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Labertew v. Chartis Property Casualty Co.

United States District Court, D. Arizona

April 19, 2018

Marcus Labertew; and John McDermott and Jennifer McDermott, husband and wife, Plaintiffs,
v.
Chartis Property Casualty Company, also known as AIG Casualty Company, and 21st Century North America Insurance Company, formerly known as American International Insurance Company, Defendants.

          ORDER

          David G. Campbell United States District Judge

         This case involves an insurance coverage dispute and a claim of bad faith against Defendants. Plaintiffs seek production of certain claim file documents that Defendants have partially redacted on work product and attorney-client privilege grounds. The Court held a discovery conference with the parties on March 26, 2018, and directed them to file memoranda addressing the work product and privilege issues. Doc. 74. Having reviewed the memoranda and relevant case law, the Court finds that Defendants have not established work product protection but have not waived the attorney-client privilege.

         I. Background.

         In March 2010, Plaintiffs filed a complaint in state court against Loral Langemeier asserting claims for breach of contract, defamation, fraud, and other wrongs arising out of their relationship in Bio-Novix, a health products business venture. Doc. 1-1 at 2-10. Langermeier had insurance policies with Defendants and tendered defense of the suit to them before trial in January 2013. One month later, Defendants issued a position letter stating that there was no coverage for the claims asserted in the lawsuit. Doc. 76-3.

         On the third day of trial, the parties entered into a stipulated judgment against Langemeier in the amount of $1.5 million. Doc. 1-16 at 27-28. The judgment was part of what is commonly called a “Damron agreement” under Arizona law, and included an assignment of Langemeier's claims against Defendants to Plaintiffs. See Damron v. Sledge, 460 P.2d 997 (Ariz. 1969).

         Plaintiffs chose to collect their judgment through a garnishment action initiated in state court. Defendants removed the proceeding to this Court and filed answers to the writs of garnishment, denying that they owed funds to Plaintiffs. Docs. 6, 7. Plaintiffs thereafter filed an amended complaint alleging that Defendants owe Plaintiffs the $1.5 million stipulated judgment and are liable to Plaintiffs under Damron for alleged bad faith conduct. Doc. 42.

         Plaintiffs sought production of the underlying claim file, including all documents related to the processing, investigation, and denial of the claim. Doc. 79-3 at 3. Defendants produced the claim file but redacted portions of ten pages on work product and attorney-client privilege grounds. Id. at 4; Doc. 76 at 2. The redacted material largely involves communications between the claims adjuster, Elisa Wheeler, two of her superiors, Mike Mansour and Brian Applebee, and outside counsel, Steven Mesaros and Randy Kingery. The redactions are as follows (listed in Bates number order):

1-2. 2/19-20/13 emails between Wheeler and Kingery (00081)
3-4. 1/29 and 1/31/13 emails between Wheeler and Mesaros (00082, 00082-3)
5. 2/4/13 email from Wheeler to Mansour (00116)
6-7. 2/7 and 2/12/13 emails between Mansour and Applebee (00122)
8. 1/28/13 email from Wheeler to Mesaros (00131)
9. 1/22/13 email from Wheeler to Mesaros (00140)
10-11. 1/17/13 emails between Wheeler and Mansour (00179)
12. Legal bills from counsel to Defendants (00265-70)
13. April to August 2013 claim notes (00272) (seven entries)
14. 2/12/13 claim note (00272)
15. 1/29/13 claim note ...

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