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COA reverses motion allowing for release of documents

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The Indiana Court of Appeals today reversed an order from Lake Superior Court that granted a motion to compel the production of documents from the appellant-defendant Allstate Insurance Company. The trial court found that by raising an advice of counsel defense, the insurance company had waived the attorney-client privilege, and therefore the documents could be produced.

In Allstate Insurance Company v. Timothy Clancy, et al., No. 45A03-0910-CV-498, regarding a May 27, 2002, accident between a truck and a motorcycle, an attorney for Allstate had offered a $100,000 policy-limit settlement to Dianna Goad, who was hit by driver Tim Clancy, who was insured by Allstate.

She refused the settlement because her husband, who was driving a separate motorcycle and witnessed the accident and resulting injury, was not also offered a $100,000 policy-limit settlement for his emotional distress claim.

At trial in 2005, a jury found that the Goads should receive $11 million - $10 million for Dianna’s personal injury claim and $1 million for her husband’s emotional distress claim. The Indiana Court of Appeals affirmed that decision in 2006.

“Following the jury verdict, Clancy assigned his claims against Allstate to the Goads who, on May 30, 2007, filed a complaint alleging, among other things, that Allstate’s decision not to offer a $100,000 policy limit to Mr. Goad in addition to $100,000 for Mrs. Goad was made in bad faith. In its answer, Allstate stated the following affirmative defense: [t]he emotional distress claim(s) of Robert Goad in cause No. 45D11-0209-CT-200 and whether insurance coverage existed for such claims is fairly debatable. Appellant’s App. at 76,” Judge James S. Kirsch wrote in today’s opinion.

During discovery, Allstate withheld 44 pages of communication between the company and the attorney who was hired to seek declaratory relief in District Court regarding the meaning of the per-person limit language contained in the policy held by Clancy.

Because Allstate counsel said the emotional distress claim was “fairly debatable,” which Allstate used in its affirmative defense, the Goads claimed Allstate therefore waived its attorney-client privilege. The trial court agreed, but the Court of Appeals disagreed.

“We hold that the ‘fairly debatable’ defense, absent any other connection to reliance upon advice of counsel, is tantamount to a good faith defense and insufficient in and of itself to waive attorney-client privilege. Accordingly, we reverse the trial court’s order compelling discovery of the challenged documents,” Judge Kirsch wrote.

However, Judge Margret G. Robb wrote in her dissent that “when an insurer asserts that a claim is ‘fairly debatable’ refers to a legal issue, it necessarily relies on advice of counsel and waives the attorney-client privilege.”

“… Insurers might more clearly indicate when they have relied on an attorney’s legal conclusion to deny coverage – and therefore put an attorney’s advice at issue to waive the attorney-client privilege – and alternatively when they have not relied on the advice of counsel but determined that the facts of a particular case led to denial of coverage. In future cases this application of the law might clarify the substantive issues in dispute and when the attorney-client privilege is waived,” she added.
 

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  1. Just an aside, but regardless of the outcome, I 'm proud of Judge William Hughes. He was the original magistrate on the Home place issue. He ruled for Home Place, and was primaried by Brainard for it. Their tool Poindexter failed to unseat Hughes, who won support for his honesty and courage throughout the county, and he was reelected Judge of Hamilton County's Superior Court. You can still stand for something and survive. Thanks, Judge Hughes!

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