Summary
holding that a plaintiff may access the unprivileged portions of the claim file of a defendant's insurer for purposes of a motion for prejudgment interest because the “defendant's insurer conducts the pretrial negotiations and litigation and approves any offers of settlement— all in the defendant's name and for the defendant's benefit”
Summary of this case from Fraley v. Estate of OedingOpinion
No. 85-1216
Decided July 30, 1986.
Civil procedure — Motion for prejudgment interest — R.C. 1343.03(C) — Plaintiff may have access to defendant's insurer's "claims file," when — Civ. R. 26(B)(3) — In camera inspection to ascertain which materials are protected by attorney-client privilege.
O.Jur 3d Discovery § 36. O.Jur 3d Interest § 41.
1. When a plaintiff, having obtained a judgment against a defendant, files a motion for prejudgment interest on the amount of that judgment pursuant to R.C. 1343.03(C), the plaintiff, upon a showing of "good cause" pursuant to Civ. R. 26(B)(3), may have access through discovery to those portions of the defendant's insurer's "claims file" that are not shown by the defense to be privileged attorney-client communications.
2. If the defense asserts the attorney-client privilege with regard to the contents of the "claims file," the trial court shall determine by in camera inspection which portions of the file, if any, are so privileged. The plaintiff then shall be granted access to the non-privileged portions of the file.
APPEAL from the Court of Appeals for Mahoning County.
Plaintiff-appellee, Joseph R. Peyko, Jr., brought an action against the defendant-appellant, Sandra Frederick, alleging that Peyko had suffered injuries and property damage as a result of a collision between the motorcycle that he was operating and an automobile driven by Frederick. It is undisputed that counsel for the defendant made an offer to settle the case for $2,000, which was subsequently reduced to $1,500. These offers were rejected by Peyko and the matter proceeded to a trial which ultimately resulted in a jury verdict and judgment for the plaintiff in the amount of $7,500.
Subsequent to the verdict in his favor, plaintiff filed a motion for prejudgment interest, pursuant to R.C. 1343.03(C), upon the allegation that the defendant had failed to make a good faith effort to settle the case. Plaintiff then issued a subpoena duces tecum to James Leugers, claims superintendent for State Farm Automobile Insurance Company (the defendant's insurer), directing him to produce the entire claims file relative to the case at the evidentiary hearing on the motion for prejudgment interest. Leugers filed a motion to quash the subpoena duces tecum on the grounds that the material in the claims file was privileged and irrelevant to the question of whether the defendant had made a good faith effort to settle.
At the hearing on plaintiff's motion for prejudgment interest, Leugers' motion to quash was granted; and, at the close of the hearing, plaintiff's motion for prejudgment interest was denied. Plaintiff then appealed the trial court's decision to the Court of Appeals for Mahoning County, which reversed the trial court. The appellate court held that while some of the material in the file may be privileged, the party claiming the privilege has the burden of showing, during an in camera inspection of the file by the court, which materials in particular were so privileged. The appellate court also found that "it is certainly relevant * * * to explore the efforts of the insurance company which essentially was paid by the insured to handle [settlement] negotiations."
The cause is now before this court pursuant to the allowance of a motion to certify the record.
Richard D. Goldberg and John M. Durkin, for appellee.
Comstock, Springer Wilson and David C. Comstock, for appellant.
The sole issue before the court is whether a plaintiff may have access through discovery to the "claims file" of the defendant's insurer, when the plaintiff, having obtained a judgment against the defendant, files a motion for prejudgment interest on the amount of that judgment pursuant to R.C. 1343.03(C). The defendant-appellant herein essentially contends that the plaintiff-appellee may not have access to the claims file because (1) the material in the file is protected under the attorney-client communication privilege, and (2) the file is not relevant to a determination of whether the defendant failed to make a good faith effort to settle the case. We find the appellant's arguments to be unpersuasive.
With regard to the appellant's assertion that the claims file is protected by the attorney-client privilege and not subject to discovery or scrutiny by the plaintiff, we simply note that "the burden of showing that testimony [or documents] sought to be excluded under the doctrine of privileged attorney-client communications rests upon the party seeking to exclude [them] * * *." Waldmann v. Waldmann (1976), 48 Ohio St.2d 176, 178 [2 O.O.3d 373] (citing In re Martin, 141 Ohio St. 87, 103 [25 O.O. 225]). In his motion to quash plaintiff's subpoena duces tecum, claims superintendent Leugers offered no proof that any of the materials in the insurer's claims file were privileged, and he did not request the court to conduct an in camera inspection of the file. Leugers' motion relied upon the blanket assertion that the file contained privileged communications; and, because the assertion is not supported in the record, it fails to satisfy Leugers' burden of showing that the file, or any part thereof, is privileged.
Appellant's second argument, that an insurer's claims file is irrelevant to a determination of whether the defendant made a "good faith effort to settle," is based upon the assertion that the defendant (not the defendant's insurer) is solely responsible for the payment of prejudgment interest pursuant to R.C. 1343.03(C). Specifically, appellant contends that because R.C. 1343.03(C) is directed only toward "the party required to pay [a judgment]" (emphasis added) and allows an award of prejudgment interest only when that party "failed to make a good faith effort to settle the case," the files of the party's insurer are irrelevant to any determination regarding the conduct of the party. We find this argument to be without merit.
Although the defendant, individually, is ultimately responsible for payment of a judgment rendered against her and for payment of any prejudgment interest thereon, any determination regarding the defendant's efforts to settle the case that resulted in such judgment necessarily requires a review of the settlement efforts of those who acted on the defendant's behalf. It is impossible to ignore the conduct of the defendant's insurer in any determination regarding settlement efforts, unless one is to ignore the realities of litigation. The defendant's insurer conducts the pretrial negotiations and litigation and approves any offers of settlement — all in the defendant's name and for the defendant's benefit. As such, the insurer's conduct clearly is more relevant to a determination regarding the settlement efforts than is the individual conduct of the defendant or defense counsel.
The purpose of R.C. 1343.03(C) is to encourage litigants to make a good faith effort to settle their case, thereby conserving legal resources and promoting judicial economy. To absolve liability insurers from responsibility for the settlement efforts that they make on behalf of individual litigants certainly would thwart the purpose, and render meaningless, the provisions of R.C. 1343.03(C). With this in mind, we hold that when a plaintiff, having obtained a judgment against a defendant, files a motion for prejudgment interest on the amount of that judgment pursuant to R.C. 1343.03(C), the plaintiff, upon a showing of "good cause" pursuant to Civ. R. 26(B)(3), may have access through discovery to those portions of the defendant's insurer's "claims file" that are not shown by the defense to be privileged attorney-client communications. If the defense asserts the attorney-client privilege with regard to the contents of the "claims file," the trial court shall determine by in camera inspection which portions of the file, if any, are so privileged. The plaintiff then shall be granted access to the non-privileged portions of the file.
A defendant ultimately is responsible for the payment of prejudgment interest awarded to a plaintiff as a result of the defendant's failure (or the failure of others acting on his behalf) to make a good faith effort to settle the case against him. The defendant's insurer, however, may be liable to the defendant for the amount of the prejudgment interest award, if the insurer's conduct was the basis for the award. See, generally, Centennial Ins. Co. v. Liberty Mut. Ins. Co. (1980), 62 Ohio St.2d 221 [16 O.O.3d 251]; Slater v. Motorists Mut. Ins. Co. (1962), 174 Ohio St. 148 [21 O.O.2d 420]; Hart v. Republic Mut. Ins. Co. (1949), 152 Ohio St. 185 [39 O.O. 479].
See, e.g., In re Klemann (1936), 132 Ohio St. 187, 193 [7 O.O. 273], which held that a casualty report of an accident that was transmitted to the insurance company's attorney "constitutes a communication from client to attorney."
Accordingly, the judgment of the court of appeals is affirmed, and the cause is remanded to the trial court for further proceedings consistent with this opinion.
In light of the disparity between the defendant's highest settlement offer and the jury's verdict, and because the plaintiff has clearly demonstrated that without access to the insurer's claims file he is unable to effectively show that the defendant, through her insurer, failed to make a good faith effort to settle the instant case, the plaintiff has shown good cause, pursuant to Civ. R. 26(B)(3), for discovery of the claims file. On remand, therefore, the trial court will proceed with an in camera inspection of the claims file in order to determine which portions of the file, if any, are privileged.
Judgment affirmed.
CELEBREZZE, C.J., LOCHER, HOLMES, C. BROWN and WRIGHT, JJ., concur.
DOUGLAS, J., concurs in judgment only.