Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_02-cv-00693/USCOURTS-casd-3_02-cv-00693-1/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 Mr. Wagoner appeared telephonically.

- 1 - 02cv0693

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

INSURANCE COMPANY OF THE STATE

OF PENNSYLVANIA, et al.,

Plaintiffs,

CASE NO. 02-CV-0693 BEN (CAB)

ORDER RE DISCOVERY CROSSMOTIONS HEARD ON

vs. FEBRUARY 16, 2007

CITY OF SAN DIEGO,

Defendant.

I. INTRODUCTION

On February 16, 2007, the Court held a hearing on the parties’ discovery cross-motions. 

Stephen Kovarik, Esq., and James Wagoner, Esq.,1 appeared for plaintiff Insurance Company of

the State of Pennsylvania (“ISOP”). Harvey Levine, Esq., Kristine Wilkes, Esq., and Drew

Gardiner, Esq., appeared for defendant City of San Diego (“the City”). Both parties had submitted

their motions, oppositions and replies directly to chambers. 

This case arises out of ISOP’s duty to defend and indemnify the City in three underlying

actions brought in state court, which the Court will refer to as the De La Fuente matters. The City

also has a counterclaim for bad faith refusal of the duty to defend. The De La Fuente matters are

still being litigated. With regard to the duty to indemnify, the present case therefore has been and

remains stayed. With regard to the duty to defend, there has been a determination that ISOP has a

Case 3:02-cv-00693-BEN-CAB Document 400 Filed 02/27/07 Page 1 of 5
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 - 02cv0693

duty to defend the City in the De La Fuente matters. At this time the parties are proceeding only

on the City’s counterclaim of bad faith refusal to defend. It is in this limited context that the

discovery motions were brought and considered.

II. DISCUSSION

A. ISOP’s Motion to Compel Production of Billing Guidelines and Procedures

 ISOP requested the City produce any billing guidelines, instructions or criteria applied to

outside counsel representing the City’s interests during the period of January 1, 2000 through

January 1, 2006, including any hourly rate guidelines to enable ISOP to compare its own policies,

rates and practices with those of the City. The City objected on the basis of relevance and

privilege. 

The objection based on relevance is overruled. The City argues that ISOP’s bad faith

refusal to defend is manifested not only by denial of the duty to defend, but also by unreasonable

failure to pay an appropriate rate for counsel, denial of expenses, and untimely and delayed

payments. ISOP claims that its rates and criteria for reimbursement are reasonable and comport

with the standards of the community for this type of a case. The City is hereby ordered to produce

any non-privileged documents setting forth guidelines, instructions and criteria, including any

hourly rate guidelines, used for the retention of outside counsel that are either general in nature, or

specific to municipality cases involving land use and property rights. Responsive documents

should be produced no later than March 26, 2007. If no such documents exist, the City shall serve

a written verified response confirming the same.

B. Motions to Quash Subpoenas for or to Compel Depositions of Counsel 

ISOP sought to quash the City’s subpoenas for depositions of ISOP’s counsel and to

compel depositions of the City’s counsel. At the hearing, both parties withdrew their objections to

depositions of counsel. ISOP will make James Wagoner available for a deposition. The City, in

turn, will make Kristine Wilkes available for a deposition. The parties may bring or renew their

motions regarding depositions of additional counsel after the above witnesses are deposed.

C. The City’s Motion to Compel Production of Documents from Claim Files

The City’s motion to compel production of documents from claim files is granted in part

Case 3:02-cv-00693-BEN-CAB Document 400 Filed 02/27/07 Page 2 of 5
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

The Court notes, however, that the discovery period related to this claim is about to close, and

any future change in ISOP’s position regarding reliance of advice of counsel defense and waiver of

privilege will be prejudicial to the City.

- 3 - 02cv0693

and denied in part. 

ISOP withheld or redacted copies of the claim files and other related records, asserting

attorney-client privilege and work product. The City asserts that the privilege or work product

doctrine do not apply because the withheld materials contain acts and decisions made by counsel,

specifically the law firm of McCormick Barstow, who acted as a claims handler and not as a legal

advisor. Alternatively, the City argues that the privilege has been waived, because ISOP’s claims

adjustor, Ms. Aimee Tersy, testified in her deposition that she relied upon counsel in her

management of the file.

The City is entitled to the production of the documents from the claim files that do not

contain legal advice. The role of the firm of McCormick Barstow with respect to the City’s claim

for defense costs is unclear and may have included the responsibilities both of a claim handler and

legal counsel. The City stated that Mr. Wagoner and other counsel at the McCormick Barstow

firm handled the review and payment of invoices tendered by litigation counsel for the City at the

request of Ms. Tersy. ISOP, on its part, represented that the counsel at the McCormick Barstow

firm provided legal advice to ISOP regarding the payment of the invoices. Further, ISOP asserts

that it is not relying on advice of counsel as a defense, and therefore has not waived the privilege.2

According to ISOP, Ms. Tersy’s testimony that she consulted with counsel regarding her claim

management does not constitute a waiver. 

Because the McCormick Barstow firm may have played a dual role with respect to the

City’s claims, the discoverability of the documents depends on their content. To the extent that the

McCormick Barstow law firm acted as a claim handler with respect to the invoices and their

payment, no privilege arose. Tasks such as investigating and analyzing claims and determining

whether payment should be made “in the insurance industry ordinarily could be done by an

individual not licensed to practice law.” 2,022 Ranch, L.L.C. v. Superior Court,113 Cal.App.4th

Case 3:02-cv-00693-BEN-CAB Document 400 Filed 02/27/07 Page 3 of 5
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

- 4 - 02cv0693

1377, 1398 (2003). 

Cloaking such an adjuster’s factual investigation in privilege would shield from discovery

information that otherwise would not be entitled to any protection if communicated by an

adjuster who was not an attorney but performed the same duties. “To apply the privilege in

such a situation would have the effect of placing a premium upon use of attorneys as

[adjusters], nonattorneys or clients acting for themselves having no such right to protect

their” communications. 

Id. (citing Watt Industries, Inc. v. Superior Court, 115 Cal.App.3d 802, 171 (1981)). Courts have

recognized that “[t]he hiring of outside counsel for a specific project usually indicates that a client

is seeking legal advice.” Id. “[E]mploying attorneys to conduct routine claims investigations,”

however, still “does not make their factual investigations subject to the attorney-client privilege.” 

Id. Further, at least one treatise has adopted the view that “factual claims investigations are not

protected” and “the only matters that are protected are those communications that constitute the

actual requesting or rendering of legal advice.” Id. at 1399 (citing Weil & Brown, Cal. Practice

Guide: Civil Procedure Before Trial, supra, ¶ 8:217.2, p. 8C-58 (“Where an attorney is hired both

to investigate and to advise the client, the court may have to review the attorney’s files in camera

to determine which documents reflect investigative work and which reflect the rendering of legal

advice.”) (emphasis original)). 

Consequently, counsel’s decisions regarding the payment of the City’s invoices based on

reviews of fee rates, support for expense claims or other factual bases, that did not involve legal

analysis, are not privileged. Such matters are accounting tasks and are not related to legal advice. 

Any documents with respect to which the counsel acted as a mere conduit transmitting the claims

to its client are also discoverable.

To the extent that the McCormick Barstow firm may have also performed the duties of

legal counsel, the motion is denied. Accordingly, the City’s motion to compel production of

documents from claim files is therefore granted as to documents related to the review of the City’s

invoices but not containing legal advice, and denied as to documents containing such advice. 

D. The City’s Request for Production of Ms. Tersy’s Performance Reviews 

Finally, the City requested ISOP produce any performance evaluations for Ms. Tersy. ISOP

is hereby ordered to produce any of Ms. Tersy’s performance reviews addressing her general

performance, and her performance specific to the management of the City’s coverage claims for the

Case 3:02-cv-00693-BEN-CAB Document 400 Filed 02/27/07 Page 4 of 5
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

- 5 - 02cv0693

De La Fuente matters. 

IT IS SO ORDERED.

DATED: February 26, 2007

CATHY ANN BENCIVENGO

United States Magistrate Judge

Case 3:02-cv-00693-BEN-CAB Document 400 Filed 02/27/07 Page 5 of 5