Allstate Indem. Co. v. Ruiz

• Decision Date: 07 April 2005
• Docket Number: No. SC01-893.,SC01-893.
• Citation: 899 So.2d 1121
• Parties: ALLSTATE INDEMNITY COMPANY, et al., Petitioners, v. Joaquin RUIZ and Paulina Ruiz, Respondents.
• Court: Florida Supreme Court

899 So.2d 1121

ALLSTATE INDEMNITY COMPANY, et al., Petitioners, v. Joaquin RUIZ and Paulina Ruiz, Respondents.

No. SC01-893.

Supreme Court of Florida.

April 7, 2005.

David B. Shelton and Lori J. Caldwell of Rumberger, Kirk and Caldwell, Orlando, Florida, for Petitioner.

Henry A. Seiden, West Palm Beach, Florida and Philip d. Parrish, Miami, Florida, for Respondent.

William F. Merlin, Jr. and Mary E. Kestenbaum of Gunn Merlin, P.A., Tampa, Florida on behalf of United Policyholders, as Amicus Curiae.

LEWIS, J.

We have for review Allstate Indemnity Co. v. Ruiz, 780 So.2d 239 (Fla. 4th DCA 2001), which expressly and directly conflicts with a number of cases from other district courts with regard to issues concerning application of work product privilege to shield documents from discovery in the insurance bad faith context. See Vesta Fire Ins. v. Figueroa, 821 So.2d 1233 (Fla. 5th DCA 2002)

; Fla. Farm Bureau Gen. Ins. Co. v. Copertino, 810 So.2d 1076 (Fla. 4th DCA 2002); Wal-Mart Stores, Inc., v. Ballasso, 789 So.2d 519 (Fla. 1st DCA 2001); McRae's, Inc. v. Moreland, 765 So.2d 196 (Fla. 1st DCA 2000); Prudential Ins. Co. of Am. v. Fla. Dep't of Ins., 694 So.2d 772 (Fla. 2d DCA 1997); Anchor Nat'l Fin. Servs., Inc. v. Smeltz, 546 So.2d 760 (Fla. 2d DCA 1989). Because we conclude there is clearly conflict and confusion in the application of discovery concepts in the case law, and particularly in the insurance bad faith context, we determine that we have jurisdiction in this case and that we should exercise our discretion to resolve the conflict. See art. V, § 3(b)(3), Fla. Const. It is our view that the conflict regarding whether the work product privilege attaches to materials created when litigation is "substantial and imminent" as held in Ruiz, as opposed to when legal action is "merely foreseeable," as held in the conflict cases, in this context is an unnecessary and unfortunate outgrowth of the inappropriate distinctions with regard to discovery rules applicable to statutory first-party and third-party bad faith actions, whether statutory or common law, developed by Florida courts, and generated by interpretations of our decision in Kujawa v. Manhattan National Life Insurance Co., 541 So.2d 1168 (Fla.1989). For the reasons set forth herein, we quash the decision of the district court below, remand the case to the district court for further consideration consistent with this opinion, clarify the applicable law and recede from our decision in Kujawa.

BACKGROUND AND FACTS

The instant action stems from the improper deletion of a covered vehicle from the Ruizes' Allstate Indemnity insurance policy by an Allstate agent. One month after securing insurance coverage for their Chevrolet Blazer, Paulina Ruiz purchased an Oldsmobile Cutlass, and instructed the Allstate agent, Paul Cobb, to add that vehicle to the policy. When Cobb added the Cutlass to the policy, he also incorrectly deleted the Blazer. The Ruizes were not notified that the Blazer was no longer covered under their insurance policy.

Subsequently, Joaquin Ruiz was involved in an accident while driving the Blazer, and submitted a normal claim for collision coverage. Allstate Indemnity initially simply denied coverage, asserting that the Blazer was not covered under the policy. The Ruizes initiated a legal action alleging that Allstate Insurance and Allstate Indemnity had engaged in bad faith and unfair claim settlement practices in violation of section 624.155 of the Florida Statutes. In addition to the bad faith claim, the Ruizes' complaint contained one count of negligence against agent Cobb and one count based upon vicarious liability for that negligence against Allstate Insurance. Subsequently, but not until a month after the commencement of the legal action, Allstate Indemnity finally admitted its obligation for collision coverage and to provide benefits to the Ruizes.

After resolution of the basic coverage issue, the Ruizes requested that the trial court compel production of certain documents, including Allstate Indemnity's claim and investigative file and materials, internal manuals, and Paul Cobb's file in connection with the pending alleged "bad faith" action. After an in-camera review, the trial court correctly ordered the documents produced, determining that the documents were relevant and reflected Allstate's handling of the underlying claim and did not constitute work product or attorney-client communications which could be concealed from disclosure. The trial court never addressed the question of whether the Ruizes would have been able to satisfy the standard set forth in rule 1.280(b)(3) of the Florida Rules of Civil Procedure for the discovery of protected work product.

Allstate petitioned the Fourth District Court of Appeal for a writ of certiorari, seeking review of the trial court's order providing discovery, and the district court granted relief in part. Allstate urged that because the problem and dispute associated with coverage was immediately apparent when it refused to make proper payment pursuant to the contract, litigation was anticipated at all pertinent times associated with each of the Ruizes' discovery requests from even the very outset of their interactions and, therefore, none of the material was subject to disclosure. See Ruiz, 780 So.2d at 240

. The district court correctly rejected Allstate's argument, noting: "Generally, an insurer's claim and litigation files constitute work product and are protected from production. The analysis differs however when an insurance company is sued for bad faith." Id. (citations omitted). However, the court then attempted to draw a distinction between "material prepared during the normal course of evaluating a claim and materials actually prepared `in anticipation of litigation.'" Id. at 241. Based on that distinction, the district court correctly determined that several items were not protected work product and were properly discoverable, including Cobb's statement of January 7, 1997; computer diaries and entries from the date Joaquin Ruiz reported the accident on December 28, 1996, through January 10, 1997; and an internal memorandum from the insurance adjuster, Mary Jidy, to her boss dated January 7, 1997. See id. at 240. The district court reversed the trial court's determination with regard to the balance of the documents sought, however, determining that such items were prepared in anticipation of litigation and were thus protected work product not subject to discovery. See id. at 241. The Ruizes assert in this Court that this clearly cannot be the standard for discovery in the insurance bad faith context because the manner in which the underlying benefit dispute was litigated and processed along with the material information related thereto is at the heart of the bad faith dispute and any informed resolution.

We granted Allstate's petition to review the district court's determination which analyzed and addressed the asserted work product privilege. Allstate Indem. Co. v. Ruiz, 796 So.2d 535 (Fla.2001) (table).

ANALYSIS

The instant action causes us to review and revisit previous decisions regarding discovery issues that arise in bad faith insurance litigation. Section 624.155 of the Florida Statutes was designed and intended to provide a civil remedy for any person damaged by an insurer's conduct, including "[n]ot attempting in good faith to settle claims when, under all the circumstances, it could and should have done so, had it acted fairly and honestly toward its insured and with due regard for her or his interests." § 624.155(1)(b)(1), Fla. Stat. (2002). As implied by the statute, bad faith actions do not exist in a vacuum. A necessary prerequisite for any bad faith action is an underlying claim for coverage or benefits or an action for damages which the insured alleges was handled in bad faith by the insurer.

It is precisely this two-tiered nature of bad faith actions that engenders the discovery battles so often waged in bad faith litigation, and is at the heart of the matter now before the Court. Allstate asserts that work product protection should extend to and envelop the entire claim file and all files, whatever the name, in the underlying coverage or damage matter or dispute, including an extension into any bad faith litigation which may flow from the processing or litigating of the underlying claim. The insureds and injured third parties, on the other hand, often and logically seek disclosure of actual events in the claim processing as reflected in the studies, notes, memoranda, and other documentation comprising the claim file type material because such information is certainly material and relevant, if not crucial, to any intelligent and just resolution of the bad faith litigation. They assert that this is precisely the evidence upon which a "bad faith" determination is made. As the insureds succinctly posit, how is one to ever determine whether an insurance company has processed, analyzed, or litigated a claim in a fair, forthright, and good faith manner if access is totally denied to the underlying file materials that reflect how the matter was processed and contain the direct evidence of whether the claim was processed in "good" or "bad" faith?

Without access to the underlying files, the insureds assert that an insured, a litigant, judge or jury can know little of the insurer's processing of the matter, thereby jeopardizing and denying a fair analysis of any bad faith claim. They assert that the same would hold true if an insurance company simply sought to totally shield all documents that pertain to the processing of the underlying claim by asserting that such material was prepared in anticipation of the bad faith action. In other words, it is asserted that the claim litigation file material constitutes the best and only evidence of an insurer's conduct. To resolve this bad faith discovery dispute, we must first review the nature of bad faith...