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The Ohio Second District Court of Appeals recently overturned a trial court’s prior discovery order which had directed that State Farm disclose certain contents of its claim file.
The underlying matter involved both an uninsured motorist (UM) / breach of contract claim coupled with a bad faith claim. In 2019, Plaintiff Ryan was injured in a motor vehicle accident with an uninsured driver. Ryan submitted a claim for uninsured motorist benefits to State Farm to help cover his medical expenses, which he said totaled about $19,377. State Farm made an offer to resolve with Ryan for $15,000, which he rejected, claiming that the offer was insufficient given that his uninsured motorist carried an “each person” limit of $25,000. Ryan filed suit against State Farm alleging breach of contract and bad faith.
State Farm moved to bifurcate the claims and to stay discovery on the bad faith claim, yet the trial court denied this requested relief. In particular, Ryan served State Farm with written discovery including a request for State Farm’s claims file, including its valuation of this UM claim. Attempting to comply, State Farm produced all but 103 pages of its 920-page claim file while asserting that the information not being produced was protected as work product and as attorney-client privileged communication.
An in camera inspection was conducted by the trial court. The trial court reversed itself and bifurcated the claims, yet also ordered that all claim file materials not protected as attorney-client privileged be disclosed in discovery. State Farm argued that if it were forced to disclose these claim materials while the UM and bad faith claims were simultaneously pending, it would be unduly prejudiced. Nonetheless, the trial court ordered the disclosure of materials State Farm’s counsel argued were protected as work product.
On appeal, “The crux of State Farm’s argument is that the trial court erred in ordering Sate Farm to produce certain documents from its claims file because, regardless of whether those documents constituted information protected as work product or by the attorney-client privilege, the materials should have been deemed protected from discovery so long as a determination of the value of the underlying UM claim remained pending.” Id at ¶26. “Where the insured is simultaneously pursuing a claim for UM coverage and bad faith, the protections that are normally afforded to an insurer who is insuring a tortfeasor should not be thrown out in the interest of judicial economy, while prejudicing the insurer’s ability to negotiate or try the value of the claim.” Id.
Considering Ohio precedent, the Second District Court of Appeals held “… not bifurcating breach of contract and bad faith claims is ‘grossly prejudicial’ to the insurance company. While the trial court ordered bifurcation of the issues, it allowed discovery related to Ryan’s bad faith claim to proceed immediately, which would also be grossly prejudicial to State Farm”, and “… we find that requiring Sate Farm to divulge its otherwise protected information prior to a resolution of Ryan’s other claims would undoubtedly affect State Farm’s ability to defend and would render the bifurcation order ‘toothless.’” Id at ¶37.