On April 15, 2013, a New York trial court granted the insured’s request for the production of certain claims file material and previously sealed discovery in Estée Lauder Inc. v. OneBeacon Insurance Group LLC et al., index number 602379/2005, leaving insurers with yet another troubling instance of a broadened scope of discovery in bad faith cases.
The trial court denied categorical protection for documents created by the insurer during the course of litigation, even if licensed attorneys were involved in the creation of such post-filing documents. Instead, the court was clear – post-litigation documents that relate to the alleged post-filing bad faith conduct are discoverable, unless the insurer demonstrates that the specific document for which it is seeking protection is “predominantly a communication of a legal character.” The court’s decision and order potentially broadens the scope of discovery in bad faith cases, exposing an insurer’s communications with its legal team where those communications are in-house and a part of the insurer’s regular business as an insurance company as opposed to a part of its legal operations.
Because the order was issued by a trial court, the discovery and bad faith questions here remain open. Nevertheless, this decision highlights the requirement that insurers that have on-going litigation with the same insured over the same series of claims should take precautions to protect their internal deliberations with counsel so as to preserve any privileges.