Ruiz v Allstate

Last month, the Supreme Court of Florida once again made clear that when one party to a lawsuit is an insurance company, some parties are more equal than others.

By way of background, bad faith litigation in Florida is two-tiered: a prerequisite to a bad faith action is an underlying claim for benefits or an action for damages. When litigating a bad faith claim, the insured will invariably seek to discover the carrier’s claim file. The rational is straightforward—the insured seeks to prove that the carrier acted in bad faith in handling a claim, and the best evidence of the carrier’s practice in handling a given claim is the claim file. The carrier would seek to protect as much of the claim file as possible from disclosure, usually by invoking the “work product” doctrine.¹ Because this doctrine immunizes information “gathered in anticipation of litigation”, but does not protect information that was not, resolution of whether the doctrine protects a given piece of information from disclosure often hinges on whether, and if so, when the carrier “anticipated” litigation.

It is no great exaggeration to note that on this question, insurers tended to argue that they anticipated litigation from the moment the claim was filed, while insured's countered that the insurer did not anticipate litigation until the lawsuit was filed. Thus, the courts developed the two middle ground approaches of “substantial and imminent” and “merely foreseeable”. Because litigation will be “merely foreseeable” before it is “imminent”, the “merely foreseeable” standard immunized more information against disclosure than the “substantial and imminent” standard. In Allstate Indemnity Company v. Ruiz, the Supreme Court of Florida was asked to resolve which standard governed. Rather than answer that question, the Court answered another—whether an insurer can claim work product protection in a first-party bad faith claim at all.

The Court noted that while an insurer could not invoke the work product doctrine in third-party bad faith actions, carriers in first-party actions had always been able to do so, as the Court itself confirmed in Manhattan National Life Insurance Company v. Kujawa, 541 So. 2d 1168 (Fla. 1989). In Ruiz, the Court decided that it would no longer enforce this distinction, holding:

in connection with evaluating the obligation to process claims in good faith under section 624.155, all materials, including documents, memoranda, and letters, contained in the underlying claim and related litigation file material that was created up to and including the date of resolution of the underlying disputed matter and pertain in any way to coverage, benefits, liability, or damages, should also be produced in a first-party bad faith action.

Elsewhere, the opinion makes it quite clear that insurers can no longer claim immunity from disclosure for material that is concededly work product, noting “work product protection that may otherwise be afforded to documents prepared in anticipation of litigation of the underlying coverage dispute does not automatically operate to protect such documents from discovery in the ensuing, or accompanying, bad faith action.”

The Supreme Court of Florida has the final say in such things, and it is difficult to imagine that the Court can be convinced to reverse its position in Ruiz, considering that Ruiz is itself an overt reversal of Kujawa (the opinion discusses at some length the wisdom of departing from “legally erroneous decisions” to “remedy continued injustice”). Because carriers will have to live with Ruiz for the foreseeable future, our advice is to keep in mind a few key points:

• In our opinion, Ruiz does not affect coverage litigation. The Court specifically cited a decision from the Third District Court of Appeal that found a carrier’s claim file was irrelevant to questions of coverage. In the case where an insured brings coverage and bad faith actions simultaneously, the Court noted “the courts should employ existing tools, such as the abatement of actions and in-camera inspection, to ensure full and fair discovery in both causes of action.”

• Despite the decision’s sweeping language, in our opinion a carrier may still invoke the lawyer-client privilege. Lawyer-client communications are protected from disclosure by statute, not the work product doctrine.
• Work product is traditionally divided between “fact” work product and “opinion” work product. One federal appellate court described the distinction as follows:

There are two kinds of work product—ordinary work product and opinion work product. Ordinary work product includes raw factual information. Opinion work product includes counsel’s mental impressions, conclusions, opinions or legal theories. Ordinary work product is not discoverable unless the party seeking discovery has a substantial need for the materials and the party cannot obtain the substantial equivalent of the materials by other means. . . In contrast, opinion work product enjoys almost absolute immunity and can be discovered only in very rare and extraordinary circumstances, such as when the material demonstrates that an attorney engaged in illegal conduct or fraud.Baker v. GMC, 209 F.3d 1051, 1054 (8th Cir. 2000).

While the Ruiz opinion does not seem to respect this distinction, in the right case a carrier might be able to concede that while what would traditionally be called “fact” work product must be disclosed, “opinion” work product is still protected. This may be the best hope for limiting the scope of the Ruiz decision.