reasoned if party to litigation is partially protected by F.R.C.P. 26(b)(3) from having to disclose certain information to opponent, requiring nonparty to deliver same kind of information to party who may subsequently join nonparty in case would be unjust).
7 Heartland Express, Inc., of Iowa v. Torres, 90 So. 3d 365, 367 (Fla. 1st DCA 2012).
8 Hickman, 329 U.S. at 511-12; Deason, 632 So. 2d at 1384 (Fla. 1994).
9 Florida’s distinction between fact and opinion work product is consonant with the federal approach. Referencing Upjohn, the Florida Supreme Court stated: “Fact work product traditionally protects that information which relates to the case and is gathered in anticipation of litigation. State v. Rabin, 495 So. 2d 257 (Fla. 3d DCA 1986). Opinion work product consists primarily of the attorney’s mental impressions, conclusions, opinions, and theories. Id. Whereas fact work product is subject to discovery upon a showing of ‘need’ and ‘undue hardship,’ opinion work product generally remains protected from disclosure.” Deason, 632 So. 2d at 1384; see, e.g., Whealton v. Marshall, 631 So. 2d 323 (Fla. 4th DCA 1994) (access to factual portions of counsel’s memo denied whernrespondents seeking discovery had access to better and more probative evidence regarding expert’s opinion and have equal or superior access to their own records so they could show no legitimate need for information in counsel’s memo).
10 Deason, 632 So. 2d at 1383.
11 See, e.g., Hartford Accident & Indem. Co. v. McGann, 402 So. 2d 1361 (Fla. 4th DCA 1981) (privilege would not extend when party claiming privilege failed to provide evidence in support of assertion of privilege).
12 See, e.g., Nationwide Mut. Fire Ins. Co. v. Harmon, 580 So. 2d 192 (Fla. 4th DCA 1991) (petition challenging order compelling production of insurer’s investigative files denied absent showing whether materials were produced in anticipation of litigation or were investigations conducted during normal business of evaluating claim); Bankers Ins. Co. v. Florida Dept. of Ins. & Treasurer, 755 So. 2d 729 (Fla. 1st DCA 2000) (attorney-client privilege did not attach to communications between insurance company and general counsel absent evidence that counsel undertook investigation in professional capacity). See also Bogan v. Northwestern Mut. Life Ins. Co., 163 F.R.D. 460, 463 (S.D.N.Y. 1995) (affirming trial court’s order to produce insurer’s documents concerning related disability insurance claim because, while litigation was reasonably anticipated, if documents were created in part to process insured’s claim and not prepared solely in anticipation of litigation, documents not protected by work product shield); Ring v. Commercial Union Ins. Co., 159 F.R.D. 653, 658 (M.D. N.C. 1995) (motion to compel undated document was granted because it may have been created before litigation was anticipated, and two other documents involved matters within ordinary course of business and, therefore, had to be produced).
13 Deason, 632 So. 2d at 1385-6.
14 Id. at 1386.
15 Id.
16 Id.
17 Skorman v. Hovnanian of Fla., Inc., 382 So. 2d 1376, 1378 (Fla. 4th DCA 1980); see also Hoch v. Rissman, Wiesberg, Barrett et al., 742 So. 2d 451 (Fla. 5th DCA 1999) (privilege does not attach to all communications to which attorney is party).
18 In Florida, an insurer has a statutory duty to independently investigate insurance claims. Fla. Stat. §§624.155(1)(b)(1), 626.9541(I)(3)(d), and 624.03 impose on an insurer a statutory obligation to conduct a reasonable investigation before denying claims and to settle claims in good faith.
19 Milinazzo v. State Farm Ins. Co., 247 F.R.D. 691, 697 (S.D. Fla. 2007) (citing Bankers Ins. Co. v. Florida Dep’t. of Ins. and Treasurer, 755 So. 2d 729 (Fla. 1st DCA 2000).
20 Cutrale Citrus, 2004 WL5215191 at * 2; see also Milinazzo, 247 F.R.D. at 696. Fed. R. Evid. 501 provides that when state law provides the rule of decision, as in diversity cases, the state law on attorney-client privilege applies. The attorney-client privilege in litigation involving a federal question is a matter of federal law. In re Bieter Co., 16 F.3d 929, 935 (8th Cir. 1994). In cases of pendent jurisdiction, federal law controls the privilege question unless the privileged communication relates only to the pendent state law claim. Von Bulow by Averspery v. Von Bulow, 811 F.2d 136, 141 (2d Cir. 1987); Smith v. Alice Peck Day Memorial Hospital, 148 F.R.D. 51 (D.N.H. 1993). In contrast to the attorney-client privilege, federal law governs the application of the work product doctrine in federal court litigation, even in diversity cases. Milinazzo, 247 F.R.D. at 698. Thus, a federal court exercising diversity jurisdiction applies state law to attorney-client privilege issues, but federal law to resolve work product issues.
21 Cutrale Citrus, 2004 WL5215191 at *3 (applying Florida law, citing Connecticut Indem. Co. v. Carrier Haulers, Inc., 197 F.R.D. 564, 572 (W.D.N.C. 2000) (quoting In re Allen, 106 F.3d 582, 602–03 (4th Cir. 1997)).
22 Id. at *2.
23 Id.
24 Milinazzo, 247 F.R.D. 691 at 701. While opining on the federal work product doctrine, the Milinazzo court intimated that the federal doctrine was consistent with Florida’s, stating that it was not “convinced that the outcome of the [c]ourt’s ruling [as to the work product privilege]. ..would have been materially different had Florida law governed.” Id. at 701, fn. 9.
25 Buckley Towers Condo., Inc. v. QBE Ins. Corp., 2008 WL 2645680 *2 (S.D. Fla. June 26, 2008).
26 Cutrale Citrus, at * 2 (citations omitted). See, e.g., Merrin Jewelry Co. v. St. Paul Fire & Marine Ins. Co., 49 F.R.D. 54 (S.D.N.Y. 1970) (Attorney’s report of examinations conducted under oath, with exception of two paragraphs providing legal advice, were discoverable; it consisted almost entirely of analysis of sworn testimony, such as any person (lawyer or not) could have made. As it summarized facts, appraised credibility and set forth inferences, all tasks that are daily entrusted to nonlawyers, such matters would be treated as ordinary business records that were fully discoverable.); National Farmers Union Prop. & Cas. Co. v. District Court, 718 P. 2d 1044 (Colo. 1986) (Memo by counsel hired to investigate claim was largely producible as it was not protected by work product or attorney-client privilege; first 27 pages were not protected because attorneys were performing as claim adjusters, and, thus, it would be ordinary business record of insurer. No attorney-client privilege could apply because information was not legal advice, but result of factual investigation; thus, attorneys were acting more as claims investigators rather than legal counsel.); Rounick v. Fireman’s Fund Ins. Co., 1996 WL 421903 (E.D. Pa. 1996) (attorney who investigated claim and took examination under oath ordered to give deposition); Western Nat’l Bank of Denver v. Employees Ins. of Wausau, 109 F.R.D. 55, 57 (D. Colo. 1985) (communications of attorney hired to investigate claim held not protected by privilege); Atlanta Coca-Cola Bottling Co. v. Transamerica Ins. Co., 61 F.R.D. 115 (N.D. Ga. 1972) (claims files were discoverable).
27 Cotton States, 444 So. 2d at 596.
28 Id.
29 Id.
30 Id.
31 Marshalls of MA, Inc. v. Minsal, 932 So. 2d 444, 446- 47 (Fla. 3d DCA 2006); see also State Farm Fire and Casualty Co. v. Valido, 662 So. 2d 1012, 1013 (Fla. 3d DCA 1995).
32 Referring to Cotton States, the Second District stated: “With all due respect, we cannot accept the proposition that the investigation file of an insurance company concerning an accident involving its insured was not prepared in anticipation of litigation simply because its contents may have been obtained prior to the filing of a formal claim. The documents and photographs sought by the Murphys were protected as work product.” Florida Cypress Gardens, 471 So. 2d at 206. The Florida Cypress Gardens court cited Winn-Dixie Stores, Inc. v. Nakutis, 435 So. 2d 307 (Fla. 5th DCA 1983), pertaining to an accident report prepared by a supermarket: “It was hardly arguable that an accident report of a slip and fall incident in a grocery store,. . . is not a document prepared in anticipation of litigation. Those reports were certainly not prepared because of some morbid curiosity about how people fall at the market.” Without the guidance of Deason, Florida Cypress Gardens applied the analysis apposite to the unusual event of a grocery store creating an accident report to the ordinary document created in the course of an insurer investigating an insured claim.
33 Demmo, 57 So. 3d at 984.
34 Id. at fn. 2.
35 Harper, 138 F.R.D. at 662. In critiquing Carver, the court stated: “[F]ocusing solely on the point of time when litigation could reasonably have been foreseen ignores the fundamental requirement of the [r]ule that the documents be produced because of the threat of litigation, for the purpose of litigation. The ‘reasonable anticipation’ time limit only narrows the set of documents a court must further examine for causation or motivation.”
36 Id. at 659.
37 Id. at 660.
38 Id. (citing Carver, 94 F.R.D. at 134).
39 Id.
40 Id. at 662-63 (citing Schmidt v. California State Automobile Assoc., 127 F.R.D. 182, 184 (D. Nev. 1989). The Harper court, citing Schmidt at length, accepted as a premise of its analysis that the majority of courts defines adjusters’ claims files as ordinary business records: “The majority of cases that have dealt with the issue of whether investigative materials prepared by insurance claims adjusters is work-product prepared in anticipation of litigation have held that since insurance companies have a routine duty to investigate accidents, such materials are not prepared in anticipation of litigation but are prepared in the ordinary course of business absent unique circumstances showing the contrary…. The connection to possible litigation of the material being prepared must be sufficiently concrete so as to provide assurance that the routine claims processing material prepared in the ordinary course of the insurance business will not be immunized from discovery.”
Harper categorically rejected an absolute privilege for an insurer’s investigative files: “An insurance company cannot reasonably argue that the entirety of its claims files are accumulated in anticipation of litigation when it has a duty to investigate, evaluate and make a decision with respect to claims made on it by its insured.” Id. (citing Pete Rinaldi’s Fast Foods v. Great Am. Ins. Cos., 123 F.R.D. 198, 202 (N.M.D.N.C. 1988)).
41 Harper, 138 F.R.D. at 663-4.
42 Id. at 661, n. 2. See also Bogan v. Northwestern Mut. Life Ins. Co., 163 F.R.D. 460, 464 (S.D. N.Y. 1995) (with regard to “causation” element, if documents were “created, among other reasons, for the processing of [insured’s] claim, there [sic] were not prepared solely in anticipation of litigation and are therefore not protected by the work-product shield”).
43 See, e.g., Ivy Hotel San Diego, LLC v. Houston Cas. Co., 2011 WL 4914941 at *7 (S.D. Cal. Oct. 17, 2011) (dominant purpose in retaining law firm must be to receive legal advice rather than to have law firm provide business advice or act as a claims adjuster); Umpqua Bank v. First Am. Title Ins. Co., 2011 WL 997212 at *3 (E.D. Cal. Mar. 17, 2011) (where insurer hired attorney both to give legal opinion and to take over claims adjuster role, “the court must make a determination of which purpose was primary”).
44 Umpqua, 2011 WL 997212 at *4.
45 Klee v. Whirpool Corp., 251 F.R.D. 507, 512 (S.D. Cal. 2006) (quoting Stout v. Illinois Farmers Ins. Co., 150 F.R.D. 594, 605 (S.D. Ind. 1993)).
46 See, e.g., 1550 Brickell Assoc. v. Q.B.E. Ins. Co., 597 F. Supp. 2d 1334 (S.D. Fla. 2009); Milinazzo v. State Farm Ins. Co., 247 F.R.D. 691, 701 (S.D. Fla. 2007); St. Joe Co. v. Liberty Mut. Ins. Co., 2006 WL 3391208 at *7 (M.D. Fla. Nov. 22, 2006). Cutrale Citrus cites Harper, but nonetheless performs an analysis more akin to the Cotton States/Carver analysis of the point of claim denial as the determining factor.
47 1550 Brickell Assoc., 597 F. Supp. 2d at 1336.
48 Id.
49 Federal courts apply Florida law in determining issues of attorney-client privilege in diversity cases; however, the attorney work product privilege is still subject to the federal rule and federal law.
50 See Flagstar Bank v. Federal Ins. Co., 2006 WL 6651780 at *13 (E.D. Mich. Aug. 21, 2006) (“A factual investigation of an insurance claim by an insurance company is within the ordinary course of an insurance company’s business.” Insurer owed insured “both a statutory and contractual duty to conduct a good faith investigation before denying [insured’]s claim, a substantial claims investigation would have been made even absent the prospect of litigation.”).
51 In finding an insurer’s claim file privileged, the Florida Cypress Gardens court cited the privilege afforded to an accident report created by a grocery store employee. Florida Cypress Gardens, 471 So. 2d at 205. Insurers, however, investigate accidents as a regular business activity; grocery stores do not.
52 America Home Assur. Co. v. United States, 2009 WL 3245445 at *2 (D.N.J. 2009); see also Weber v. Paduano, No. 02–3392, 2003 WL 161340 at *6 (S.D.N.Y. Jan. 22, 2003) (steps insurer takes immediately upon learning of the accident “are almost always part of its ordinary business of claim investigation…”); Flagstar Bank 2006 WL 6651780 at *13 (“A factual investigation of an insurance claim by an insurance company is within the ordinary course of an insurance company’s business.”); Christensen v. Am. Family Mut. Ins. Co., 2011 WL 3841293 at *14 (D. Utah Aug. 29, 2011) (“It is presumed that a document or thing prepared before a final decision was reached on an insured’s claim, and which constitutes part of the factual inquiry into or evaluation of that claim, was prepared in the ordinary and routine course of the insurer’s business of claim determination and is not work product. The converse, of course, is presumed for documents produced after claims denial.”); CH2M Hill, Inc. v. Houston Gen. Ins. Co., 1999 WL 1279369 at *4 (D. Or. Aug. 4, 1999) (“In the insurance context it is the insurer’s ordinary business to investigate claims.”).
53 Allendale Mut. Ins. Co. v. Bull Data Sys., Inc., 145 F.R.D. 84, 87 (N.D. Ill. 1992).
F. Malcolm Cunningham, Jr. , is the managing partner of The Cunningham Law Firm, P.A., in West Palm Beach. He is a 1980 graduate of Howard University School of Law in Washington, D.C., and a former law clerk to Judge Joseph W. Hatchett of the U.S. Court of Appeals for the Fifth Circuit. Cunningham focuses his practice in construction, business, and insurance disputes.
Amy L. Fischer is an associate of The Cunningham Law Firm, P.A., in West Palm Beach. She is a 1989 cum laude graduate of The University of Florida Levin College of Law and is board certified by The Florida Bar in construction law. Fischer focuses her practice in construction and business disputes and appeals.
