Langdon v. Champion

• Decision Date: 01 April 1988
• Docket Number: No. S-1898,S-1898
• Citation: 752 P.2d 999
• Parties: Joanne G. LANGDON and Ronald A. Langdon, Petitioners, v. David Lee CHAMPION, Sr., d/b/a the Champion Corporation, Respondent.
• Court: Alaska Supreme Court

Page 999

752 P.2d 999

56 USLW 2579

Joanne G. LANGDON and Ronald A. Langdon, Petitioners, v. David Lee CHAMPION, Sr., d/b/a the Champion Corporation, Respondent.

No. S-1898.

Supreme Court of Alaska.

April 1, 1988.

Bernard P. Kelly, Steven Pradell, Bernard P. Kelly & Associates, Anchorage, for petitioners.

Kenneth P. Jacobus, Joe M. Huddleston, Hughes, Thorsness, Gantz, Powell & Brundin, Anchorage, for respondent.

Before RABINOWITZ, C.J., and BURKE, MATTHEWS, COMPTON and MOORE, JJ.

OPINION

BURKE, Justice.

In this appeal, petitioners Joanne and Ronald Langdon (Langdon) ask us to reverse an order of the superior court denying their motion to compel production of respondent Champion's insurance adjustors' ¹ investigative reports and files (files). Most, if not all, of the materials sought were compiled prior to commencement of suit and involvement of an attorney for Champion. The question we must resolve, therefore, is whether information in an insurance adjustor's files, prepared or obtained prior to any active participation of counsel, is protected from discovery by either the attorney-client privilege or the work product doctrine.

We conclude that statements made by an insured to an insurer are not protected by the attorney-client privilege unless it can be shown that the insurer, in receiving such communications, was acting at the express direction of counsel for the insured. Similarly, we conclude that materials contained in an insurer's files shall be presumed to have been compiled in the ordinary course of business, and, thus, outside the scope of the work product doctrine, absent a showing that the materials were prepared at the request or under the supervision of the insured's attorney.

I BACKGROUND

The action below was a personal injury suit filed by Langdon against Champion on July 9, 1986. The facts material to the issue presented here are not in dispute.

The alleged tort occurred on November 26, 1984. Champion's insurance company, State Farm, and its adjustor, Mr. Ron Lee, became aware of Langdon's claims as early as September 9, 1985. On September 11, 1985, Champion gave a recorded statement to his insurance adjustor. This statement was transcribed on August 12, 1986. Actual correspondence between Langdon's attorney and Mr. Lee commenced on October 23, 1985, and continued until Langdon filed her complaint. The case was assigned to defense counsel by letter dated July 16, 1986.

On July 21, 1986, Langdon made a Request for Production of any recorded or written statements by Champion, investigative reports, including those of the insurance adjustor, and the complete insurance adjustor's file. Champion objected to production based upon the attorney-client privilege and the work product doctrine. Langdon then filed a Motion to Compel Production which superior court judge Milton M. Souter denied without comment, citing Civil Rule 26(b)(3). We granted Langdon's petition for review of this order.

II STANDARD OF REVIEW

The issue whether an insurance adjustor's reports and files are protected by the attorney-client privilege or the work product doctrine is a question of law. The standard of review on issues of law is de novo or independent judgment. Walsh v. Emerick, 611 P.2d 28, 30 (Alaska 1980). Under this standard, it is our duty "to adopt the rule of law that is most persuasive in light of precedent, reason and policy." Brooks v. Brooks, 733 P.2d 1044, 1055 (Alaska 1987) (quoting Guin v. Ha, 591 P.2d 1281, 1284 n. 6 (Alaska 1979)).

III ATTORNEY-CLIENT PRIVILEGE

Under the general rule, Langdon is entitled to discover any relevant, unprivileged information. Alaska R.Civ.P. 26(b)(1). ² The first issue we must resolve, then, is whether statements made by an insured to his insurer ³ are protected from discovery by the attorney-client privilege.

The attorney-client privilege allows a client to refuse to disclose, and to prevent others from disclosing, confidential communications between the client and his attorney or the attorney's representative, or between the client and the client's representative, made for the purpose of facilitating the rendition of legal services to the client. Alaska R.Evid. 503(b). ⁴ A representative of the lawyer is one employed to assist the lawyer in rendering legal services; a representative of the client is one having authority to obtain legal services and act on legal advice on behalf of the client. Alaska R.Evid. 503(a)(2) and (4). ⁵ Determination of the privilege issue in the present context will necessarily turn upon whether a client's insurance adjustor may properly be considered a representative of the client or his attorney within the meaning of these provisions.

We begin by concluding that an insurer is not a "representative" of the client within the meaning of Evidence Rule 503(a)(2). Although, at first glance, an insurer would appear to fall within the definition of a claimant's representative, the commentary to Rule 503(a)(2) clearly suggests otherwise. That commentary indicates that the definition of a client's representative was included in the Rules solely as a means by which to adopt the "control group" test governing assertion of the attorney-client privilege by corporate clients. There is no indication that the definition was intended to extend the protection of the privilege to communications made to third parties such as insurers.

Whether an insurer is a representative of the attorney within the meaning of Evidence Rule 503(a)(4), however, is a closer question. We have never squarely decided this issue, ⁶ and those jurisdictions which have considered it are sharply divided.

A shrinking majority of states prohibit discovery of statements made by aninsured to his insurer. Most of these courts base their decision on provisions in the insurance policy which require the insurer to defend the insured and the insured to cooperate in the investigation. See, e.g., Gene Compton's Corp. v. Superior Court, 205 Cal.App.2d 365, 23 Cal.Rptr. 250, 252-56 (1962); Grand Union Co. v. Patrick, 247 So.2d 474, 475 (Fla.App.1971); People v. Ryan, 30 Ill.2d 456, 197 N.E.2d 15, 17-18 (1964); Asbury v. Beerbower, 589 S.W.2d 216, 217 (Ky.1979); State ex rel Cain v. Barker, 540 S.W.2d 50, 53-54 (Mo.1976); Brakhage v. Graff, 190 Neb. 53, 206 N.W.2d 45, 47-48 (1973); Thomas v. Harrison, 634 P.2d 328, 334 (Wyo.1981). See generally Annotation, Privilege of Communications or Reports Between Liability or Indemnity Insurer and Insured, 22 A.L.R.2d 659, 660-62 (1952).

These courts reason that because the insured has delegated the conduct of the defense to the insurance company, "the insured may properly assume that the communication is made to the insurer as an agent for the dominant purpose of transmitting it to an attorney for the protection of the interests of the insured." ⁷ Ryan, 197 N.E.2d at 17. These courts are also concerned that communication between the insured and the insurer would be inhibited or that the insured would be faced with the dilemma of either refusing to cooperate with his insurer in violation of his policy or face possible civil or criminal exposure if the communication was disclosed. E.g., State ex rel. Cain, 540 S.W.2d at 56-57; see also Thomas, 634 P.2d at 334; Kandel v. Tocher, 22 A.D.2d 513, 256 N.Y.S.2d 898, 900 (1965) (characterizing liability insurance as "litigation insurance" and stressing desirability of encouraging complete candor between insured and insurer).

A substantial and growing minority of state courts, on the other hand, have concluded that statements made to an insurer by the insured are generally not protected by the attorney-client privilege. Longs Drug Stores v. Howe, 134 Ariz. 424, 657 P.2d 412, 415-16 (1983); Butler v. Doyle, 112 Ariz. 522, 544 P.2d 204, 207 (1975); Conley v. Graybeal, 315 A.2d 609, 610 (Del.Super.1974); DiCenzo v. Izawa, 723 P.2d 171, 176-78 (Haw.1986); Alseike v. Miller, 196 Kan. 547, 412 P.2d 1007, 1017 (1966); Jacobi v. Podevels, 23 Wis.2d 152, 127 N.W.2d 73, 75-76 (1964). The federal rule is likewise. E.g., Rogers v. Aetna Casualty & Surety, 601 F.2d 840, 845 (5th Cir.1979); Jackson v. Kroblin Refrigerated Xpress, 49 F.R.D. 134, 136-37 (N.D.W.Va.1970); Gottlieb v. Bresler, 24 F.R.D. 371, 372 (D.D.C.1959); Kulich v. Murray, 28 F.Supp. 675, 676 (S.D.N.Y.1939).

Courts adopting this view reason that communications between insured and insurer are not in the same class as communications between client and attorney, because the insurer may use its information for purposes inimical to the interests of the insured. Butler, 544 P.2d at 207; DiCenzo, 723 P.2d at 177; Jacobi, 127 N.W.2d at 76. In the words of the Wisconsin Supreme Court:

When the insured makes ... a statement he is ordinarily fulfilling a condition of his policy, requiring him to notify the insurer of the occurrence and circumstances of the accident and to cooperate with the insurer. If the statement be false, the insurer may use it against the insured as foundation for a claim of noncooperation. If the statement discloses facts giving rise to some other defense against the insurer's liability under the policy, the insurer is doubtless free to make use of those facts.

Jacobi, 127 N.W.2d at 76. Similarly, the Arizona court in Butler stated:

The insurance carrier is more than a mere agent transmitting the policyholder's statement to the attorney hired to defend the insured.

The insurance carrier has the right to review and consider the statement submitted by the insured for any legitimate purpose connected with the business of the company. Coverage, cooperation, and renewal are a few of the matters, in addition to consideration of the potential claim, for which the insurer may use the statement of the insured. The use of the statement for a purpose adverse to the interest of the insured is certainly inconsistent with the claim of privilege upon his behalf.

544 P.2d at 207. See also DiCenzo, 723 P.2d at 177 (quoting Jacobi and Butler )....