In Lynn v. State Farm Mut. Auto. Ins. Co., ___ F. Supp. 3d ___, No. 23-cv-03222-MDB, 2024 WL 4180731 (D. Colo. Sept. 6, 2024), a U.S. Magistrate Judge dealt with the thorny issue of discovery of post-litigation claim evaluation and review materials.
The dispute was presented to the Court by the plaintiff-policyholder’s, Ms. Sheree Lynn’s, motion to compel. Injured in an automobile accident, the other party’s insurance carrier paid her that policy’s bodily injury liability limits. Ms. Lynn then claimed the underinsured motorist (UIM) benefits under her own policy with State Farm.
Ms. Lynn and State Farm disagreed over “the nature and extent” of Ms. Lynn’s injuries. Lynn, 2024 WL 4180731, at *1. She eventually brought the instant suit for insurer bad faith.
“Plaintiff seeks an order requiring the production of Defendant’s post-litigation claim review materials.” Lynn, 2024 WL 4180731, at *1. Put another way, Ms. Lynn requested among other things, materials which State Farm obtained in discovery in this bad faith case. Among the materials State Farm obtained in discovery in this bad-faith case were “over 40+ medical and employment Authorizations” from Ms. Lynn’s “’employers and medical providers,’” she told the Court. Lynn, 2024 WL 4180731, at *1.
She was not interested so much in these discovery materials per se, as in materials reflecting State Farm’s evaluation and review of this and other information after the bad-faith litigation commenced.
State Farm’s response to the plaintiff’s requested discovery included what the Court described as an admission “that it ‘continues to review information obtained post-suit[.]’ (Doc. No. 30 at 2-3, 5.)” (All brackets and parentheses by the Court.) The Court’s response was succinct insofar as establishing a right in this case to relevant, unprivileged claim evaluation material obtained and reviewed by State Farm regarding Lynn’s UIM claim after the bad-faith litigation began:
Plaintiff is entitled to know whether that review has been conducted in good faith and whether Defendant is adhering to its duty of good faith and fair dealing.
Lynn, 2024 WL 4180731, at *4. That may seem to an outside observer to have ended the matter, but it didn’t.
The reason that this was not the end of the matter lies in how the Court got to this point. The Court’s inquiry into discoverability of these materials was informed by guidance from two sources: federal proportionality of discovery, and Colorado doctrine concerning the duty of good faith and fair dealing here. To the Court, proportionality of discovery in federal court meant that the defendant carrier should not be required to produce information for which the defendant “claims work product or privilege protections over post-litigation claim review materials,” i.e., “those objections” which the defendant “reflected in a [future] privilege log.” Lynn, 2024 WL 4180731, at *4. Parenthetically, the Court had previously noted that up until this point, “so far as the Court can tell,” the defendant had not yet put these materials on a privilege log to support its “work product argument[.]” Lynn, 2024 WL 4180731, at *1.
The second source informing the Court’s resolution of the policyholder’s motion to compel production of the post-litigation claims evaluation and review materials in this case, was Colorado law. After wending its way through the thicket of Colorado cases involving the duty of good faith and fair dealing in third-party and in first-party bad faith cases (including at least one UIM case), the Court held that Colorado law would recognize a continuing duty of good faith and fair dealing in this case even after the bad-faith lawsuit was filed:
An insurer who continues to evaluate a claim is necessarily creating new discoverable documentation while the case is pending. However, unless and until Colorado law changes to relieve an insurer of its post-litigation duty of good faith, that duty must be tested through discovery. The difficulties this presents for courts should not give insurers a free pass on that discovery. Additionally, courts have many tools at their disposal to manage discovery, curtail it where necessary, and stave off discovery abuses. [Citation omitted.] Thus, the concern over process will not deter this Court from ordering relevant and proportional discovery that will facilitate adjudication on the merits. [Citations omitted.] Insureds are entitled to know whether their insurers continue to operate in good faith,, and post-litigation claim review materials are relevant to that determination.
Lynn, 2024 WL 4180731, at *4.
In the end, the issue of discoverability of post-litigation claim materials reviewed and evaluated by the defendant carrier in this insurer bad faith case required the Court to resolve the tug of Federal proportionality with the pull of State law. The Court resolved the dispute in this matter with this succinct holding:
CONCLUSION
For these reasons it is
ORDERED that Plaintiff’s Motion (Doc. No. 24) is GRANTED to the extent Defendant does not log the communication/document on a privilege log. It is DENIED without prejudice to the extent Defendant logs it on a privilege log within 10 days of this order.
Lynn, 2024 WL 4180731, at *4 (boldface in original).
The Court’s holding is so concise that I hesitate to say anything else about it. It could not be clearer. But, perhaps because I am a lawyer, I will speak. The ball is now in the insurance carrier’s court (no pun intended) and this case will go from there, depending on what the carrier does.
Please read the disclaimer. ©2024 Dennis J. Wall. All rights reserved. Interested in many things including Claims and Bad Faith Law? Check out my Substack newsletter.