Howell v. Alfa Ins. Corp. (In re Alfa Ins. Corp.)

• Decision Date: 05 April 2019
• Docket Number: 1170804
• Citation: Howell v. Alfa Ins. Corp. (In re Alfa Ins. Corp.), 284 So.3d 891 (Ala. 2019)
• Parties: EX PARTE ALFA INSURANCE CORPORATION et al. (In re: R.G. "Bubba" Howell, Jr., and M. Stuart "Chip" Jones v. Alfa Insurance Corporation, Alfa Mutual General Insurance Corporation, Alfa Life Insurance Corporation, and Alfa Specialty Insurance Corporation)
• Court: Alabama Supreme Court

284 So.3d 891

EX PARTE ALFA INSURANCE CORPORATION et al.

(In re: R.G. "Bubba" Howell, Jr., and M. Stuart "Chip" Jones

v.Alfa Insurance Corporation, Alfa Mutual General Insurance Corporation, Alfa Life Insurance Corporation, and Alfa Specialty Insurance Corporation)

1170804

Supreme Court of Alabama.

April 5, 2019

William P. Gray, Jr., Douglas N. Robertson, and John David Gray of Gray & Associates, LLC, Birmingham, for petitioners.

P. Ted Colquett of Colquett Law, LLC, Birmingham; and R. Matt Glover of Prince Glover & Hayes, P.C., Tuscaloosa, for respondents.

PER CURIAM.

Alfa Insurance Corporation, Alfa Mutual General Insurance Corporation, Alfa Life Insurance Corporation, and Alfa Specialty Insurance Corporation (hereinafter referred to collectively as "Alfa") petition this Court for a writ of mandamus requiring the Montgomery Circuit Court to vacate its May 23, 2018, orders (1) denying Alfa's motion for a protective order as to materials Alfa contends are protected by the attorney-client privilege and (2) compelling Alfa to produce such materials for in camera inspection and for discovery. We grant the petition and issue the writ.

I. Facts and Procedural History

The parties recently were before this Court regarding an earlier discovery order. In Ex parte Alfa Insurance Corp., 263 So.3d 689 (Ala. 2018) (" Alfa I"), Alfa sought mandamus review of a December 18, 2015, discovery order entered during the pendency of Alfa's appeal from the trial court's denial of Alfa's motion to compel arbitration, in which the trial court's judgment was affirmed, without an opinion, Alfa Ins. Corp. v. Howell (No. 1150151, Sept. 29, 2017) 267 So.3d 813 (Ala. 2017) (table). In Alfa I we summarized the pertinent factual background as follows:

"R.G. ‘Bubba’ Howell, Jr., and M. Stuart ‘Chip’ Jones were insurance agents for an Alfa insurance agency in Mississippi. Their agency agreements with Alfa included an arbitration provision, as well as a provision requiring Howell and Jones to purchase ‘errors and omissions’ insurance coverage.

"Howell and Jones purchased errors and omissions insurance policies from Alfa Mutual General Insurance Corporation (‘the E & O policies’). The certificate of insurance for the E & O policies provided that Alfa, as the insurer, would

" ‘pay on behalf of the Individual Insured all sums in excess of deductible amount for which Individual Insured is legally obligated to pay as damages as a result of CLAIMS FIRST MADE AGAINST INDIVIDUAL INSURED DURING THE COVERAGE PERIOD by reason of acts, errors, or omissions in the performance of Professional Services by the Individual Insured, provided that such acts, errors, or omissions occurred (i) when acting on behalf of [Alfa] or with the specific consent of [Alfa], and (ii) during the Coverage Period.’

"(Capitalization in original.) The certificate also sets forth three ‘key exclusions’ to coverage under the E & O policies: ‘(1) Intentional, dishonest, fraudulent, etc., acts; (2) Commingling of funds; (3) Suits/claims by business enterprises owned by Individual Insured and not named on declarations.’

"In 2012, Alfa accused Howell and Jones of selling competing products in contravention of their agency agreements; Howell and Jones, however, alleged that their actions had been approved by Alfa. Regardless, Alfa forced Howell to resign his position as an Alfa agent on December 31, 2012, and discharged Jones on January 1, 2013.

"Procedural History

"A. The First Arbitration Proceeding

"On March 27, 2013, Howell and Jones invoked the arbitration provision in their agency agreements by initiating separate arbitration proceedings against Alfa, seeking post-separation benefits and damages. On June 19, 2013, Alfa answered the complaints in arbitration and filed counterclaims against Howell and Jones alleging breach of contract, breach of fiduciary duty, fraudulent misrepresentation, suppression, and intentional interference with business relations.

"....

"On May 23, 2014, Howell and Jones submitted insurance claims under the E & O policies demanding that Alfa defend and/or indemnify costs to combat Alfa's counterclaims against them. On June 4, 2014, Alfa denied Howell's and Jones's insurance claims on the basis that[, among other reasons, Howell and Jones's conduct fell within the exclusions from coverage under their respective E & O policies]. On July 9, 2014, Alfa voluntarily dismissed its counterclaims against Howell and Jones without prejudice.^[1]

"B. The State-Court Proceedings

"On November 13, 2014, Howell and Jones filed a complaint in the Montgomery Circuit Court asserting claims of breach of contract, bad faith, abuse of process, the tort of outrage, and conspiracy against Alfa. Howell and Jones alleged, among other things, that Alfa breached the E & O policies by refusing to provide them defense and/or indemnity coverage on the counterclaims and that Alfa had filed the counterclaims, which it knew were not covered under the E & O policies, in the arbitration proceedings for the purpose of causing Howell and Jones to incur thousands of dollars in unnecessary legal expenses.

"Along with their complaint, which they subsequently amended, Howell and Jones propounded discovery requests, including a request for admissions and a request for production of documents.... They also submitted a notice of depositions, including a request for the depositions of Angela Cooner, Thomas Treadwell, Tom David, and Charles Elmore, all of whom were legal counsel for Alfa, as well as for ‘[o]utside legal counsel of [Alfa] who participated in or contributed to the drafting and filing of the counterclaims against [Howell and Jones] as dated June 19, 2013.’

"On December 9, 2014, Alfa filed a ‘Response to Requests to Admit’ in which it denied most of the requested admissions, but it also repeatedly stated that ‘[d]iscovery is ongoing and will be supplemented as permitted under the Alabama Rules of Civil Procedure, and any request for additional information not contemplated by Rule 36 will be responded to within the bounds of the Alabama Rules of Civil Procedure.’

"On May 6, 2015, Howell and Jones filed a motion to compel Alfa to answer and to respond to the first discovery requests filed on November 13, 2014. That same afternoon, Alfa filed its response and objection to the motion to compel discovery, as well as a motion for a protective order. Alfa argued that the matters, documents, and depositions requested by Howell and Jones were all protected by the attorney-client privilege....

"On August 13, 2015, the circuit court granted Howell and Jones's motion to compel discovery, giving Alfa three weeks (until September 3, 2015) to respond....

"....

"On September 3, 2015, Alfa filed a ‘Motion to Compel Arbitration, Dismiss, and Stay Proceedings.’ The motion to compel was based upon the arbitration provision in the agency agreements. Simultaneously, Alfa filed its answer to the complaint in which it noted that it was ‘specifically reserving the right to arbitrate these matters pursuant to the requirements of the Independent Exclusive Agency Agreement in effect between the parties in accordance with the Motion to Compel Arbitration filed prior to this initial Answer.’ On the same date, Alfa also filed an ‘Objection to Discovery Request and Notice of Service of Discovery Documents’ along with a privilege log listing items Alfa identified as protected by the attorney-client privilege and the work-product doctrine."

263 So.3d at 691–93. Alfa's privilege log asserted that Alfa was providing, "in accordance with the Alabama Rules of Civil Procedure," "a description of the nature of the documents, communications, or things not produced sufficient to enable the Plaintiffs to ascertain the need, or absence thereof, to contest the claim of privilege or protection." See Rule 26(b)(6)(A), Ala. R. Civ. P. The privilege log provides the pertinent Bates stamp for various documents being withheld and some description of those documents (for example, the document bearing Bates stamp "0001-0003" is described as a "[l]etter transmitting Coverage Opinion from outside counsel, concerning coverage of ... Jones, Policy Certificate No. EO-104-57"). The privilege log also includes various general descriptions such as "[a]ny and all communications, of any kind whatsoever, by or between Alfa in-house counsel and any other outside counsel representing Alfa in this or related matters, pertaining in any way to the subject matter of the Plaintiffs' Complaint or Plaintiffs' First Amended Complaint, filed in this case."

This Court's opinion in Alfa I continues as follows:

"On October 30, 2015, the circuit court denied Alfa's motion to compel arbitration, to dismiss, and to stay the proceedings.

"On November 2, 2015, Howell and Jones propounded their first set of interrogatories to Alfa. They also submitted their second set of requests for production of documents to Alfa, in which they sought the following:

" ‘1. ... [E]ach document in the custody or control of Alfa that it relied upon when it authorized the filing of counterclaims in arbitration against Chip Jones and Bubba Howell.

" ‘2. ... [E]ach piece of correspondence and/or memo in the custody or control of Alfa that touches upon or concerns the counterclaims in arbitration against Chip Jones and Bubba Howell.

" ‘3. ... [E]ach document provided to Dennis Bailey[, an attorney with the law firm Rushton, Stakely, Johnston & Garrett, P.A.,] by Alfa as part of the coverage opinion sought from Dennis Bailey regarding the claims for defense and indemnity asserted by Chip Jones and Bubba Howell pursuant to the Alfa policies issued to them.

" ‘4. ... [E]ach piece of correspondence between Alfa and Dennis Bailey or the law office of Rushton Stakely concerning the claims for defense and indemnity asserted by Chip Jones and Bubba Howell pursuant to the Alfa policies issued to them....’^[2] "On November 3, 2015, Howell and Jones filed notices of intent to serve subpoenas on the law firms of Rushton, Stakely,

...