Holler bad faith and privileges disappear.

• Position: Ohio

Splitting 4-3, the Ohio Supreme Court held that when a plaintiff alleges bad faith against an insurer, neither the attorney-client privilege nor the work product doctrine will protect documents in the insurer's claims file prepared before the denial of coverage. The majority's rationale was simply that "claims file materials that show an insurer's lack of good faith in denying coverage are unworthy of protection." Boone v. Vanliner Insurance Co., 744 N.E.2d 154 (2001).

The case involved 1,741 documents in the insurer's claims file. The trial court found that 175 documents were protected by the attorney-client privilege or the work product doctrine. On appeal, the insurer challenged that ruling as to 30 documents. The intermediate appellate court agreed with the appeal, except as to one document. Thus, 29 were at issue before the supreme court.

The supreme court extended the scope of an earlier decision, Moskovitz v. Mt. Sinai Medical Center, 635 N.E.2d 331 (Ohio 1994), which held that in an action for statutory prejudgment interest, otherwise protected claims files were discoverable after a verdict of liability. "While the lack of good faith to settle involves conduct that may continue throughout the entire claims process, a lack of good faith in determining coverage involves conduct that occurs when assessment of coverage is being considered," Justice Douglas stated. "Therefore, the only attorney-client and work product documents that would contain information related to the bad faith claim, and, thus, be unworthy of protection, would have been created prior to the denial of coverage.... At that stage of the claims handling, the claims file materials will not contain work product, i.e., things prepared in anticipation of litigation, because at that point it has not yet been determined whether coverage exists. Of course, if the trial court finds that the release of this information will inhibit the insurer's ability to defend the underlying claim, it may issue a stay of the bad faith claim and related production of discovery pending the outcome of the underlying action."

The dissenters, in an opinion by Justice Cook, objected to the majority's adoption of a "wholesale exception" to the attorney-client privilege without a reasoned basis for doing so. The "unworthy of protection" rationale is unsupported, the dissenters stated, pointing out that the "startling effect" of the decision is that an insured need only allege bad faith to trigger...