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Insurance Company of the State of Pennsylvania v. City of San Diego

February 26, 2007

INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA, ET AL., PLAINTIFFS,
v.
CITY OF SAN DIEGO, DEFENDANT.



The opinion of the court was delivered by: Cathy Ann Bencivengo United States Magistrate Judge

ORDER RE DISCOVERY CROSS-MOTIONS HEARD ON FEBRUARY 16, 2007

I. INTRODUCTION

On February 16, 2007, the Court held a hearing on the parties' discovery cross-motions. Stephen Kovarik, Esq., and James Wagoner, Esq.,*fn1 appeared for plaintiff Insurance Company of the State of Pennsylvania ("ISOP"). Harvey Levine, Esq., Kristine Wilkes, Esq., and Drew Gardiner, Esq., appeared for defendant City of San Diego ("the City"). Both parties had submitted their motions, oppositions and replies directly to chambers.

This case arises out of ISOP's duty to defend and indemnify the City in three underlying actions brought in state court, which the Court will refer to as the De La Fuente matters. The City also has a counterclaim for bad faith refusal of the duty to defend. The De La Fuente matters are still being litigated. With regard to the duty to indemnify, the present case therefore has been and remains stayed. With regard to the duty to defend, there has been a determination that ISOP has a duty to defend the City in the De La Fuente matters. At this time the parties are proceeding only on the City's counterclaim of bad faith refusal to defend. It is in this limited context that the discovery motions were brought and considered.

II. DISCUSSION

A. ISOP's Motion to Compel Production of Billing Guidelines and Procedures

ISOP requested the City produce any billing guidelines, instructions or criteria applied to outside counsel representing the City's interests during the period of January 1, 2000 through January 1, 2006, including any hourly rate guidelines to enable ISOP to compare its own policies, rates and practices with those of the City. The City objected on the basis of relevance and privilege.

The objection based on relevance is overruled. The City argues that ISOP's bad faith refusal to defend is manifested not only by denial of the duty to defend, but also by unreasonable failure to pay an appropriate rate for counsel, denial of expenses, and untimely and delayed payments. ISOP claims that its rates and criteria for reimbursement are reasonable and comport with the standards of the community for this type of a case. The City is hereby ordered to produce any non-privileged documents setting forth guidelines, instructions and criteria, including any hourly rate guidelines, used for the retention of outside counsel that are either general in nature, or specific to municipality cases involving land use and property rights. Responsive documents should be produced no later than March 26, 2007. If no such documents exist, the City shall serve a written verified response confirming the same.

B. Motions to Quash Subpoenas for or to Compel Depositions of Counsel

ISOP sought to quash the City's subpoenas for depositions of ISOP's counsel and to compel depositions of the City's counsel. At the hearing, both parties withdrew their objections to depositions of counsel. ISOP will make James Wagoner available for a deposition. The City, in turn, will make Kristine Wilkes available for a deposition. The parties may bring or renew their motions regarding depositions of additional counsel after the above witnesses are deposed.

C. The City's Motion to Compel Production of Documents from Claim Files

The City's motion to compel production of documents from claim files is granted in part and denied in part.

ISOP withheld or redacted copies of the claim files and other related records, asserting attorney-client privilege and work product. The City asserts that the privilege or work product doctrine do not apply because the withheld materials contain acts and decisions made by counsel, specifically the law firm of McCormick Barstow, who acted as a claims handler and not as a legal advisor. Alternatively, the City argues that the privilege has been waived, because ISOP's claims adjustor, Ms. Aimee Tersy, testified in her deposition that she relied upon counsel in her management of the file.

The City is entitled to the production of the documents from the claim files that do not contain legal advice. The role of the firm of McCormick Barstow with respect to the City's claim for defense costs is unclear and may have included the responsibilities both of a claim handler and legal counsel. The City stated that Mr. Wagoner and other counsel at the McCormick Barstow firm handled the review and payment of invoices tendered by litigation counsel for the City at the request of Ms. Tersy. ISOP, on its part, represented that the counsel at the McCormick Barstow firm provided legal advice to ISOP regarding ...


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