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CV-2012-12-6749 MOPP 12/09/2013 15:53:02 PM ROWLANDS, MARY MARGARET Page 1 of 7
IN THE COURT OF COMMON PLEAS
SUMMIT COUNTY, OHIO
PHILWAY PRODUCTS, INC., ) CASE NO. CV-2012-12-6749
)
Plaintiff, ) JUDGE MARY MARGARET ROWLANDS
)
vs. ) ACADIA INSURANCE COMPANY’S
) MEMORANDUM IN OPPOSITION TO
SIRAK MOORE INSURANCE AGENCY,) SUPPLEMENTAL MOTION TO COMPEL
INC., et al. ) PRODUCTION OF DOCUMENTS
)
Defendants. )
I. INTRODUCTION
Acadia Insurance Company (“Acadia”) has responded to numerous discovery requests and
has produced thousands of pages of documents. In addition to the documents produced, Acadia
provided a privilege log identifying the fact that itwas withholding from production or redacting
from the documents that were produced numerous entries reflecting reserve information,
reinsurance information, attorney work product and/or attorney-client privileged communications.
Philway Products, Inc. (“Philway”) now seeks to compel Acadia to produce this information.
Philway initially filed a motion to compel production of documents. The Court’s
magistrate conducted a telephone conference with the parties to ascertain additional information
concerning Philway’s request. The Court ordered Philway to provide supplemental authority with
a specific indication as to those particular items identified on Acadia’s privilege log that they
believed Acadia should be required to produce. Towards that end, on or about November 20,
2013, Philway submitted its supplemental motion to compel identifying specific documents that
they believed Acadia should be compelled to produce in discovery. Philway has disputed
Acadia’s assertion that they are not entitled to reserve or reinsurance information. They have also
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asserted that Acadia waived any attorney-client privilege by producing certain documents to a
third party and that no work product privilege attached to any documents not directed to
counsel?? Philway’s contentions are unfounded and, as such, its supplemental motion to compel
production of documents should be denied.
II. LEGAL ANALYSIS
A. The documents containing information regarding Acadia’s reserves are not
reasonably calculated to lead to the discovery of admissible evidence and, as
such, are not discoverable.
Philway argues that it is entitled to discover documents regarding various reserves
established by Acadia. Philway asserts that such information is “probative of how [Acadia] valued
plaintiff’s claims.” Philway’s assertion, however, is without merit.
Reserves established by Acadia do not make the existence of any fact that is of consequent
to the determination of the insurance coverage dispute between the parties more or less probable.
As one court explained, reserves are not an admission of liability and are not relevant to
insurance coverage disputes:
Reserves are accounting entries which an insurance company regularly uses
to set aside sufficient funds in the event of policyholder liability. The court
finds unpersuasive [policyholder’s] claim that the establishment of reserves
evidences an acknowledgement by the insurers of their liability for the ***
claims. Rather, the establishment of reserves is an appropriate
business decision justified by the necessity of preserving financial
stability in the event of liabilities which cannot be predicted with any
degree of certainty. [The insureds] themselves might choose to set aside
funds for the purpose of paying for the underlying *** claims without
acknowledging the validity of those claims. Reserves do not represent an
admission or a valuation of liability and are irrelevant to the issues
between insurer and insured.
Hoechst Celanese Corp. v. National Union Fire Ins. Co., 623 A. 2d 1099, 1109 (Del. Super. Ct.
1991) (emphasis added).
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Other courts have similarly held that evidence of insurance reserves is not relevant. See,
e.g., Front Royal Ins. Co. v. Gold Players, Inc., 187 F.R.D. 252, 257 (W.D. Va. 1999)
(acknowledging the irrelevance of reserve information in determining if insurance coverage
exists); Fid. & Deposit Co. of Md. v. McCulloch, 168 F.R.D. 516, 525 (E.D. Pa. 1996), (holding
that reserves have very tenuous, if any, relevance); Am. Prot. Ins. Co. v. Helm Concentrates, Inc.,
140 F.R.D. 448, 450 (E.D. Cal. 1991) (stating that the amount of reserves is not relevant to
answering the questions whether the claimed loss is covered and whether the insurer acted in
good faith in investigating a loss); Nat’l. Union Fire Ins. Co. v. Stauffer Chem. Co., 558 A.2d
1091, 1097 (Del. Super. Ct. 1989) (same); Leski, Inc. v. Fed. Ins. Co., 129 F.R.D. 99, 106
(D.N.J. 1989) (holding that reserves have very tenuous, if any, relevance); Indep. Petrochemical
Corp v. Aetna Cas. & Sur. Co., 117 F.R.D. 282, 287 (D.D.C. 1986) (same); Exch. Nat’l. Bank of
Chicago v. United States Fid. & Guar. Co., 1985 WL 1773, at *1 (N.D. Ill. 1985) (holding that
the establishment of a reserve is not a concession that the company acted in bad faith in denying a
claim and the establishment of a reserve has no bearing upon an insurer’s liability in a first-party
bad faith action or an action for unfair claims practices); Union Carbide Corp. v. Travelers
Indemn. Co., 61 F.R.D. 411, 412 (W.D. Pa. 1973) (holding that reserves have very tenuous, if
any, relevance). Inasmuch as reserve information is not relevant and not likely to lead to the
discovery of admissible evidence, Acadia should not be compelled to produce this information.
B. The documents contained information regarding Acadia’s reinsurance
information are not reasonably calculated to lead to the discovery of
admissible evidence and, as such, not subject to discovery.
Philway argues that it is entitled to reinsurance information. It further argues that this
information is relevant because it may show how claims are valued and whether Acadia took
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inconsistent positions regarding its reinsurer than it did with its insured. Philway’s assertion is
without merit.
Reinsurance is insurance that an insurance company purchases to cover all or a portion of
the risks associated with insurance policies it issues. Benjamin v. Credit Gen. Ins. Co., 10th Dist.
No. 04AP-642 (Mar. 25, 2005), unreported; Covington v. Am. Chambers Life Ins. Co., 150 Ohio
App. 3d 119, 2002-Ohio-6165, ¶20. Philway simply has no interest in any reinsurance contracts
entered into by Acadia, and any contract of reinsurance has no relevance or bearing on the
analysis of the insurance policy at issue in this case. Stickel v. Excess Ins. Co. of America, 136
Ohio St. 49 (1939) (stating “[t]he reinsurance is absolutely foreign to the original assured, and
whom the reinsurance contracts no sort of obligation”); Lake County Employers’ Health and
Welfare Benefit Plan and Trust v. Fidelity Sec. Life Ins. Co., 90 Ohio App. 3d 809 (1993)
(stating “the reinsurance contract is totally unconnected to the original insurance contract, and
does not give the original insured any rights against the reinsurance company”). Therefore, any
evidence of reinsurance is inadmissible and not relevant.
Additionally, evidence of reinsurance is also inadmissible because itincludes information
that is confidential and proprietary in nature. Fireman’s Fund Ins. Co. v. Superior Court, 233
Cal. App. 3d 1138, 1141 (1991) (finding that reinsurance documents constituted “highly sensitive
commercial information”). Further, communications regarding reinsurance constitute attorney-
client privileged communications and work product because they may contain information
regarding policy interpretation and coverage issues. Potomac Elec. Power v. California Union
Ins. Co., 136 F.R.D. 1, 3 (D.D.C. 1990) (finding that documents relating to reinsurance may
constitute proprietary information and information protected by the attorney-client privilege and
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the work product doctrine). Consequently, Philway’s motion to compel production of documents
that contain reinsurance information should be denied.
C. The attorney-client and work product privileges extent to protect
communications with independent adjuster.
Philway argues that Acadia waived any third-party privilege by providing certain
documentation to the independent adjuster Acadia hired to adjust this dispute, Andrea Wymer.
Without citation to any authority, Philway claims that this local adjuster was not an agent of
Acadia and, as such, the communications provided to the adjuster are not subject to the attorney-
client or work product privileges. Philway’s assertion, however, is without merit.
The attorney-client privilege operates “to encourage full and frank communications between
attorneys and their clients and thereby promote broader public interest in the observance of law
and administration of justice. The privilege recognizes the sound legal advice for advocacy serves
public ends and that such advice of advocacy depends upon a lawyer being fully informed by the
client.” Upjohn Co. v. United States, 449 U.S. 383, 389 (1989); Cargotec, Inc. v. Westchester
Fire Ins. Co., 155 Ohio App. 3d 653, 2003-Ohio-7257, ¶7. Similarly, the work product doctrine
protects an attorney’s work product which consists of “documents and tangible things prepared in
anticipation of litigation or for trial by or for another party or by or for that other party’s
representative.” Civ.R. 26(B)(3). Philway does not suggest that the documents identified in the
privilege log are not protected by the attorney-client or work product privileges. Rather, Philway
argues that any protection has been waived by inclusion of Acadia’s local adjuster in the chain of
communications.
The common law privileges protect against the disclosure of oral, written, and recorded
information unless the privilege is waived either expressly or by conduct implying waiver.
Jackson v. Greger, 110 Ohio St. 3d 488 2006-Ohio-4968. Acadia did not waive any attorney-
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client or work product privileges associated with documents ithas refused to produce simply
because Acadia’s independent, local adjuster was involved in the communications.
Philway does not dispute that the independent adjuster was retained by Acadia for purposes
of adjusting this fire loss. It has long been held that, privileged material provided to an adjuster
hired by an insurance carrier to investigate a claim does not waive any attorney-client or work
product privileges. See Breech v. Turner, 127 Ohio App. 3d 243 (1998). Consequently, the mere
fact that an independent adjuster was copies of privileged communications does not constitute a
waiver of the attorney-client or work product privilege entitling Philway to the discovery of this
information.
III. CONCLUSION
Based upon the foregoing, Philway’s supplemental motion to compel is without merit and
should be denied.
Respectfully submitted,
/s/ Brian D. Sullivan
Brian D. Sullivan, Esq. (#0063536)
Clifford C. Masch, Esq. (#0015737)
REMINGER CO., L.P.A
101 West Prospect Avenue, Suite 1400
Cleveland, Ohio 44115-1093
Phone: (216) 687-1311
Fax: (216) 687-1841
bsullivan@reminger.com
cmasch@reminger.com
Attorneys for Defendant,
Acadia Insurance Company
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CERTIFICATE OF SERVICE
I hereby certify that on December 9, 2013, a copy of foregoing document was filed
electronically. Notice of this filing will be served on all parties via regular U.S. mail. Parties may also
access this filing through the Court’s system.
Ronald N. Towne, Esq.
Ann L. Wehener, Esq.
LEIBY, HANNA, RESNICK, TOWNE,
EVANCHAN, PALMISANO & HOBSON, LLC
388 South Main Street, Suite 402
Akron, Ohio 44311
Oldham Kramer, Esq.
Colin G. Skinner, Esq.
195 South Main Street
Akron, Ohio 44308
Attorneys for Plaintiff
Carol K. Metz, Esq.
1400 Fifth Third Center
600 Superior Avenue East
Cleveland, Ohio 44114-2652
Attorneys for Defendants,
Mai Oswald and Sirak Moore
Insurance Agency, Inc.
/s/ Brian D. Sullivan
Brian D. Sullivan, Esq.
Clifford C. Masch, Esq.
Attorneys for Defendant,
Acadia Insurance Company
7
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CV-2012-12-6749 MOPP 12/09/2013 15:53:02 PM ROWLANDS, MARY MARGARET Page 1 of 7 IN THE COURT OF COMMON PLEAS SUMMIT COUNTY, OHIO PHILWAY PRODUCTS, INC., ) CASE NO. CV-2012-12-6749 ) Plaintiff, ) JUDGE MARY MARGARET ROWLANDS ) vs. ) ACADIA INSURANCE COMPANY’S ) MEMORANDUM IN OPPOSITION TO SIRAK MOORE INSURANCE AGENCY,) SUPPLEMENTAL MOTION TO COMPEL INC., et al. ) PRODUCTION OF DOCUMENTS ) Defendants. ) I. INTRODUCTION Acadia Insurance Company (“Acadia”) has responded to numerous discovery requests and has produced thousands of pages of documents. In addition to the documents produced, Acadia provided a privilege log identifying the fact that itwas withholding from production or redacting from the documents that were produced numerous entries reflecting reserve information, reinsurance information, attorney work product and/or attorney-client privileged communications. Philway Products, Inc. (“Philway”) now seeks to compel Acadia to produce this information. Philway initially filed a motion to compel production of documents. The Court’s magistrate conducted a telephone conference with the parties to ascertain additional information concerning Philway’s request. The Court ordered Philway to provide supplemental authority with a specific indication as to those particular items identified on Acadia’s privilege log that they believed Acadia should be required to produce. Towards that end, on or about November 20, 2013, Philway submitted its supplemental motion to compel identifying specific documents that they believed Acadia should be compelled to produce in discovery. Philway has disputed Acadia’s assertion that they are not entitled to reserve or reinsurance information. They have also CV-2012-12-6749 MOPP 12/09/2013 15:53:02 PM ROWLANDS, MARY MARGARET Page 2 of 7 asserted that Acadia waived any attorney-client privilege by producing certain documents to a third party and that no work product privilege attached to any documents not directed to counsel?? Philway’s contentions are unfounded and, as such, its supplemental motion to compel production of documents should be denied. II. LEGAL ANALYSIS A. The documents containing information regarding Acadia’s reserves are not reasonably calculated to lead to the discovery of admissible evidence and, as such, are not discoverable. Philway argues that it is entitled to discover documents regarding various reserves established by Acadia. Philway asserts that such information is “probative of how [Acadia] valued plaintiff’s claims.” Philway’s assertion, however, is without merit. Reserves established by Acadia do not make the existence of any fact that is of consequent to the determination of the insurance coverage dispute between the parties more or less probable. As one court explained, reserves are not an admission of liability and are not relevant to insurance coverage disputes: Reserves are accounting entries which an insurance company regularly uses to set aside sufficient funds in the event of policyholder liability. The court finds unpersuasive [policyholder’s] claim that the establishment of reserves evidences an acknowledgement by the insurers of their liability for the *** claims. Rather, the establishment of reserves is an appropriate business decision justified by the necessity of preserving financial stability in the event of liabilities which cannot be predicted with any degree of certainty. [The insureds] themselves might choose to set aside funds for the purpose of paying for the underlying *** claims without acknowledging the validity of those claims. Reserves do not represent an admission or a valuation of liability and are irrelevant to the issues between insurer and insured. Hoechst Celanese Corp. v. National Union Fire Ins. Co., 623 A. 2d 1099, 1109 (Del. Super. Ct. 1991) (emphasis added). 2 CV-2012-12-6749 MOPP 12/09/2013 15:53:02 PM ROWLANDS, MARY MARGARET Page 3 of 7 Other courts have similarly held that evidence of insurance reserves is not relevant. See, e.g., Front Royal Ins. Co. v. Gold Players, Inc., 187 F.R.D. 252, 257 (W.D. Va. 1999) (acknowledging the irrelevance of reserve information in determining if insurance coverage exists); Fid. & Deposit Co. of Md. v. McCulloch, 168 F.R.D. 516, 525 (E.D. Pa. 1996), (holding that reserves have very tenuous, if any, relevance); Am. Prot. Ins. Co. v. Helm Concentrates, Inc., 140 F.R.D. 448, 450 (E.D. Cal. 1991) (stating that the amount of reserves is not relevant to answering the questions whether the claimed loss is covered and whether the insurer acted in good faith in investigating a loss); Nat’l. Union Fire Ins. Co. v. Stauffer Chem. Co., 558 A.2d 1091, 1097 (Del. Super. Ct. 1989) (same); Leski, Inc. v. Fed. Ins. Co., 129 F.R.D. 99, 106 (D.N.J. 1989) (holding that reserves have very tenuous, if any, relevance); Indep. Petrochemical Corp v. Aetna Cas. & Sur. Co., 117 F.R.D. 282, 287 (D.D.C. 1986) (same); Exch. Nat’l. Bank of Chicago v. United States Fid. & Guar. Co., 1985 WL 1773, at *1 (N.D. Ill. 1985) (holding that the establishment of a reserve is not a concession that the company acted in bad faith in denying a claim and the establishment of a reserve has no bearing upon an insurer’s liability in a first-party bad faith action or an action for unfair claims practices); Union Carbide Corp. v. Travelers Indemn. Co., 61 F.R.D. 411, 412 (W.D. Pa. 1973) (holding that reserves have very tenuous, if any, relevance). Inasmuch as reserve information is not relevant and not likely to lead to the discovery of admissible evidence, Acadia should not be compelled to produce this information. B. The documents contained information regarding Acadia’s reinsurance information are not reasonably calculated to lead to the discovery of admissible evidence and, as such, not subject to discovery. Philway argues that it is entitled to reinsurance information. It further argues that this information is relevant because it may show how claims are valued and whether Acadia took 3 CV-2012-12-6749 MOPP 12/09/2013 15:53:02 PM ROWLANDS, MARY MARGARET Page 4 of 7 inconsistent positions regarding its reinsurer than it did with its insured. Philway’s assertion is without merit. Reinsurance is insurance that an insurance company purchases to cover all or a portion of the risks associated with insurance policies it issues. Benjamin v. Credit Gen. Ins. Co., 10th Dist. No. 04AP-642 (Mar. 25, 2005), unreported; Covington v. Am. Chambers Life Ins. Co., 150 Ohio App. 3d 119, 2002-Ohio-6165, ¶20. Philway simply has no interest in any reinsurance contracts entered into by Acadia, and any contract of reinsurance has no relevance or bearing on the analysis of the insurance policy at issue in this case. Stickel v. Excess Ins. Co. of America, 136 Ohio St. 49 (1939) (stating “[t]he reinsurance is absolutely foreign to the original assured, and whom the reinsurance contracts no sort of obligation”); Lake County Employers’ Health and Welfare Benefit Plan and Trust v. Fidelity Sec. Life Ins. Co., 90 Ohio App. 3d 809 (1993) (stating “the reinsurance contract is totally unconnected to the original insurance contract, and does not give the original insured any rights against the reinsurance company”). Therefore, any evidence of reinsurance is inadmissible and not relevant. Additionally, evidence of reinsurance is also inadmissible because itincludes information that is confidential and proprietary in nature. Fireman’s Fund Ins. Co. v. Superior Court, 233 Cal. App. 3d 1138, 1141 (1991) (finding that reinsurance documents constituted “highly sensitive commercial information”). Further, communications regarding reinsurance constitute attorney- client privileged communications and work product because they may contain information regarding policy interpretation and coverage issues. Potomac Elec. Power v. California Union Ins. Co., 136 F.R.D. 1, 3 (D.D.C. 1990) (finding that documents relating to reinsurance may constitute proprietary information and information protected by the attorney-client privilege and 4 CV-2012-12-6749 MOPP 12/09/2013 15:53:02 PM ROWLANDS, MARY MARGARET Page 5 of 7 the work product doctrine). Consequently, Philway’s motion to compel production of documents that contain reinsurance information should be denied. C. The attorney-client and work product privileges extent to protect communications with independent adjuster. Philway argues that Acadia waived any third-party privilege by providing certain documentation to the independent adjuster Acadia hired to adjust this dispute, Andrea Wymer. Without citation to any authority, Philway claims that this local adjuster was not an agent of Acadia and, as such, the communications provided to the adjuster are not subject to the attorney- client or work product privileges. Philway’s assertion, however, is without merit. The attorney-client privilege operates “to encourage full and frank communications between attorneys and their clients and thereby promote broader public interest in the observance of law and administration of justice. The privilege recognizes the sound legal advice for advocacy serves public ends and that such advice of advocacy depends upon a lawyer being fully informed by the client.” Upjohn Co. v. United States, 449 U.S. 383, 389 (1989); Cargotec, Inc. v. Westchester Fire Ins. Co., 155 Ohio App. 3d 653, 2003-Ohio-7257, ¶7. Similarly, the work product doctrine protects an attorney’s work product which consists of “documents and tangible things prepared in anticipation of litigation or for trial by or for another party or by or for that other party’s representative.” Civ.R. 26(B)(3). Philway does not suggest that the documents identified in the privilege log are not protected by the attorney-client or work product privileges. Rather, Philway argues that any protection has been waived by inclusion of Acadia’s local adjuster in the chain of communications. The common law privileges protect against the disclosure of oral, written, and recorded information unless the privilege is waived either expressly or by conduct implying waiver. Jackson v. Greger, 110 Ohio St. 3d 488 2006-Ohio-4968. Acadia did not waive any attorney- 5 CV-2012-12-6749 MOPP 12/09/2013 15:53:02 PM ROWLANDS, MARY MARGARET Page 6 of 7 client or work product privileges associated with documents ithas refused to produce simply because Acadia’s independent, local adjuster was involved in the communications. Philway does not dispute that the independent adjuster was retained by Acadia for purposes of adjusting this fire loss. It has long been held that, privileged material provided to an adjuster hired by an insurance carrier to investigate a claim does not waive any attorney-client or work product privileges. See Breech v. Turner, 127 Ohio App. 3d 243 (1998). Consequently, the mere fact that an independent adjuster was copies of privileged communications does not constitute a waiver of the attorney-client or work product privilege entitling Philway to the discovery of this information. III. CONCLUSION Based upon the foregoing, Philway’s supplemental motion to compel is without merit and should be denied. Respectfully submitted, /s/ Brian D. Sullivan Brian D. Sullivan, Esq. (#0063536) Clifford C. Masch, Esq. (#0015737) REMINGER CO., L.P.A 101 West Prospect Avenue, Suite 1400 Cleveland, Ohio 44115-1093 Phone: (216) 687-1311 Fax: (216) 687-1841 bsullivan@reminger.com cmasch@reminger.com Attorneys for Defendant, Acadia Insurance Company 6 CV-2012-12-6749 MOPP 12/09/2013 15:53:02 PM ROWLANDS, MARY MARGARET Page 7 of 7 CERTIFICATE OF SERVICE I hereby certify that on December 9, 2013, a copy of foregoing document was filed electronically. Notice of this filing will be served on all parties via regular U.S. mail. Parties may also access this filing through the Court’s system. Ronald N. Towne, Esq. Ann L. Wehener, Esq. LEIBY, HANNA, RESNICK, TOWNE, EVANCHAN, PALMISANO & HOBSON, LLC 388 South Main Street, Suite 402 Akron, Ohio 44311 Oldham Kramer, Esq. Colin G. Skinner, Esq. 195 South Main Street Akron, Ohio 44308 Attorneys for Plaintiff Carol K. Metz, Esq. 1400 Fifth Third Center 600 Superior Avenue East Cleveland, Ohio 44114-2652 Attorneys for Defendants, Mai Oswald and Sirak Moore Insurance Agency, Inc. /s/ Brian D. Sullivan Brian D. Sullivan, Esq. Clifford C. Masch, Esq. Attorneys for Defendant, Acadia Insurance Company 7