Olsen v. Owners Insurance Co.

          ORDER

          Nina Y. Wang United States Magistrate Judge

         Magistrate Judge Nina Y. Wang This matter comes before the court on two motions:

(1) Plaintiff Kenneth Olsen's (“Plaintiff” or “Mr. Olsen”) Motion to Compel Disclosure of Communications with Attorney Mr. Torrey (“Plaintiff's Motion to Compel”), filed April 26, 2019, [#70]; and

(2) Defendant Owners Insurance Company's (“Defendant” or “Owners”) Motion to Compel Noneconomic and Impairment Damages Information (“Defendant's Motion to Compel”), filed April 26, 2019, [#71].

         The undersigned considers the Motions pursuant to 28 U.S.C. § 636(b) and the Memorandum dated April 29, 2019 [#72]. This court concludes that oral argument will not materially assist in the resolution of this matter.^[1] Accordingly, upon careful review of the Motions, the applicable case law, and the entire case file, I GRANT IN PART and DENY IN PART Plaintiff's Motion to Compel and DENY Defendant's Motion to Compel.

         BACKGROUND

         This litigation arises out of an insurance dispute between Mr. Olsen and Owners. See [#1; #3]. On or about April 23, 2017, Plaintiff was involved in a traffic collision with a third party, Varejo Manzaneras (“Ms. Manzaneras”). See [#3 at ¶ 5]. Plaintiff sustained injuries because of the traffic collision, requiring medical treatment; Plaintiff alleges his injuries also prohibited from returning to work. See [id. at ¶¶ 10, 15-19, 26-27]. Mr. Olsen, through his employer at the time, was covered under Defendant's uninsured/underinsured motorist insurance policy. See [id. at ¶ 29].

         On or about October 9, 2017, Owners gave permission to Plaintiff to accept Ms. Manzaneras's $25, 000 policy limit. See [id. at ¶ 23]. Believing this money did not cover all his injuries and medical treatment, Plaintiff sought benefits from Owners. See [id. at ¶¶ 32-36]. Over the next several months, Plaintiff continued to request benefits or an update on the status of his benefits and provided medical bills to Owners, but to no avail. See [id. at ¶¶ 32-62]. Plaintiff then initiated this suit, originally filed in the Denver County District Court but removed to this court by Owners, asserting claims against Owners for breach of contract, unreasonable delay or denial of insurance benefits pursuant to Colo. Rev. Stat. § 10-3-1115, and bad faith breach of an insurance contract. See [id. at ¶¶ 69-83].

         Relevant here, the Parties appeared before the undersigned for an informal discovery dispute conference on April 10, 2019, at which the Parties raised a host of issues regarding both Parties' production obligations in response to written discovery. See [#69]. As to the issues of Defendant's production of deemed privileged communication between its claims adjuster and it s in-house counsel and Plaintiff's production of noneconomic and impairment damages information, this court ordered further briefing on the matters. See [id.]. On April 26, 2019, the Parties filed the instant Motions to Compel. Plaintiff's Motion to Compel seeks production of approximately 48 documents that contain correspondence between Owners' claims adjuster Nicholas Zeman (“Mr. Zeman”) and its in-house counsel Andrew Torrey (“Mr. Torrey”) that Owners has withheld as privileged. See [#70; #83]. Defendant's Motion to Compel seeks production of information concerning Mr. Olsen's claimed noneconomic and impairment damages. See [#71; #84]. Because the Motions are now ripe, I consider each below.

         LEGAL STANDARDS

         Pursuant to Rule 37(a)(1), a party may move for a court order compelling disclosure or discovery, and must certify that she “has in good faith conferred or attempted to confer with the person or party failing to make disclosure or discovery in an effort to obtain it without court action.” Fed.R.Civ.P. 37(a)(1). A motion to compel may include a party's failure to produce documents requested pursuant to Rule 34. See Fed. R. Civ. P 37(a)(3)(B)(iv). “The party moving to compel discovery must prove that the opposing party's answers are incomplete[, ]” and the “party objecting to discovery must establish that the requested discovery does not fall under the scope of relevance as defined in Rule 26(b)(1).” Tara Woods Ltd. P'ship v. Fannie Mae, 265 F.R.D 561, 566 (D. Colo. 2010). Ultimately, “[t]he administration of the rule[] lies necessarily within the province of the trial court with power to fashion such orders [as] may be deemed proper to vouchsafe full discovery for the just, speedy and inexpensive determination of the lawsuit.” Robison v. Transamerica Ins. Co., 368 F.2d 37, 39 (10th Cir. 1966).

         ANALYSIS

         I. Plaintiff's Motion to Compel

         A. Applicable Law

         Because this is a diversity action, Colorado substantive law governs the scope and application of the attorney-client privilege. See White v. Am. Airlines, Inc., 915 F.2d 1414, 1424 (10th Cir. 1990) (“In a civil action based upon a state cause of action, state law controls the determination of privileges.”). By contrast, “the work product privilege is governed by a uniform federal standard embodied in Fed.R.Civ.P. 26(b)(3).” Frontier Refining, Inc. v. Gorman-Rupp Co., Inc., 136 F.3d 695, 702 n.10 (10th Cir. 1998) (citation and quotation omitted).

         Colorado has codified the attorney-client privilege in pertinent part as follows: “An attorney shall not be examined without the consent of his client as to any communication made by the client to him or his advice given thereon in the course of professional employment . . . .” Colo.Rev.Stat. § 13-90-107(b). The law is clear that the attorney-client privilege inures to the benefit and protection of the client to allow a client to gain counsel, advice, or direction with respect to the client's rights and obligations confidentially. See Mountain States Tel. & Tel. Co. v. DiFede (“DiFede”), 780 P.2d 533, 541 (Colo. 1989).

         The work product doctrine is reflected in Fed.R.Civ.P. 26(b)(3)(A), which generally protects “documents and tangible things that are prepared in anticipation of litigation or for trial by or for a party or its representative (including the other party's attorney, consultant, surety, indemnitor, insurer, or agent).” Fed.R.Civ.P. 26(b)(3)(A). The party seeking to invoke the attorney-client privilege or the work product doctrine bears the burden of establishing that it attaches.

         Neither the attorney-client privilege nor the work product doctrine is absolute as either ma y be waived. The burden of proving such waiver rests upon the party seeking to overcome the privilege. DiFede, 780 P.2d at 542; accord. H. ex rel. Holder v. Gold Fields Mining Corp., 239 F.R.D. 652, 655 (N.D. Okla. 2005) (“[T]he majority view is that the party claiming waiver has the burden of proof on that issue.”). A waiver of the attorney-client privilege or work product doctrine may be either express or implied. A waiver may be express when a party affirmatively consents to disclosure of the information. See, e.g., In re Qwest Commc'ns Int'l Inc., 450 F.3d 1179, 1185 (10th Cir. 2006) (explaining that a client may waive the attorney-client privilege by disclosing privileged communications to a third-party; noting, “Any voluntary disclosure by the client is inconsistent with the attorney-client relationship and waives the privilege.” (citation and internal quotations omitted)); Grace United Methodist Church v. City of Cheyenne, 451 F.3d 643, 668 (10th Cir. 2006) (“The work-product privilege may be waived by the voluntary release of materials otherwise protected by it.” (citation and quotation omitted)). Waiver may also be implied through conduct. See, e.g., People v. Madera, 112 P.3d 688, 691 (Colo. 2005) (“Courts have found implied waiver of the attorney-client privilege when a defendant places the allegedly privileged communication at issue in the litigation, because ‘any other rule would enable the client to use as a sword the protection which is awarded him as a shield.'” (citations omitted)).

         Unlike the attorney-client privilege, work product immunity is not automatically waived by any disclosure to a third party. In re Sealed Case, 676 F.2d 793, 802-10 (D.D.C. 1982). The general standard for determining whether protected work product must be disclosed is where (1) the materials are otherwise discoverable under Rule 26(b)(1); and (2) the party shows that it has substantial need for the materials to prepare its case and cannot, without undue hardship, obtain their substantial equivalent by other means. Fed.R.Civ.P. 26(b)(3). If disclosure of work product is ordered by the court, the court must protect against the disclosure of the mental impressions, conclusions, opinions, or legal theories of a party's attorney or other representative concerning the litigation. Fed.R.Civ.P. 26(b)(3)(B).

         In the context of insurance claims and investigations, “[n]ot every document drafted by counsel or every communication with counsel is protected by the attorney-client privilege.” Hurtado v. Passmore & Sons, L.L.C., No. 10-cv-00625-MSK-KLM, 2011 WL 2533698, at *4 (D. Colo. June 27, 2011) (citing Nat'l Farmers Union Prop. & Cas. Co. v. Dist. Court For City & Cty. of Denver, 718 P.2d 1044, 1049 (Colo. 1986) [hereinafter Nat'l Farmers Union]). “For example, the attorney-client privilege does not protect the results of a factual investigation conducted by counsel relating to the origination of an insurance policy and the validity of a claim. ” Colo. Mills, LLC v. Philadelphia Indem. Ins. Co., No. 12-cv-01830-CMA-MEH, 2013 WL 1340649, at *3 (D. Colo. Apr. 2, 2013) (citing Nat'l Farmers Union, 718 P.2d at 1048-49); accord Cornhusker Cas. Co. v. Skaj, No. 11-cv-110-S, 2012 WL 12541136, at *2 (D. Wyo. Apr. 5, 2012) (holding the work product doctrine did not protect disclosure of the insurer's investigative file, because doing so “would allow an insurance company to insulate all investigative materials generated in every case involving serious injuries long before any coverage decisions are made or threats of litigation arise.”). Indeed, “if a lawyer is acting in an investigative capacity, and not as a legal counselor, with reference to whether an insurance claim should be paid, then neither the [attorney-client] privilege . . . nor the work product privilege protects communications from a lawyer to an insurance carrier.” Munoz v. State Farm Mut. Auto. Ins. Co., 968 P.2d 126, 130 (Colo.App. 1998) (citing Nat'l Farmers Union, 718 P.2d at 1044); accord Smith v. Marten Transp., Ltd., No. 10-cv-0293-WYD-KMT, 2010 WL 5313537, at *2-4 (D. Colo. Dec. 17, 2010) (holding the neither the attorney-client privilege nor work-product doctrine applied to communications by an attorney acting as a claims investigator regarding a claim investigation or communications with a witness).

         Typically, claim investigations arising in the first-party context, like the claim at issue here, are “made in the ordinary course of business and are discoverable[.]” Weitzman v. Blazing Pedals, Inc., 151 F.R.D. 125, 126 (D. Colo. 1993) (“When an insured presents a first party claim, he is asking for payment under the terms of the insurance contract between him and the insurance company, and the insurance company owes him a duty to adjust his claim in good faith. There is no initial contemplation of litigation.”). Indeed, the roles of claims handler and attorney are not mutually exclusive. See W. Nat'l Bank of Denver v. Emp'rs Ins. Of Wausau, 109 F.R.D. 55, 57 (D. Colo. 1985) (noting that “investigations by a person who is an attorney but acting in the capacity of an investigator and adjustor for the insurance company” prepares an investigative file in the ordinary course of the insurer's business). The mere fact that an attorney is involved in a communication or drafting does not automatically render that communication or document subject to the attorney-client privilege or work product doctrine. See Perez v. Alegria, No. 15-MC-401- SAC, 2015 WL 4744487, at *4 (D. Kan. June 24, 2015) (rejecting a blanket privilege objection for the basis for prohibiting his deposition or document discovery when the attorney was also a fact witness); Heartland Surgical Specialty Hosp., LLC v. Midwest Div., Inc., No. 05-2164 MLB- DWB, 2007 WL 625809, at *6 (D. Kan. Feb. 23, 2007) (observing that privilege does not necessarily attach when an attorney also performed duties as a consultant involved in competitive business activities and decision-making).

         To the extent such communications are protected by the attorney-client privilege, courts consider whether (1) the information was provided by agents of the corporate client “to counsel acting as counsel” at the direction of supervisors; (2) the information was necessary for the provision of legal advice; (3) the agents were aware that their communications were made for the purpose of counsel rendering legal advice to the corporate client; and (4) the communications were treated as confidential. See Bonanno v. The Quizno's Franchise Co., LLC, No. 06-cv-02358-WYD-KLM, 2008 WL 1801173, at *3 (D. Colo. Apr. 18, 2008) (citing Nat'l Farmers Union, 718 P.2d at 1049 (discussing Upjohn Co. v. United States, 449 U.S. 383, 394-95 (1981))). Accordingly, the nature of the services rendered by Owners' attorneys to Owners at any given time drives whether the work product doctrine or attorney-client privilege attaches, not a particular chronology of events. See Church Mut. Ins. Co. v. Coutu, No. 17-CV-00209-RM-NYW, 2018 WL 2388555, at *5 (D. Colo. May 25, 2018).

         B. Application

         Mr. Olsen seeks production of several claim notes that contain communications between Mr. Zeman and Mr. Torrey, and which Owners has withheld as attorney-client privileged or protected by the work-product doctrine. Mr. Olsen contends that Mr. Zeman consulted Mr. Torrey in the ordinary course of Owners' claim-handling process and thus Owners must produce communications that do not seek legal advice but rather discuss the handling of Mr. Olsen's insurance claim. See [#70 at 6-7; #83 at 2-3]. Mr. Olsen argues that although Mr. Torrey is Owners' in-house counsel, he did not always provide Mr. Zeman with legal advice, and at times acted as a claim-handler, i.e., authorized independent medical examinations or settlements. See [#70 at 6-8; #83 at 2-5]. According to Plaintiff, those communications where Mr. Torrey assisted Mr. Zeman in the handling of Plaintiff's insurance claim are not subject to the attorney-client privilege or work-product doctrine. See [#70 at 6-8; #83 at 2-5].

         Owners counters that the communications at issue are subject to the attorney-client privilege and work-product doctrine because “Mr. Zeman was generally advised to seek legal counsel from Mr. Torrey if he had questions about whether his investigation of a suspicious claim would result in bad faith liability for Owners[.]” [#80 at 5]. According to Owners, it is immaterial whether Mr. Zeman contacted Mr. Torrey during the claim-handling process, as the communications concerned limiting Owners' liability in any subsequent litigation between Mr. Olsen and Owners. See [id. at 6-9].^[2] That is, “communications by an attorney that seem to ‘fall within the responsibilities of file handler' are actually shrouded by this ever-present threat of liability for bad faith claims handling.” [id. at 7]. Finally, Owners argues that the work-product doctrine also shields the Messrs. Zeman and Torrey's communications because the threat of litigation arose ...