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In re State Farm Fire and Casualty Co.

Supreme Court of Colorado, En Banc

June 4, 2018

In Re State Farm Fire and Casualty Company, Plaintiff
v.
Gary J. Griggs and Susan A. Goddard. Defendants

          Original Proceeding Pursuant to C.A.R. 21 Broomfield County District Court Case No. 16CV30175 Honorable F. Michael Goodbee, Judge

          Attorneys for Plaintiff: Wheeler Trigg O'Donnell LLP John R. Trigg Evan Stephenson Marissa S. Ronk Denver, Colorado

          Attorneys for Defendant Susan A. Goddard: Connelly Law, LLC Sean Connelly Denver, Colorado Franklin D. Azar & Associates, P.C.

          Natalie Brown Dezarae D. LaCrue Aurora, Colorado

          No appearance on behalf of Defendant Gary J. Griggs.

          OPINION

          GABRIEL JUSTICE

         ¶1 In this original proceeding pursuant to C.A.R. 21, we review the district court's determination that petitioner State Farm Fire and Casualty Company ("State Farm") impliedly waived the attorney-client privilege protecting communications between it and its former counsel when it submitted an affidavit from that former counsel to rebut allegations of discovery misconduct. We issued a rule to show cause and now make the rule absolute. We conclude that the attorney affidavit submitted in this case did not place any privileged communications at issue. Accordingly, the district court erred in finding that State Farm impliedly waived its attorney-client privilege.

         I. Facts and Procedural History

         ¶2 This case concerns a discovery dispute arising out of an automobile accident in which Gary Griggs, a driver insured by State Farm, injured Susan Goddard and several others.

         ¶3 In the underlying action, State Farm seeks a declaratory judgment that Griggs breached the contractual duties set forth in his insurance policy by executing a settlement agreement pursuant to Nunn v. Mid-Century Insurance Co., 244 P.3d 116 (Colo. 2010), in which he waived a jury trial, consented to arbitration, and assigned to Goddard any rights that he had against State Farm. Goddard counterclaims, asserting, among other things, that State Farm acted in bad faith by refusing both to settle her claims against Griggs and to indemnify Griggs for the judgment entered against him after the arbitration to which Griggs had consented.

         ¶4 In the course of discovery on the above-described claims, a State Farm insurance adjuster testified regarding a medical lien related to services apparently provided by Exempla to another person injured in the automobile accident at issue. The adjuster testified that this lien was in the amount of $264, 075. This was pertinent because State Farm purportedly relied on the amount of this lien to determine the portions of the limited insurance proceeds to allocate to each of the injured parties' claims.

         ¶5 At some point, State Farm's then-attorney, Franklin Patterson, learned that the above-described lien was not, in fact, in the amount of $264, 075. Rather, the correct lien amount was only $264.75. Before Patterson had taken any steps to correct the adjuster's misstatement, however, the district court entered an order disqualifying him and his law firm, pursuant to Colo. RPC 1.9, as State Farm's counsel, based on Patterson's prior attorney-client relationship with the law firm representing Goddard.

         ¶6 Following Patterson's disqualification, State Farm's newly-retained counsel disclosed the corrected lien amount to Goddard, noting that the lienholder, Exempla, apparently was the source of the error. Based on this disclosure, which Goddard viewed as belated by many months, Goddard sought sanctions against State Farm in the form of a directed verdict on her bad faith claim. In support of this request, Goddard alleged that State Farm had deliberately and intentionally concealed the corrected lien information.

         ¶7 State Farm filed a brief opposing Goddard's request for sanctions and in support thereof submitted an affidavit from Patterson. In this affidavit, Patterson recited the following facts pertinent to ...


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