In Apex Mort. Corp. v. Great N. Ins. Co., No. 17 C 3376, 2018 WL 341661 (N.D. Ill. January 9, 2018) (Weisman, USMJ), a U.S. Magistrate Judge was confronted with numerous discovery requests in a bad faith case.
As anyone involved with any other bad faith case would have reason to expect in this case, one of the requests in this particular bad faith case asked for production of the insurance carrier's claims file.
This bad faith case was brought by a mortgagee, Apex. Apex took control of a property after it foreclosed on it. During the time that Apex controlled the property, a fire broke out. Firefighters responded and two were killed. Their estates sued the mortgagee.
The mortgagee in turn sued two of its liability carriers, Great Northern and Federal. The carriers paid for Apex's defense, and Great Northern tendered its $1 Million policy limit to settle the underlying claims against Apex, but basically the two carriers otherwise declined to do any more than that because they both relied on their common "Foreclosure Exclusion" to deny coverage. The "Foreclosure Exclusion" was the same in both of their liability insurance policies, and it was a standard foreclosure exclusion written in the following language:
“This insurance does not apply to any liability or loss, cost or expense arising out of property you acquire by foreclosure, repossession, deed in lieu of foreclosure or as mortgagee in possession.”
Apex Mort. Corp. v. Great N. Ins. Co., No. 17 C 3376, 2018 WL 341661, at *1 (N.D. Ill. January 9, 2018).
During discovery in its insurance bad faith case, Apex requested production of Federal's claims file "and documents relating to the coverage decision, this case, or ... underlying lawsuits." Federal actually did not object. Instead, Federal produced documents it claimed were responsive, but "with privileged information redacted." The Court had previously determined that the privilege assertion was an assertion of attorney-client privilege, that the assertion of attorney-client privilege was governed by Pennsylvania law, and that the privilege had not been established on the record of this particular case.
In redacting documents that it produced, however, Federal neglected to mention whether they were necessarily all of the documents requested or even what particular "privilege" Federal was asserting in redacting these documents, saying only that the redactions resulted from some unspecified "privilege" in this regard. That is how the Magistrate Judge saw it.
That being the case, and particularly since Federal did not bother to support its redactions with reasons why, the Magistrate Judge ordered these materials to be produced based upon the Court's previous rulings about the assertion of attorney-client privilege in this case:
Accordingly, the Court orders Federal to produce: (1) any non-privileged documents responsive to these requests that have not already been produced; and (2) any portions of the claims file Federal has designated as privileged that this opinion makes clear are not privileged.
Apex Mort. Corp. v. Great N. Ins. Co., No. 17 C 3376, 2018 WL 341661, at *6 (N.D. Ill. January 9, 2018) (Weisman, USMJ).
If a party to a federal lawsuit is going to conceal evidence, including during discovery, it must disclose its reasons for redaction or disclose the evidence. Or suffer the consequences if that party completely ignores the Rules and the rulings.
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