Richey v. Chappell

• Decision Date: 25 June 1992
• Docket Number: No. 11S01-9206-CV-496,11S01-9206-CV-496
• Citation: 594 N.E.2d 443
• Parties: Norman RICHEY, Denise L. Richey, and Norman Richey III, By and Through his Natural Guardians, Appellants, (Plaintiffs Below), v. William G. CHAPPELL, Appellee. (Defendant Below), and Indiana Farmers Mutual Insurance Group, Non-Party Respondent, Appellee.
• Court: Indiana Supreme Court

Page 443

594 N.E.2d 443

Norman RICHEY, Denise L. Richey, and Norman Richey III, By and Through his Natural Guardians, Appellants (Plaintiffs Below), v. William G. CHAPPELL, Appellee. (Defendant Below) and Indiana Farmers Mutual Insurance Group, Non-Party Respondent, Appellee.

No. 11S01-9206-CV-496.

Supreme Court of Indiana.

June 25, 1992.

Keith R. Lyman, Terre Haute, for Norman Richey, Denise L. Richey and Norman Richey, III.

Mark D. Hassler, Frey Hunt Hassler & Lorenz, Terre Haute, for William G. Chappell.

Stephen J. Peters and William N. Ivers, Stewart & Irwin, Indianapolis, for Indiana Farmers Mut. Ins. Group.

Michael E. Brown, Rodney L. Scott, Kightlinger & Gray, Indianapolis, for amicus curiae, Ins. Institute of Indiana.

John C. Trimble, Richard K. Shoultz, Lewis Bowman St. Clair & Wagner, Indianapolis, for amicus curiae, Indiana Defense Lawyers Ass'n.

ON PETITION TO TRANSFER

KRAHULIK, Justice.

We grant transfer to decide whether a statement of an insured given to his insurer is protected from discovery by a third party.

William G. Chappell (Defendant-Appellee below) ("Chappell") and his insurance company, Indiana Farmers Mutual Insurance Group (Non-Party Respondent Appellee below) ("Farmers"), seek transfer after the Court of Appeals decided that Norman Richey, Denise L. Richey, and Norman Richey, III, (Plaintiffs-Appellants below) (collectively the "Richeys") were entitled to obtain, via a subpoena duces tecum, a copy of a statement given by Chappell to Farmers. Richey v. Chappell (1991), Ind.App., 572 N.E.2d 1338.

The facts relevant to the petition are as follows. On February 13, 1988, Chappell and the Richeys were involved in an automobile collision. Five days later, Chappell gave a statement to Farmers concerning the incident. The Richeys filed suit in 1990. During discovery, the Richeys served a subpoena duces tecum on Farmers requesting various documents. Farmers filed objections to producing some of the documents falling within the scope of the requests. The trial court examined the disputed material in camera and ordered Farmers to produce certain documents. ¹ Production was denied for the remaining documents, including Chappell's statement. The Richeys took an interlocutory appeal pursuant to Ind.Appellate Rule 4(B)(6) in connection with that portion of the trial court's order denying discovery.

As to all documents except Chappell's statement, the Court of Appeals affirmed the trial court's order because the documents (1) were inadmissible at trial and not reasonably calculated to lead to the discovery of admissible evidence, (2) were equally accessible to the Richeys, or (3) contained the opinions and conclusions of Farmers' employees. 572 N.E.2d at 1340-41. The Court of Appeals concluded that Chappell's statement was discoverable because Farmers had not sustained its burden of establishing that the statement was obtained in anticipation of litigation rather than in the normal course of Farmers' business. 572 N.E.2d at 1341-42. Farmers and Chappell seek transfer from that holding. We conclude that in third-party actions such as this one, statements given by an insured to his insurance company are privileged and are not subject to discovery by the third party.

In Indiana, the information available through discovery, although broad, is not all-inclusive. Indiana Trial Rule 26(B)(1) requires that the information sought must be relevant, admissible, or reasonably calculated to lead to the discovery of admissible evidence, and not privileged. Subdivision 3 of the Rule further refines the parameters by permitting discovery of documents or tangible items prepared "in anticipation of litigation" only upon a showing that the party seeking discovery has a substantial need for the materials and is unable, without undue hardship, to obtain the substantial equivalent by other means. Even with such a showing of hardship, however, the party seeking discovery is in no event entitled to the mental impressions, conclusions, opinions, or legal theories of an attorney or other representative of the party concerning the litigation. Our discovery rules are designed "to allow liberal discovery with a minimum of court involvement in the discovery process." Chustak v. Northern Ind. Pub. Serv. Co. (1972), 259 Ind. 390, 395, 288 N.E.2d 149, 152-3. As we recently noted in Canfield v. Sandock (1990), Ind., 563 N.E.2d 526, 531, in camera inspections, such as the one involved here, should be a rare procedure in discovery disputes.

In Indiana, the issue of whether a third party is entitled to discover an insured's statement given to his insurer has recently been decided on the basis of whether the statement was obtained in anticipation of litigation or in the ordinary course of business. See e.g. Schierenberg v. Howell-Baldwin (1991), Ind.App., 571 N.E.2d 335, 338; DeMoss Rexall Drugs v. Dobson (1989), Ind.App., 540 N.E.2d 655. In these cases, the Court of Appeals has concluded that because the defendant's insurance company did not establish that the insured's statements were obtained in anticipation of litigation, the statements were discoverable. This result has given rise to uncertainty--at the time the statement is obtained--about whether the statement will be subject to discovery. As in this case, resolving a discovery dispute about disclosure of statements has required the expenditure of court time on in camera inspections and interlocutory appeals. After considering the legal arguments, pertinent case law, and the approach taken by other states, we conclude that statements from the insured to his insurer are protected from discovery by a third party.

Under Indiana law, a communication between an attorney and a client is privileged and not discoverable. Trial Rule 26(B)(1); Colman v. Heidenreich (1978), 269 Ind. 419, 423, 381 N.E.2d 866, 869. Although the privilege is presently recognized by statute, Ind.Code Secs. 34-1-14-5 and 34-1-60-4, the privilege was first recognized in Indiana as a part of the common law by judicial decision. Jenkinson v. State (1845), 5 Blackf. 465, 466. The scope of the privilege has been defined by this Court to include communications between an attorney and the client made through their agents or representatives. Brown v. State (1983), Ind., 448 N.E.2d 10, 13-14; Bingham v. Walk (1881), 128 Ind. 164, 171, 27 N.E. 483, 486; Maas v. Bloch (1855), 7 Ind. 202.

One of the primary duties placed upon insurers by the issuance of a liability insurance policy is the obligation to defend claims filed by third persons against the insured. In order to effectively defend the claim, the insured must be questioned about sensitive matters which may be embarrassing, incriminating, or detrimental to the insured. The failure to cooperate may invalidate coverage, Miller v. Dilts (1984), Ind., 463 N.E.2d 257, and even an insured's constitutional right against self-incrimination may not override the insured's duty to cooperate with the insurance company. Standard Mut. Ins. Co. v. Boyd (1983), Ind.App., 452 N.E.2d 1074, 1079. In connection with its obligation to defend claims, the insurance company retains an attorney, not usually of the insured's own choosing, to represent the insured. Statements from the insured are then used by the attorney to assist in the defense of the insured, just as statements given by plaintiffs to their own attorneys are used to assist in the prosecution. Uncertainty about whether the insured's statements are discoverable gives rise to a conflict about...