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NY Court Rules on Standard for Discovery of an Insurer’s Investigation File

In any litigation, information that is relevant or intended to lead to relevant information is discoverable unless it falls within an exception. Relevant information which is privileged such as communications between an attorney-client, physician-patient, and spouses as well as attorney work product are common exceptions to the discovery rule. In the context of insurance coverage disputes, one issue that often arises is the extent to which discovery of an insurer’s investigation file is permissible, particularly when an attorney conducts the investigation. A recent New York Appellate Court decision ruled on this issue and reiterated the standard to apply to determine whether the investigation was attorney work product and thus not subject to discovery.

As a standard practice, insurance companies conduct investigations when a claim is submitted to determine whether coverage exists. The general rule is that information related to an investigation which are done in the ordinary course of business, and not in anticipation of litigation are discoverable. (This rule applies to insurance companies and other businesses which may have employees prepare incident reports). However, The Appellate Division First Department recently considered a common issue – what happens when an insurance company utilizes an attorney to perform an investigation.

Venture v. Preferred Mutual Insurance Co. involved an insurance claim submitted by a homeowner as a result of a home fire. The insurer retained counsel to investigate the claim and provide an analysis. The attorney ultimately concluded the fire was arson, as a result of which the insurer denied coverage. The insured challenged the disclaimer and during discovery, the insurance company withheld a portion of the investigation as attorney work product. The Court reviewed the standard to be applied and held that the attorney work product protection only applies to materialprepared by counsel acting as such, and to materials uniquely the product of a lawyer’s learning and professional skills, such as those reflecting an attorney’s legal research, analysis, conclusions, legal theory or strategy.”

The Court ultimately sent the case back to the trial court for a factual determination of whether the attorney was acting in a legal capacity.

As shown by this case, insurance companies should be aware that simply having an attorney perform non-legal tasks does not create protection from discovery. The court will look at the substance of the work, not merely that it originated from an attorney.

Attorneys for insureds should note that if an insurance company withholds documents based on attorney work product, they may have grounds for challenging the failure to respond to the discovery request.

Learn more about our Insurance Coverage Disputes practice.

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