WHAT INSURANCE COMPANIES NEED TO KNOW ABOUT DISCOVERY
IN FIRST-PARTY CASES AFTER ALLSTATE INSURANCE CO. V. RUIZ,899 SO.2D 1121 (FLA. 2005)
By Susan Lerner, Esq. - July 2006

Your claim and litigation files are fair game for discovery in first-party bad faith lawsuits after Allstate Insurance Co. v. Ruiz, 899 So.2d 1121 (Fla. 2005). There, Florida’s highest court receded from its 1989 decision of Kujiawa v. Manhattan National Life Insurance Co., 541 So.2d 1168 (Fla. 1989) and ruled that in first-party bad faith cases the work-product privilege does not protect materials (such as the claim and litigation files) prepared through the date of the resolution of the underlying claim for coverage.

Allstate Insurance Co. v. Ruiz in Action

In the year since the supreme court decided Allstate Insurance Co. v. Ruiz, Florida’s intermediate appellate courts have held the line against allowing discovery of work-product material in cases where the claim for coverage is still pending and those cases are discussed below. But where the uncertainty has arisen is whether Allstate Insurance Co. v. Ruiz allows discovery of the attorney-client material generated in the underlying coverage dispute.

Diverging Opinions on Attorney-Client Privilege After Allstate v. Ruiz

In Florida state court, the attorney-client privilege remains intact (at least for now). In XL Specialty Ins. Co. v. Aircraft Holdings, LLC, 929 So.2d 578 (Fla. 1st DCA 2006), the First District refused to read Ruiz broadly to eliminate the attorney-client privilege in first-party bad faith cases. The court did point out in footnote six that if the carrier asserts advice of counsel in defense of the bad faith claim, the carrier waives the privilege. The court then certified the following question to be of great public importance:

Does the Florida Supreme Court’s holding in Allstate Indemnity Co. v. Ruiz, 899 So.2d 1121 (Fla. 2005), relating to discovery of work product in first-party bad faith actions brought pursuant to section 625.155, Florida Statutes, also apply to attorney-client privileged communications in the same circumstances?

Aircraft Holdings has petitioned the Florida Supreme Court to exercise its discretionary jurisdiction in SC06-1303. As of the date of this publication, the supreme court has not ruled on whether it will accept jurisdiction. Please check www.flcourts.org for an update.

But, in Cozort v. State Farm Mutual Automobile Insurance Co., 233 F.R.D. 674 (M.D. Fla. 2005), a first-party bad faith case, a federal district judge ruled that the plaintiff was “entitled to production of all claim file or litigation file materials pertaining to coverage issues, despite State Farm’s assertion of attorney-client privilege.” The judge did allow that “the parties are currently in litigation and State Farm may be entitled to assert attorney-client privilege and, to a lesser extent, work product protection for appropriate documents created after the underlying coverage litigation ended.”

One Thing Remains Clear: Allstate Insurance Co. v. Ruiz does not require production of work product until the coverage issue is resolved

XL Specialty Ins. Co. v. Aircraft Holdings, LLC, 929 So.2d 578 (Fla. 1st DCA April 24, 2006) (the court pointed out that even if read broadly, Ruiz still would not require production of work-product or attorney-client documents while the breach of contract action was still in litigation, including any appeals).

GEICO General Ins. Co. v. Hoy, 927 So.2d 122 (Fla. 2nd DCA 2006) (reaffirming that even after Ruiz, when a litigant sues for both coverage and bad faith in the same action, the insurer’s claim file is not discoverable until the issue of coverage has been resolved: “Because Ms. Hoy is pursuing a claim for coverage under the policy and seeking to void the release she previously signed, the circuit court departed from the essential requirements of the law by ordering GEICO to produce its claim file for inspection by Ms. Hoy’s counsel. We have previously held that requiring the disclosure of an insurer’s claim file during the litigation of coverage issues would result “in irreparable harm that cannot be adequately addressed on a plenary appeal”).

Susan Lerner, Esq. is board certified by the Florida Bar as a specialist in Appellate Practice. You may contact Susan Lerner, Esq. via email at ssl@Florida-Attorneys.com.

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