In the case of Water's Edge Condominium Owners Association v. Affiliated FM Insurance Company, in the U.S. District Court of Seattle Washington, Judge James L. Robart, made a precedent-setting ruling by granting Plaintiff's 69 Motion to Compel.

Water's Edge asked the court to compel the Defendant’s attorney, Mr. Syhre, Esq., to sit as a deponent for deposition at a mutually convenient date and time, and the court granted that request.

However, the court narrowed the scope of questioning at the deposition to be limited to the following areas:
(1) the review of Water's Edge's claim supporting documents;
(2) the investigation into the nature and extent of the property damages; and
(3) the denial letter.

Relevant Factual Background

The Plaintiff, Waters Edge Homeowners Association is a condominium owners association business incorporated in Washington State.

The Plaintiffs allege that one of the defendant carriers, MiddleOak Specialty Insurance, had improperly, and in bad faith, denied coverage on their property-damage claim.

The Plaintiff’s filed suit against the insurer and through the course of discovery were forced to ask the court to use its judicial powers to order the deposition of the lawyer that was assigned to investigate the association’s property damage and who drafted the insurer’s letter denying coverage.

The attorney in question objected to the plaintiff's notice of deposition on the grounds of privilege and work-product doctrine.

Plaintiff’s Motion to Compel

The association argued, that the attorney was a central witness in the mishandling of the claim, and subsequent litigation to determine whether the insurer’s denial was in “bad faith.”

The Court’s Rational for Its Ruling

In his order, Judge Robart noted that under Cedell v. Farmers Insurance Co. Of Washington, 176 Wn.2d 686, 295 P.3d 239 (2013), an attorney handling the insurance claim adjustment process is assisting the insurer in carrying out its quasi-fiduciary responsibility to fairly consider claims submitted by its insureds.

In the Cedell case, the Washington Supreme Court found that there is ordinarily no attorney-client privilege between the insured and the carrier in the claims adjustment process. Therefore, the insured is generally entitled to the carrier’s claim file and related discovery, which would include materials, that in other settings, may fall within the scope of privilege or work product protection.

Ultimately, Judge Robart found that because the attorney in Water’s Edge investigated the association’s claim for the insurance company and drafted the insurer’s coverage denial letter, the court found that the attorney fell within the factors set forth in Cedell.

Judge Robart further noted that the attorney’s assertions of privilege did not bar the attorney’s deposition concerning the quasi-fiduciary tasks the attorney had performed for the insurer.

However, in addition to limiting the scope of questioning at the deposition, the court’s order also allows the insurance company to object if the deposition moves into areas involving legal advice offered to the carrier on its own legal exposure.

Conclusion

This case underscores the broadening scope of discovery available to parties who are involved in insurance bad faith litigation, which now includes the ability to take the deposition of an insurer’s attorney who was involved in the claim adjustment process.