Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_02-cv-00693/USCOURTS-casd-3_02-cv-00693-7/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Insurance Contract

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1 02cv693

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

INSURANCE COMPANY OF THE STATE OF

PENNSYLVANIA, et al.,

Civil No. 02cv693 BEN (CAB)

Plaintiffs,

ORDER REGARDING DEFENDANT’S

MOTION TO COMPEL THE

PRODUCTION OF DOCUMENTS

v.

CITY OF SAN DIEGO,

Defendant.

Before the Court is the City of San Diego's ("the City"), motion to compel the production of

communications between the Insurance Company of the State of Pennsylvania ("ISOP"), and its counsel,

McCormick, Barstow, Sheppard, Wayte & Carruth (“McCormick Barstow"). The parties submitted

extensive briefing on this motion and the Court heard argument on September 27, 2007. The motion has

been held under submission, in part due to pending motions for summary judgment and ISOP's motion

to stay this litigation. Those motions are now resolved. Therefore, the Court returns to this discovery

issue. 

The Court will not recite the background of this case. It is lengthy and complex. Although

certain claims remain stayed, ISOP's motion to stay the City's counterclaim of bad faith denial of the

duty to defend was denied and the question was determined "ripe for adjudication." [Doc. No. 489.]

Consequently the matter of whether ISOP waived the attorney-client privilege with regard to the

determination of its duty to defend is also ripe. 

Case 3:02-cv-00693-BEN-CAB Document 495 Filed 04/04/08 Page 1 of 4
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1

 ISOP's privilege log reflects that certain communications, relating to the duty to indemnify,

were also withheld based on relevance. The question of ISOP's duty to indemnify the City is not

currently at issue in this litigation, and ISOP's objections regarding production of documents unrelated to

the determination of and duty to defend is sustained.

2 02cv693

When presented with the City's coverage claim, ISOP engaged the McCormick Barstow firm to

obtain legal advice regarding its coverage obligations, if any. ISOP has withheld from production

communications it had with McCormick Barstow on the determination of its duty to defend asserting

attorney-client privilege and work product.1 The City contends that based on the discovery conducted in

connection with the claim, ISOP has waived the privilege as to these communications because "the

testimony of ISOP's representatives revealed that ISOP's determinations were based entirely on the

recommendations of its attorneys at McCormick Barstow." (City's Motion at 1.) For ISOP to establish

that its coverage determinations were reasonable and made in good faith, the City argues ISOP will

necessarily have to rely upon the investigation and recommendations made by its counsel and therefore

has waived the privilege.

ISOP has repeatedly represented it is not asserting an advice of counsel defense, has not

affirmatively injected advice of counsel into this case as a defense and has not waived the privilege. 

ISOP has repeatedly represented it can and will defend the City's claim of bad faith based upon the

language of its policies and the facts of the De La Fuente claim, including the complaints, the City's

tender of the claim, ISOP's response to those tenders, extrinsic evidence provided by the City, the

investigative materials contained in ISOP's file, United National's payments, the City's bill, and ISOP's

payment of those bills. (ISOP's Opposition at 13.)

ISOP acknowledges it retained McCormick Barstow to investigate the City's claim and make a

coverage determination under the policy, but asserts those communications are and remain privileged,

citing Aetna Cas. & Sur. Co. v. Superior Ct., 153 Cal.App.3d 467 (1984). In Aetna, the insurance

company retained counsel to investigate the insured's claim and make a coverage determination under

the policy. The court concluded it was a "classic example of a client seeking legal advice from an

attorney." Id. at 476. "An insurance company should be free to seek legal advice in cases where

coverage is unclear without fearing that the communications necessary to obtain that advice will later

become available to an insured who is dissatisfied with a decision to deny coverage." Id. at 474. The

Case 3:02-cv-00693-BEN-CAB Document 495 Filed 04/04/08 Page 2 of 4
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

3 02cv693

court found the insurance company was not asserting advice of counsel, simply because it accepted the

advice of its counsel. Id. at 475

ISOP argues that the fact it consulted with, and received advice from, counsel does not waive the

attorney-client privilege or inject advice of counsel into the case as an affirmative defense. ISOP’s

contention, like that of the insurance company in Aetna, is that, 

it acted as it did not because it was advised to do so, but because the advice was, in

its view, correct; and it is prepared to defend itself on the basis of that asserted correctness

rather than the mere fact of the advice. Such a defense does not waive the attorney-client

privilege.

Id. 

The City, however, argues that regardless of ISOP's contention, the Court should find ISOP

impliedly waived the privilege by its conduct that put the opinions or analysis of its attorneys' at issue in

the case. The City contends the discovery has demonstrated "virtually all the investigation and analysis

was done by counsel or with counsel's participation. . . . Hence ISOP's entire defense of ‘correctness'

turns on actions and opinions of its counsel who admittedly made this investigation and evaluation."

(City's Reply at 2.) Because the "only meaningful source of information as to the reasonableness of

ISOP's investigation and policy interpretations is ISOP's legal counsel," as a matter of "fundamental

fairness," the City argues ISOP must turn over the attorney communications that contain the how, what,

and why of the actions on the City's claim. (Id.) 

An implied waiver of the attorney-client privilege requires an affirmative act by the asserting

party that puts the protected information at issue by making it relevant to the case. Southern Cal. Gas

Co. v. Public Utilities Comm'n, 50 Cal.3d 31, , 42 n.11(1990). The City contends ISOP actions made the

withheld communications relevant because discovery to date demonstrates the withheld communications

are the only evidence of the reasonableness or unreasonableness of ISOP's determination of the

coverage. ISOP contends it can defend its case based on the factual discovery provided and that the

withheld opinions and advice of its counsel are not part of its defense. It has repeatedly and expressly

stated it is not relying on its attorneys' advice to defend the City's claim. The Court finds ISOP has not

impliedly waived its attorney-client privilege. The motion for the general production of the withheld

communications between ISOP and McCormick Barston based on implied waiver of the privilege is

Case 3:02-cv-00693-BEN-CAB Document 495 Filed 04/04/08 Page 3 of 4
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2

 This Order does not alter the Court's previous Order issued on February 27, 2007 [Doc. No.

400], regarding production of McCormick Barstow communications regarding the actual payment of the

City's defense expenses.

4 02cv693

DENIED.

2

 The City is not, however, precluded by this Order from challenging the withholding of

specific documents on ISOP's privilege log. The parties should meet and confer regarding any specific

challenges and may submit briefing, as well as the challenged documents for in camera review, as

necessary.

ISOP's position that it is not waiving the attorney-client privilege or asserting advice of counsel

as an affirmative defense is final as to the City's claim of bad faith regarding the duty to defend. 

ISOP is precluded from directly or indirectly introducing evidence that it actions regarding the

determination of its duty to defend were reasonable because those actions were directed by counsel. 

IT IS SO ORDERED.

DATED: April 4, 2008

CATHY ANN BENCIVENGO

United States Magistrate Judge

Case 3:02-cv-00693-BEN-CAB Document 495 Filed 04/04/08 Page 4 of 4