Hutchinson v. Farm Family Cas. Ins. Co.

• Decision Date: 01 March 2005
• Docket Number: No. 17113.,17113.
• Citation: 273 Conn. 33,867 A.2d 1
• Court: Connecticut Supreme Court
• Parties: Marie J. HUTCHINSON, Administratrix (Estate of Darcie C. Hutchinson), et al. v. FARM FAMILY CASUALTY INSURANCE COMPANY.

867 A.2d 1

273 Conn. 33

Marie J. HUTCHINSON, Administratrix (Estate of Darcie C. Hutchinson), et al. v. FARM FAMILY CASUALTY INSURANCE COMPANY.

No. 17113.

Supreme Court of Connecticut.

Argued September 20, 2004.

Decided March 1, 2005.

Steven L. Seligman, Hartford, for the appellant (defendant).

Robert T. Rimmer, with whom, on the brief, was Robert I. Reardon, Jr., New London, for the appellees (plaintiffs).

SULLIVAN, C.J., and BORDEN, NORCOTT, KATZ and VERTEFEUILLE, Js.

SULLIVAN, C.J.

The plaintiffs¹ filed a bill of discovery against the defendant, Farm Family Casualty Insurance Company, seeking the production of certain materials covered by the attorney-client privilege that were contained in the defendant's files pertaining to the plaintiffs' insurance claim. After a hearing and an in camera review of the privileged materials, the trial court rendered judgment granting the bill of discovery. The defendant appealed from the judgment to the Appellate Court and, upon a joint motion by the plaintiffs and the defendant, we transferred the appeal to this court pursuant to General Statutes § 51-199(c) and Practice Book § 65-2. We conclude that the trial court improperly granted the bill of discovery. Accordingly, we reverse the judgment of the trial court and remand the case with direction to render judgment denying the bill of discovery.

The record reveals the following relevant facts and procedural history. Darcie C. Hutchinson (decedent), the plaintiffs' twenty-one year old daughter, was killed on September 13, 1996, when a pickup truck driven by Robert A. Milefski, who was driving while under the influence of alcohol, collided with her car. Milefski had automobile liability insurance with a policy limit of $50,000. The decedent was an insured under an insurance policy issued by the defendant to the plaintiffs that provided for uninsured or underinsured motor vehicle coverage with a policy limit of $250,000 per person. In September and October, 1996, the plaintiffs and their attorney had a number of meetings and telephone conversations with the defendant's district claims manager, Marlin J. Cook, concerning the defendant's obligations under the policy. The plaintiffs allege that Cook stated that the defendant would pay the policy limit of the underinsured motorist policy as soon as Milefski's insurer paid his policy limit of $50,000, and that the defendant would deduct only that $50,000 from its payment to the plaintiffs.

On October 21, 1996, the plaintiffs brought a wrongful death action against Milefski. The plaintiffs allege that, in reliance on Cook's representations that the defendant would not deduct from its payment to them the value of any assets recovered from Milefski, they rejected an offer by Milefski's insurer to pay the policy limit in exchange for a release of all claims against Milefski and, instead, sought to recover his personal assets. Ultimately, the parties settled the suit for the policy limit of $50,000 and assets in the form of real property.² The plaintiffs allege that Cook consented to the settlement and stated again at that time that the defendant would pay the underinsured policy limit less only the $50,000 from Milefski's insurer.

After the defendant failed to make payment, the plaintiffs brought an action in the Superior Court alleging breach of contract, bad faith, violations of the Connecticut Unfair Trade Practices Act, General Statutes § 42-110a et seq., violations of the Connecticut Unfair Insurance Practices Act, General Statutes § 38a-815 et seq., reckless and wilful misconduct and fraud. Thereafter, the action was removed to the United States District Court for the District of Connecticut. On motion of the defendant and over the objection of the plaintiffs, the District Court granted the defendant's motion to compel arbitration of all claims raised in the action and dismissed the action.

Throughout the legal proceedings against the defendant, the plaintiffs sought discovery of the defendant's claims file relating to this matter. The defendant produced a redacted copy of the file, but refused to produce materials that it claimed were covered by the attorney-client privilege. The plaintiffs then brought this action for a bill of discovery seeking disclosure of the privileged materials. The trial court held a hearing on the matter on April 14 and May 19, 2003, at which the parties made arguments but presented no evidence. The plaintiffs argued that relevant privileged materials are discoverable in an action in which an insured alleges bad faith against its insurer. The defendant countered that the central issue in the plaintiffs' claim of bad faith was whether Cook had made the representations alleged by the plaintiffs, which ultimately was a credibility issue and had nothing to do with the defendant's communications with its attorneys. It further argued that the privileged materials did not fall into any of the established exceptions to the attorney-client privilege. After conducting an in camera review of the claims file, the court determined that the privileged communications were "relevant in this bad faith action." Accordingly, it concluded that "the [plaintiffs'] allegations of bad faith entitle them to have produced [the] defendant's entire claims file including communications between [the] defendant and its attorneys" and granted the bill of discovery. This appeal followed.

On appeal, the defendant claims that the trial court's determination that the materials were relevant to the plaintiffs' claim of bad faith did not justify disclosure because the materials were subject to the attorney-client privilege and did not fall into any recognized exception to that privilege. The plaintiffs counter that the allegation of a claim of bad faith against an insurer for failure to pay a claim by its very nature requires the disclosure of privileged materials. Accordingly, they argue, the court did not abuse its discretion by ordering disclosure of the materials after it had determined, following an in camera review, that the privileged materials related to the alleged bad faith conduct. We conclude that the trial court improperly determined that the allegation of bad faith entitled the plaintiffs to an in camera review of the privileged materials and that its finding of relevance justified disclosure of the materials.

We begin by addressing the standard of review. Ordinarily, "[t]o sustain [a bill of discovery], the petitioner must demonstrate that what he seeks to discover is material and necessary for proof of, or is needed to aid in proof of or in defense of, another action already brought or about to be brought." Berger v. Cuomo, 230 Conn. 1, 6, 644 A.2d 333 (1994). The trial court's ruling on the bill is subject to review for abuse of discretion. See id., at 7, 644 A.2d 333. Whether the trial court properly concluded that there is an exception to the attorney-client privilege when an insured has made an allegation of bad faith against an insurer, however, and, if so, whether it properly delineated the scope and contours of such an exception, are questions of law. See Olson v. Accessory Controls & Equipment Corp., 254 Conn. 145, 168-69, 757 A.2d 14 (2000) (whether court should recognize civil fraud exception to attorney-client privilege and limitations on exception are questions of law). Accordingly, our review of these issues is plenary.

In Metropolitan Life Ins. Co. v. Aetna Casualty & Surety Co., 249 Conn. 36, 52, 730 A.2d 51 (1999), this court recognized that the attorney-client privilege "was created to encourage full and frank communication between attorneys and their clients and thereby promote broader public interests in the observation of law and administration of justice.... Exceptions to the attorney-client privilege should be made only when the reason for disclosure outweighs the potential chilling of essential communications. It is obvious that professional assistance would be of little or no avail to the client, unless his legal adviser were put in possession of all the facts relating to the subject matter of inquiry or litigation, which, in the indulgence of the fullest confidence, the client could communicate. And it is equally obvious that there would be an end to all confidence between the client and [the] attorney, if the latter was at liberty or compellable to disclose the facts of which he had thus obtained possession...." (Citation omitted; internal quotation marks omitted.)

We also recognized in Metropolitan Life Ins. Co. that the attorney-client privilege implicitly is waived when the holder of the privilege has placed the privileged communications in issue. Id., at 52-53, 730 A.2d 51. "[B]ecause of the important public policy considerations that necessitated the creation of the attorney-client privilege [however], the `at issue,' or implied waiver, exception is invoked only when the contents of the legal advice is integral to the outcome of the legal claims of the action.... Such is the case when a party specifically pleads reliance on an attorney's advice as an element of a claim or defense, voluntarily testifies regarding portions of the attorney-client communication, or specifically places at issue, in some other manner, the attorney-client relationship. In those instances the party has waived the right to confidentiality by placing the content of the attorney's advice directly at issue because the issue cannot be determined without an examination of that advice." (Citation omitted.) Id.

In addition to the "at issue" exception to the attorney-client privilege, this court has recognized a crime-fraud exception to the privilege that extends to civil fraud. See Olson v. Accessory Controls & Equipment Corp., supra, 254 Conn. at 169, 757 A.2d 14. Under the civil fraud exception, the party seeking disclosure of privileged materials must establish both that there is probable cause to believe that the client intended to perpetrate a...