State ex rel. U.S. Fidelity and Guar. Co. v. Canady

• Decision Date: 11 July 1995
• Docket Number: No. 22867,22867
• Citation: 460 S.E.2d 677,194 W.Va. 431
• Court: West Virginia Supreme Court
• Parties: STATE of West Virginia ex rel. UNITED STATES FIDELITY AND GUARANTY COMPANY and Tim Linsky, Relators, v. Honorable Herman G. CANADY, Jr., Judge of the Circuit Court of Kanawha County, and Robert M. Lovell, Respondents.

Page 677

460 S.E.2d 677

194 W.Va. 431

STATE of West Virginia ex rel. UNITED STATES FIDELITY AND GUARANTY COMPANY and Tim Linsky, Relators, v. Honorable Herman G. CANADY, Jr., Judge of the Circuit Court

of Kanawha County, and Robert M. Lovell, Respondents.

No. 22867.

Supreme Court of Appeals of

West Virginia.

Submitted May 30, 1995.

Decided July 11, 1995.

[194 W.Va. 433] Syllabus by the Court

1. "In determining whether to grant a rule to show cause in prohibition when a court is not acting in excess of its jurisdiction, this Court will look to the adequacy of other available remedies such as appeal and to the over-all economy of effort and money among litigants, lawyers and courts; however, this Court will use prohibition in this discretionary way to correct only substantial, clear-cut, legal errors plainly in contravention of a clear statutory, constitutional, or common law mandate which may be resolved independently of any disputed facts and only in cases where there is a high probability that the trial will be completely reversed if the error is not corrected in advance." Syllabus Point 1, Hinkle v. Black, 164 W.Va. 112, 262 S.E.2d 744 (1979).

2. " 'A writ of prohibition is available to correct a clear legal error resulting from a trial court's substantial abuse of its discretion in regard to discovery orders.' Syllabus Point 1, State Farm Mutual Automobile Insurance Co. v. Stephens, 188 W.Va. 622, 425 S.E.2d 577 (1992)." Syllabus Point 3, State ex rel. McCormick v. Zakaib, 189 W.Va. 258, 430 S.E.2d 316 (1993).

3. When a discovery order involves the probable invasion of confidential materials that are exempted from discovery under Rule 26(b)(1) and (3) of the West Virginia Rules of Civil Procedure, the exercise of this Court's original jurisdiction is appropriate.

4. The burden of establishing the attorney-client privilege or the work product exception, in all their elements, always rests upon the person asserting it.

5. When a circuit court's discovery ruling with respect to privileged materials will result in the compelled disclosure of those materials, a hard and more stringent examination will be given on appeal to determine if the circuit court abused its discretion.

6. Unless obviously correct or unreviewably discretionary, rulings requiring attorneys to turn over documents that are presumably prepared for their clients' information and future action are presumptively erroneous.

7. "In order to assert an attorney-client privilege, three main elements must be present: (1) both parties must contemplate that the attorney-client relationship does or will exist; (2) the advice must be sought by the client from that attorney in his capacity as a legal adviser; (3) the communication between the attorney and client must be identified to be confidential." Syllabus Point

[194 W.Va. 434] 2, State v. Burton, 163 W.Va. 40, 254 S.E.2d 129 (1979)

8. A party may waive the attorney-client privilege by asserting claims or defenses that put his or her attorney's advice in issue.

9. Where the work product exception is asserted, a circuit court must consider that the protection stemming from this privilege belongs to the professional, rather than the client, and that efforts to obtain disclosure of opinion work product should be evaluated with particular care.

James D. McQueen, Jr., Lisa A. Moncey, Joseph K. Reeder, McQueen & Brown, L.C., Charleston, for relators.

George B. Morrone III, Kenova, Amy M. Herrenkohl, Barboursville, for respondents.

CLECKLEY, Justice:

In this original proceeding for a writ of prohibition, we are asked to vacate an order entered on April 21, 1995, by the respondent judge, the Honorable Herman G. Canady, Jr., of the Circuit Court of Kanawha County, directing counsel for the defendants below and the relators herein, United States Fidelity and Guaranty Company (USF & G) and Tim Linsky, an adjuster for USF & G, to produce four documents they assert are protected by the attorney-client privilege and/or the attorney work product exception. The order does not state any of the respondent judge's reasons for directing the relators to produce the documents other than it was "[u]pon mature consideration ... and after hearing argument of counsel[.]" The relators contend they will suffer irreparable harm if they are forced to disclose the documents. We issued a rule to show cause and now grant the writ of prohibition.

I. FACTS AND PROCEDURAL BACKGROUND

The underlying claim arose from a dispute over fire insurance coverage between USF & G and the plaintiff below and the respondent herein, Robert M. Lovell. On April 14, 1992, a residential dwelling owned by Mr. Lovell and insured by USF & G was destroyed totally by fire. As a result, Mr. Lovell filed a claim with USF & G to collect the proceeds under his insurance policy. Mr. Linsky was assigned to adjust the claim.

For various reasons, USF & G suspected the fire may have been the result of arson and, thus, did not pay Mr. Lovell the proceeds of his insurance policy pending an investigation. USF & G employed its Special Investigations Unit (SIU) and, on or about July 1, 1992, retained Craig McKay, a lawyer, to investigate the claim. On November 6, 1992, after nearly seven months without receiving the insurance proceeds, Mr. Lovell filed a civil action against USF & G and Mr. Linsky. In his action, Mr. Lovell alleged breach of contract, unfair trade practices, and other general claims of bad faith insurance practices.

According to the relators, on November 4, 1992, two days prior to Mr. Lovell filing his suit, it was decided that USF & G would pay the claim contingent upon the outcome of certain scientific testing. After receiving the test results, the relators maintain the SIU gave the claim back to an adjuster on November 8, 1992, for disposition. To the contrary, Mr. Lovell strongly contests USF & G's assertion that it decided to cover the claim prior to his suit.

On or about November 10, 1992, USF & G retained James D. McQueen, Jr., another lawyer, to defend and advise it with regard to the civil action brought by Mr. Lovell. By affidavit, Mr. McKay states he was relieved of his responsibilities after he learned of the pending lawsuit, which occurred on or about November 9, 1992. On November 12, 1992, Mr. McKay sent William Kimmel, a senior claims examiner for USF & G, a document entitled "LITIGATION REPORT." Mr. McKay averred that this document summarizes the facts of the case, his activities, his mental impressions and opinions, and his evaluation of the pending bad faith action. Due to the nature of the report, the relators assert Mr. McKay acted in his capacity as a lawyer, and, thus, the report is protected by the attorney-client privilege. On the other The report written by Mr. McKay is only one of four documents at issue in this case. The other three documents include: A letter written by Mr. McQueen, dated November 25, 1992, and sent to Bob Siems, USF & G's in-house counsel, and Mr. Kimmel; an electronic mail message from Mr. Kimmel to Mr. Siems, which references the letter written by Mr. McQueen; and a copy of the November 25, 1992, letter from Mr. McQueen to Mr. Kimmel and Mr. Siems via a facsimile transmission from Mr. McQueen to Mr. Linsky. All four documents were prepared after suit was filed. The relators assert all the documents are protected by the attorney-client privilege and, because they were prepared in anticipation of litigation, also are protected by the work product doctrine.

[194 W.Va. 435] hand, Mr. Lovell argues that an insurance company "should not be permitted to protect its claims file generated during the adjustment and investigation of a fire loss claim, simply because it hired an attorney to perform the factual investigation into whether the claim should be paid."

On or near December 8, 1992, USF & G agreed to pay Mr. Lovell the full limits of his policy for his property losses. In spite of this agreement, Mr. Lovell maintained his action against USF & G and Mr. Linsky for bad faith and unfair trade practices. For more than two years, the parties participated in discovery on Mr. Lovell's remaining claims. Problems arose, however, when the relators refused to produce certain documents maintaining the documents were not discoverable because they are protected under the attorney-client privilege and/or the work product doctrine. ¹ During the course of discovery, the relators produced numerous documents, including post-suit documents. On August 24, 1994, the respondent judge endorsed a stipulation by the parties that the documents referenced by the stipulation would not by their identification or production "act as a waiver of any privilege for which the parties are entitled as a matter of law." Of those who are affiliated with the four documents at issue in this case, Mr. Lovell asserts that all except for Mr. McQueen were identified as witnesses by the relators and were deposed.

On April 14, 1995, the circuit court held an in camera hearing to inspect the documents in controversy. The documents were filed under seal and were not shown to Mr. Lovell or his counsel. Upon review of the documents, the circuit court ruled the four documents are discoverable and should be disclosed. ² The relators now seek a writ of prohibition from this Court to prevent the disclosure of those documents. ³

In his reply to the relators' petition for a writ of prohibition, the respondent judge said that, in addition to his remark that he "found the documents to be 'highly relevant,' ... the record reflects [he] ... meant to say [that the] plaintiff is probably going to need the documents in order to meet his burden of proof, and that this conclusion was drawn after careful and conscientious consideration of the facts[.]" Thus, the respondent judge asserts that, although it was not explicitly articulated, Mr. Lovell demonstrated a " 'substantial need' " for the documents. Moreover, the respondent judge requests this...