Insurance Company Seeks Protective Order in New Mexico Lawsuit for Bad Faith Denial of Uninsured Motorist Coverage

Though parties to personal injury litigation in American federal courts have broad discovery rights, certain materials are protected in the discovery process including those that are subject to the attorney-client and work product privileges. In a recent case, the United States District Court for the District of New Mexico granted in part a motion for a protective order brought by an insurance company defendant.

The case arose after an insurance company denial of coverage. A woman was involved in a New Mexico motor vehicle accident with an unknown driver, following which she made a claim with her insurance company for uninsured motorist (UM) coverage. The insurance company denied coverage, taking the position that its insured was 100% at fault for the accident. The insured driver then sued for UM benefits and punitive damages and a jury found the UM driver 100% at fault and awarded the insured driver damages.

Thereafter the plaintiff sued her insurance company for breach of contract, bad faith, negligence, and unfair practices for the insurance company’s failure to pay the claim, including paying the jury verdict, and for its handling of the claim through the underlying lawsuit. The insurance company paid the jury verdict and sought a protective order with respect to discovery sought by the plaintiff.

The court applied Federal Rule of Civil Procedure 26. Rule 26(b)(1) allows discovery of “any nonprivileged matter that is relevant to any party’s claim or defenses and proportional to the needs of the case. . . .” Rule 26(c)(1) goes on to provide, however, that a court may “for good cause, issue an order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense,” including “forbidding the disclosure or discovery” or “forbidding inquiry into certain matters, or limiting the scope of disclosure or discovery to certain matters.” In this case the court agreed with the insurance company that conduct of its adjusters and employees during the underlying litigation was not relevant to whether the insurance company acted in bad faith in refusing to cover the plaintiff’s claim. Alternatively, the court found that documents and communications of the insurance company following denial of coverage were protected from discovery because of the work product doctrine, which protects from disclosure materials prepared in anticipation of litigation. This doctrine had not precluded discovery from the insurance company adjusters who initially handled the plaintiff’s claim and made a liability determination, who had been deposed at the point the insurance company sought a protective order.

Next the court protected from discovery written reports prepared by counsel to the insurance company during the underlying litigation. The plaintiff had argued that the insurance company’s counsel had been working as a claims adjuster so the attorney-client privilege did not apply. The court differentiated the situation before it from ones cited by the plaintiff, in which counsel acted in the ordinary course of business as a claims adjuster. In this case the court concluded that counsel’s report had been prepared following the insurance company’s denial of coverage and in anticipation of litigation and was, therefore, protected from discovery. The court also denied the plaintiff discovery of a PowerPoint presentation she asserted the defendant insurance company used to train claim handlers. The plaintiff had argued that the presentation was discoverable because it was not specific to a claim but rather was a general training for litigation adjusters. The court concluded that the presentations were still protected by the attorney-client privilege because they facilitated counsel’s provision of legal advice. The court asked for these materials to be submitted for in camera review to ensure they did not contain other information, not protected by privilege, such as information concerning business matters or management decisions.

If you or a loved one has suffered personal injuries following a car accident, there may be grounds for recovery. Insurance companies are among the parties that may be responsible for paying for the costs of an accident. They are sophisticated litigants, and often try to cause litigation to be drawn out in order to gain an advantage over their insureds and others. To understand more about your case, call New Mexico insurance bad faith lawyer Matthew Vance at the Law Office of Matthew Vance, P.C. We provide a free consultation and can be reached at (505) 242-6267 or online.

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