E.B. Metal Industries v. State

• Decision Date: 08 February 1988
• Docket Number: No. 72971,72971
• Parties: E.B. METAL INDUSTRIES, Claimant, v. The STATE of New York, Defendant.
• Court: New York Court of Claims

Page 516

525 N.Y.S.2d 516

138 Misc.2d 698

E.B. METAL INDUSTRIES, Claimant, v. The STATE of New York, Defendant.

Claim No. 72971 Court of Claims of New York.

Feb. 8, 1988.

DeGraff, Foy, Conway, Holt-Harris & Mealey by Michael J. Cunningham, Albany, for claimant.

Robert Abrams, Atty. Gen. by John J. Pickett, Asst. Atty. Gen., Albany, for defendant.

EDWIN MARGOLIS, Judge.

Claimant seeks an order compelling compliance with its demand for discovery and inspection dated July 7, 1987. The underlying action is for property damages resulting from flooding in the Town of Whitehall, New York, in May and June 1984. Claimant alleges that the flooding and consequent damage to its property was caused by the negligence of the State in the design, construction and operation of a temporary cofferdam on the Champlain Canal.

Only two of the demands contained in the original request remained in dispute as of the return date of this motion, and the State subsequently withdrew its objection to one of those demands by letter dated December 29, 1987.

The remaining item in dispute is the request, contained in Paragraph 7 of claimant's demand, for the following information:

Records with respect to claims submitted to the State by persons claiming property damage or personal injury as a result of flooding in or about Whitehall, New York in May and June, 1984.

The State declines to comply with this request on the ground that settlement records are immune from discovery. Initially, the court must reject claimant's argument that the State has waived its objections by failing to submit a timely motion for a protective order. Recourse to CPLR 3122 is not strictly required when the party objecting to discovery relies on statutory authority exempting certain items from discovery. ( Greene v. Lee, 112 A.D.2d 140, 490 N.Y.S.2d 830; Whittington v. Rectors of Church of Advent, 54 A.D.2d 732, 387 N.Y.S.2d 674.)

The immunity that is primarily relevant in this situation is that provided to material "prepared in anticipation of litigation or for trial" (CPLR 3101[d][2], as amended by L.1985, ch. 294.). ¹ Such material is conditionally immunized from discovery and inspection, whether it was prepared by a lawyer or non-lawyer. ( Welch v. Globe Indemnity Co., 25 A.D.2d 70, 267 N.Y.S.2d 48; Kandel v. Tocher, 22 A.D.2d 513, 516-517, 256 N.Y.S.2d 898.)

As a general rule, material prepared for litigation in a case other than the one in which disclosure is sought is not immunized. ( Firemen's Ins. Co. v. Gray, 41 A.D.2d 863, 342 N.Y.S.2d 501; Bennett v. Troy Record Co., 25 A.D.2d 799, 269 N.Y.S.2d 213.) However, there is an exception to this general rule where the litigation for which the material was prepared arose from the same occurrence or transaction underlying the case in which disclosure is sought and where disclosure would be unfair. ( Johnson, Drake and Piper, Inc. v. State of New York, 62 Misc.2d 725, 309 N.Y.S.2d 645; Cataldo v. County of Monroe, 42 Misc.2d 15, 247 N.Y.S.2d 279, affd. 20 A.D.2d 755, 247 N.Y.S.2d 1022; 7 Carmody Wait 2d § 42:84, p. 153; 44 N.Y.Jur.2d § 67, p. 396.)

In his affidavit in opposition to the instant motion, the Attorney General submitted, for the court's in camera inspection, records with respect to the two generic types of claim that were submitted to the State arising from the 1984 Whitehall flood. One was a claim filed with this court pursuant to the Court of Claims Act. With respect to an action pending in this court, material prepared for settlement or compromise of such claim under § 20-a of the Court of Claims Act is an integral component of the process of litigation, and is, therefore, immunized as material "prepared in anticipation of litigation or for trial." (CPLR 3101(d)(2).)

A different situation obtains with respect to a claim submitted under section 8 (subds. 12 through 12-f) of the State Finance Law. In such case, the State is in a position analogous to that of an ordinary liability insurance carrier. Under the State Finance Law, the Comptroller possesses the power and duty to "examine, audit and certify for payment" certain small claims. The power to audit is the power to "hear and examine, and thereupon to allow or to reject." ( People ex rel. Desiderio v. Conolly, 238 N.Y. 326, 333, 144 N.E. 629.) This function is precisely the same as that performed by a liability insurance carrier. The allowance or rejection of claims is a part of the regular course of business of both an insurance carrier under a liability insurance policy and the Comptroller under section 8 of the State Finance Law.

The decisional law of this state is that material prepared in the regular course of business to aid an insurance carrier in deciding whether to allow or reject a claim is discoverable. Only material prepared after the carrier has determined to reject such claim is immunized as material prepared in anticipation of litigation. ( Landmark Insurance Company v. Beau Rivage Restaurant, Inc., 121 A.D.2d 98, 509 N.Y.S.2d 819; E. Cuker, Inc. v. New York Property Insurance Underwriting Association, 98 A.D.2d 621, 469 N.Y.S.2d 364; Millen Industries, Inc. v. American Mutual Liability Insurance Company, 37 A.D.2d 817, 324 N.Y.S.2d 930.)

A claim filed under the State Finance Law is analytically indistinguishable from claims made to a liability insurance carrier. An investigation or report undertaken by the State, in connection with such a claim and prior to its rejection by the Comptroller, is not a report prepared in anticipation of litigation--it was prepared only to enable the Comptroller to make a decision whether or not to allow such claim. Therefore, such materials are discoverable. Of course, merely because they are discoverable does not make such material admissible into evidence at trial. ( Dattmore v. Egan Real Estate, Inc., 112 A.D.2d 800, 492 N.Y.S.2d 302, and cases cited therein.)

The State also argues "that the settlement documents are not discoverable because they are covered by the lawyer-client privilege." CPLR 4503 encompasses both the client's confidential communication to the attorney as well as the attorney's confidential advice to the client. (Richardson, Evidence, § 415 [Prince 10th ed].) As discussed above, settlement materials prepared in anticipation of litigation or for trial in this court are privileged, while those materials prepared in connection with claims under section 8 of the State Finance Law are discoverable. The related issue of attorney-client privilege...