Generally, attorney-client privilege applies to communications and advice between an attorney and client and extends to documents which contain a privileged communication. Wash. Rev. Code Ann. § 5.60.060(2)(a). But, when an insured driver brings a bad faith claim against his/her insurance provider, the insured must show the insurer’s breach of the insurance contract was unreasonable, frivolous, or unfounded. To do so, insured drivers insist on access to their claim files. Currently, Washington courts are warry to determine a bright line on claim files and their protection under work-product or attorney-client privilege, but continue to compound case law addressing the issue.
Established Precedent from Richardson v. GEICO
In October, 2017, Division II Court of Appeals in Richardson v. Government Employees Insurance Company (“GEICO”), the insured driver brought action against GEICO to recover for bad faith in handling claims for underinsured motorist (UIM) and personal injury protection (PIP) benefits after initially settling a motor vehicle accident claim with the tortfeasor and applying for and receiving a denial of UIM benefits from GEICO. Richardson v. Government Employees Insurance Company, 200 Wash. App. 705, 403 P.3d 115 (2017). During the bad faith litigation, GEICO asserted attorney-client privilege and attorney work-product. The Superior Court compelled the insurer to produce privileged documents and information; but the Court of Appeals granted discretionary review. Id.
The Court noted insured drivers need special considerations for bad faith claims against insurers, and so the insured generally is entitled to access the insured’s claims file because work product and attorney-client privilege cannot be invoked to the insurer’s benefit where the only issue in the case is whether the company breached its duty of good faith in processing the insured’s claim. Id; Wash. Rev. Code Ann. § 5.60.060(2)(a); Wash. Super. Ct. Civ. R. 26(b)(4). However, the Court determined there is no presumption of the insurer’s waiver of the attorney-client privilege during discovery in insured’s suit alleging bad faith in handling claim for UIM benefits, and because there is no presumption, the insured must overcome a higher bar in order to discover privileged pre-litigation information. Wash. Rev. Code Ann. § 5.60.060(2)(a).
In accordance, the Court established insurer’s documents and materials that were protected by attorney-client privilege and work-product doctrine and were generated after insured file suit were not subject to discovery in action alleging bad faith in handling claim for UIM benefits, and discovery of the insurer’s privileged post-litigation materials would be contrary to public policy since allowing litigation conduct to serve as evidence of bad faith would undermine insurer’s right to contest questionable claims and to defend itself against them. Wash. Rev. Code Ann. § 5.60.060(2)(a); Wash. Super. Ct. Civ. R. 26(b)(4).
Washington courts have cited to Richardson v. Government Employees Insurance Company when analyzing the scope of discovery for first-party bad faith claims, but have yet to establish a bright line on the matter. This effectively allows courts to reassess the scope of discoverable material in bad faith claims for every similar but new suit filed against an insurer in Washington.
Impact of Court Conclusions in Leahy v. State Farm
The scope of discovery in first-party bad faith claims has been further analyzed in Leahy v. State Farm, where the insured driver sued an insurance company and received a jury award for $884,017.31 in damages for her requested UIM payout, and then amended her complaint to add extraontractual claims for bad faith insurance practices, violation of the Consumer Protection Act, and violation of the Insurance Fair Conduct Act. Leahy v. State Farm, 3 Wash.App.2d 613, 418 P.3d 175 (2018). The trial court dismissed these claims on summary judgment, but were reversed on appeal. On appeal, Leahy contended the trial court abused its discretion in allowing State Farm to withhold documents based on work product. Id. As similarly held in Richardson v. Government Employees Insurance Company, the Court opined the insured who brings a first-party bad faith claim against a UIM insurer must overcome the higher bar applicable to discovery, whereby the attorney-client privilege protects communications and advice between an attorney and client and extends to documents which contain a privileged communication.
Included in the court’s analysis on the disclosure of claim file materials, the Court asserted Richardson v. Government Employees Insurance Company failed to provide helpful guidance on the current claim because Leahy sought materials after her initial demand and judgment for UIM payout occurred, but before she filed suit for the bad faith claims. However, as the two cases are not factually dissimilar, the Court of Appeals’ opinion in Leahy actually reinforces precedent set in Richardson v. Government Employees Insurance Company, standing for the proposition that the Court must require the insured driver to demonstrate she had a substantial need for certain documents in the insurer’s claim file.
In furtherance of the precedent set in Richardson v. Government Employees Insurance Company, the Court in Leahy upheld the trial court’s designation of materials created (a) in the ordinary course of business and which were (b) in anticipation of litigation, irrespective of when litigation was initiated, and allowed the insurer to withhold such documents based on work product doctrine. In addition, the Court opined the insured was not entitled to discover documents in the insurer’s claims file covered by attorney-client privilege, it protected all communication between insurer and its attorneys for purposes of the bad faith claim. Id.
Leahy highlights the same court precedent regarding the established higher bar an insured must overcome before privileged claim file materials will be discoverable. But, because the Court focused on defining the scope of privilege for materials before litigation was initiated, Leahy court precedent modifies and adds to the Court precedents set in Richardson. While the Leahy court chose not to expand upon the precedent Richardson set regarding post-initiation-of-litigation materials, this tends to shows the court’s willingness to uphold insurer’s attorney-client privilege and work-product protections, to which Washington insurers and attorneys should be kept apprised.