In Homeowners Choice v. Thompson, 377 So.3d 1204 (Fla. 1st DCA 2023), notorious wannabe bully, Curt Allen, got verbally spanked yet again. Curt had his client, the insurer, claim that its claims and underwriting files were categorically protected against discovery in the insured homeowners’ first-party breach of contract lawsuit.

In Thompson, Hurricane Sally had damaged the insureds’ Pensacola home in September of 2020. The insureds obtained estimates totaling over $285,000 to repair wind damage, which the policy covered. In contrast, the insurer–as it always does–initially determined the net payable loss was only $2,058, asserting that the damage was mostly ordinary wear and tear, improper construction, or the result of other causes the policy did not cover.

The insureds filed suit for breach of the insurance contract and sought discovery of the insurer’s field adjuster’s notes, evaluations, inspections, reports, and photos kept in the ordinary course of business; and any documents or evidence supporting the insurer’s denial of the claim or its defenses or affirmative defenses. The insurer, led by Curt, asserted a categorical work-product privilege in its claims and underwriting files, without serving a privilege log. Ultimately the trial court ordered the insurer to file disputed documents under seal, with a privilege log.

The trial court reviewed the documents in camera and overruled in part the insurer’s objections to producing the requested discovery. The court ordered the insurer to produce some of the disputed documents, including the field adjuster’s logs and photos of the initial home inspection and some documents relating to the insurer’s early “basic evaluation” of the claim. The court upheld the insurer’s work-product objections as to some other documents and particularly those generated later in the process.

The appellate court noted that it had rejected the same categorical-privilege argument that the insurer was asserting.  That case also involved a first-party breach of contract action, and the insurer argued that an “order allowing discovery of its underwriting manual(s) is categorically prohibited in breach of contract cases, like this one, until and unless bad faith litigation commences.” Foster, 333 So. 3d at 775. The court called that “sweeping characterization” incorrect. Id. (citing Am. Integrity Ins. Co. of Fla. v. Venable, 324 So. 3d 999 (Fla. 1st DCA 2021); and then Avatar Prop. & Cas. Ins. Co. v. Simmons, 298 So. 3d 1252, 1254 (Fla. 5th DCA 2020)).

Simply put, “there is no categorical legal rule prohibiting discovery of underwriting manuals in breach of contract cases, especially if they are relevant.” Id.

The appellate court held that Curt’s assertion of privilege was overly broad, just as was the assertion in Foster. 

Here is something most insurance defense lawyers seem to not understand: Documents in claims and underwriting files are not automatically work product.

Curt did not argue or prove that the requested documents were prepared in anticipation of litigation, reasoned the appellate court. To the contrary, the documents ordered produced were created just days after the hurricane and before any coverage determination had occurred.

The court also rejected the insurer’s broad confidentiality, proprietary, and trade secret objections raised in its privilege log. See Progressive Am. Ins. Co. v. Lanier, 800 So. 2d 689, 690-91 (Fla. 1st DCA 2001) (explaining that insurer’s “blanket statement in its privilege log is insufficient to establish the work-product privilege”).

Well, yet another pet peeve of mine was proven correct. This is basic stuff that all lawyers learn on day one of law school. The work product immunity doctrine–which is not a “privilege”–requires a finding that the document was prepared in anticipation of litigation. According to the insurance companies themselves, when they adjust claims, they are trying to find coverage for their insureds. One might say, “yeah right,” but on this issue, we must take the insurance companies at their word, and they cannot have their cake and eat it too. If they were truly trying to find coverage for their customers as they adjusted the claim, then the early field adjuster notes could not have been prepared in anticipation of litigation.

Yet for the seven-plus years this author has been representing insureds in first-party property insurance cases, he has dealt with insurance defense lawyers not understanding this very basic concept. Taking an average of three depositions per week the past seven years–depositions of field adjusters and insurance companies’ corporate representatives–this author has experienced — most recently, today — the vast majority of insurance companies and their lawyers wrongly asserting that the entire claim file is subject to some generic “claim file privilege.” There is no such thing, and several reported appellate decisions so hold.

These defense lawyers wrongly equate asking any question about the insurance company’s thinking or reasoning behind a decision to deny or underpay a claim with attempting to prematurely turn the breach-of-contract action into a “bad faith” action. That view is simply wrong. Denying a claim for the wrong reason or because of the wrong view of facts can simply be a breach of contract that is not necessarily bad faith, and we lawyers representing insureds in these cases are not necessarily asserting otherwise by asking a corporate representative or field adjuster the reasoning behind doing what they did. Those questions are fair game, yet defense lawyers routinely shut them down and wrongly instruct witnesses not to answer.

The real world problem for lawyers on the insured’s side, however, is that in this high-volume practice area with overburdened judges, it is often difficult to bring this issue to the court. The wrongful assertions by defense lawyers are so far off (obviously wrong), yet they are so adamant in their incorrect views, that nearly every deposition would need to be suspended so that the issue could be brought to the judge (or a motion to re-open the deposition filed, heard, and granted). (We are lucky if a field adjuster or corporate representative shows up to a deposition the first time.)

The fact is that the pragmatic limitations of time and how many cases each judge has assigned to them makes getting a court hearing on this issue in every case nearly impossible. The result has been that, for years, insurance companies have been getting away with habitually not handing over documents or allowing answers to questions that are clearly discoverable.