*1 recog- majority in case express The the instant damages for breach of the quential We none- nizes: insurance contract. terms of the Beck’s, jury verdict the affirm the because theless not further It would it could award properly instructed that reasonably if encouraging insurers to act implied cove- damages such for breach impose consequential broad we were the sustain is sufficient to nant and the evidence every in insurer damages allowed Beck on theory of the under that alternative verdict ultimately by a court to who is determined Finally, district
recovery. we vacate the incorrectly coverage, regard- have denied attorney remand fees and court’s award of how reasonable the denial. Such less in accordance for recalculation fees ought damage greater incur no insurer contingency arrangement. Billings’ fee with any person breaching exposure than other express terms of a contract. statement, majority despite this DURHAM, J., Yet STEWART, A.C.J., and attorney as an ZIMMERMAN, sanctions the award of fees C.J., opinion. in concur consequential damages for both element of Justice, HOWE, concurring implied the breach of covenant dissenting: express provisions of insurance contract. It agree. I that determination cannot With I except I allow the concur would general in a to our rule that does violence by plaintiff as con- recovery of fees action, attorney can- contract fees breach of only sequential damages defendant’s party unless not be awarded successful implied good covenant of faith breach of the provided agree- parties have so their dealing. I not allow fees and fair would only award for breach I would fees ment. any express breach of the terms based on covenant, the ma- implied with consistent the contract. jority’s holding that trial court erred “the broad instructing the that it could award jurisdic- general rule observed this damages of either consequential for breach attorney fees awarded to tion is that can be and fair implied good covenant of faith only prevailing party where express of the insurance dealing or the terms predicated a statute or the the award is contract.” express of a written instrument such terms J., RUSSON, HOWE’s concurs Justice note or a Howev- promissory contract. concurring dissenting opinion. er, general departed have we recovery upheld cases and few first-party in a fees a successful insured her The fees against
suit his or insurer. as an of conse- awarded element been implied
quential damages for breach of dealing inher- good faith and fair covenant of ASKEW, Lee Plaintiff Julia every policy. Zions First ent in Respondent, Co., Ins. Nat’l Bank v. National Am. Title (Utah 1988); Beck Exck, Ins. P.2d Farmers HARDMAN, Defendant Paul (Utah 1985); Energy Mut. also Moore v. see and Petitioner. (Utah Ct.App. Ins.
1991). Attorney fees also awarded No. were 940613. Canyon suing his insurer insured Supreme Court of Utah. Bracey, Country Store (Utah 1989), although it is not clear whether June awarded for the fees implied covenant or for breach breach of the insurance con- express terms
tract. *2 James,
Gary Dodge, A. Mark F. A. Robert McConnell, City, plaintiff. Salt Lake Stephen Rice, Morgan, G. Mitchell T. Jo- Minnock, seph City, E. Salt Lake for defen- dant. Johnson, Belnap,
Paul M. Michael S. Salt City, Lake for amicus State Farm Mutual Auto Insurance. Helgesen, Havas,
Jack C. Edward B. Salt City, Lake Lawyers amicus Utah Trial Association.
RUSSON, Justice: injured Julia Lee Askew an automo- bile-horse accident and sued the owner of the horse, Paul damages. Prior to trial, sought she access to the claim file of Hardman’s insurance Farm Utah Company, Bureau particularly Insurance recorded statement of Hardman taken dur- ing investigation Farm Bureau’s of the acci- dent. The trial court denied access to the ground they documents on the had been discovery pur- therefore were suant to rule of the Utah Rules of proceeded Civil Procedure. The matter trial, and the returned a verdict in favor of Hardman. motion, court, support of and we cedure. appealed this Askew Ap a list of the contents of the filed
poured
case to
Utah Court
“Privileged Log,” the affidavit
trial court
entitled
argued that
peals. Askew
attorney, Stephen Morgan,
Farm Bureau’s
her access to documents
unjustifiably denied
*3
during
Morgan to Farm
copies of letters from
file of Hardman’s insurer
and
in the claim
Johnson,
manager, Greg
in-
reversed Bureau’s claims
discovery.
The court of
managers
how to inves-
structing
a new trial on
claims
as to
the matter for
and remanded
deny
tigate
trial
erred in
and handle information
that the
ground
the
might
also
discovery
litigation
and Hard-
that
arise. Hardman
of the
ing
Johnson, averring
of
to the
particular.
Askew v.
filed the affidavit
man’s statement
Hardman,
procedures
when
contacts
(Ct.App.1994),
P.2d 1258
cert.
used
an insured
(Utah 1995).
involving
a
P.2d 13
Hardman
Farm Bureau after
accident
granted, 892
particularly
party,
this court
third
when the accident
writ of certiorari which
filed a
of the
livestock
insured.
granted. We reverse the decision
involves
jury
and
the
ver
reinstate
opposed
motion and
Askew
Hardman’s
judgment.
dict
compel Farm
to turn over
moved to
Bureau
argued
requested
Askew
the
documents.
BACKGROUND
“in
the documents were
the automobile
November
ordinary
litigation,”
anticipation of
but
passenger
Askew
a
which Julia Lee
business, and did
of Farm Bureau’s
course
horse
highway.
on the
The
struck
horse
a
prod-
for “work
not meet the test established
morning
The
Paul Hardman.
was owned
Standard,
in Gold
Inc. v.
protection
uct”
accident,
that a
Hardman observed
after the
Corp.,
Barrick
American
Resources
portion of his fence was down and contacted
1990).
(Utah
At
of Askew’s
the time
suspected van-
report
office to
the sheriffs
virtually
discovery
no
occurred.
request,
had
investigated
Deputy Monson
dalism.
to
court denied Askew’s motion
The trial
to
report
in his
that Hardman wanted
stated
ruling
in Farm
compel,
he was
him the fence inasmuch as
show
claim file “were
Bureau’s
being
horse had
of
sued because his
afraid
[its]
at
of
the instruction
contacted
an accident. Hardman also
caused
litigation.” After
insurer,
liability
Bureau In-
Utah Farm
his
order,
voluntarily
(Farm
judge’s
Bureau),
Hardman
the trial
Company
which sent
surance
Bu-
photographs Farm
to Askew
delivered
investigate the accident.
Robert Harmon to
morning
of the accident scene
reau took
suit
September
Askew filed
after the accident.
damages
to
for her
against Hardman
recover
alleging
negligently
con-
injuries,
he
Later,
she
deposed
after Askew
pasture
maintained
fence
structed or
compel production of docu-
again moved to
escape
his horse
and enter
which allowed
to
time, however,
requested
she
This
ments.
causing
highway,
accident. Askew
taken
only Hardman’s recorded statement
deposi-
upon Farm Bureau a notice of
served
following
investigator Harmon
Bureau
Farm
subpoena
command-
duces tecum
tion and
argued that she needed
accident. She
bring
“all docu-
ing
deposition
to the
it to
prepare
and that
recording to
her case
refer, reflect,
or relate”
ments
unable to obtain the substantial
she was
“any investigatory
or to Askew and
accident
recording by other means.
equivalent
relating
reports”
accident.
court, however,
that Askew
trial
The
equiva-
quash
subpoe-
fact obtained
“substantial
moved to
Askew’s
had in
statement
pre-
recorded
protective
order to
lent” of
na and to obtain
lengthy deposition of Hardman
through her
discovery
Farm
file. Hard-
Bureau’s
vent
thus
report.
It
deputy sheriffs
that all of
Askew and the
argued
man
the documents
for the re-
rejected Askew’s motion
again
requested were
did, how-
The trial court
statement.
corded
ever,
iden-
depose
Harmon to
Pro-
allow Askew
the Utah Rules of Civil
tiiy
photographs
regarding imposition
and describe the
he took the
broad discretion
dis
sanctions);
day
covery
after the accident and to obtain Har-
First Fed.
Loan
Sav. &
Schamanek,
Assoc. v.
mon’s observations of the accident scene at
(Utah 1984) (same).
subsequently
Although
time.
took
Askew
Har-
trial courts
deposition,
proceeded
mon’s
broad discretion matters of discov
court,
ery,
exercising
trial.
the trial
returned
verdict of no
such discre
tion,
apply
correct
find
cause of action in favor Hardman. Askew
must
law to its
fact,
appealed.
ings
findings
and its
of fact must be
supported by
appel
sufficient evidence. An
The court of
reversed and remand-
late court will
find
abuse of discretion
ground
ed
trial on
the case for a new
absent an
conclusion of
or
erroneous
law
judge
in denying
had erred
Askew
*4
evidentiary
where there
no
is
basis for
in
access to
the claim
documents
file. The
Pena,
ruling.
trial
See
court’s
State v.
appeals
stated that “an insurance
(Utah 1994) (while
932,
appellate
adjuster’s
discoverable,”
report
generally
is
is,
always
courts
decide what the law defer
Askew,
884 P.2d at
and that Hardman
may
given
ence
to trial
application
be
court’s
had failed to show that the documents in his
facts);
of law to the
accord
Superi-
Brown v.
company’s
file
prepared
claim were
Court,
or
137 Ariz.
670 P.2d
anticipation
in
litigation.
of
Id. at
It
(1983) (trial
discovery
court discretion in
attorney
further
fact
stated that the
that no
right
matters “includes the
to decide contro
was
preparation
involved in Farm Bureau’s
issues,
verted
to
factual
draw inferences
of the
accident claim file
Askew/Hardman
conflicting
possible
where
inferences are
suggested
prepared
that it
in
the ordi-
weigh
to
competing interests.
It
not
does
nary course of
Id.
business.
privilege
application
include the
of incorrect
certiorari,
argues
On
in
predicated
of
upon
law or a decision
irration
holding
prepared
that the claim file was not
bases.”). Thus,
al
we must first
if
determine
anticipation
litigation
of
and thus was not
appeals correctly
the court of
held that the
26(b)(3)
protected under rule
of the Utah
trial court made an erroneous
of
conclusion
Procedure,
of
appeals
Rules Civil
the court of
law.
If
of
the court
in this
erred
give
failed to
appropriate deference to the
regard,
its
still
if
reversal
be affirmed
Second,
trial court.
Hardman asserts that
findings
the trial
evidentiary sup
court’s
lack
by
the court
shifting
of
port.
proving
burden of
harmless error from As-
refusing
kew to him and then
to
us,
allow him an
In the matter before
applica
opportunity to
show that
error was harm-
governing discovery
ble law
of documents is
26(b)(3)
less.
set forth in rule
of
Utah Rules
provides
Civil
This
Procedure.
rule
that a
ANALYSIS
party cannot
prepared
discover documents
by an
anticipation
insurer
litigation
of
decision,
reviewing
appeals’
party
unless that
shows a substantial need
we
correctly
must
it
determine whether
con
prepare
for the materials to
his case
cluded that the trial court abused its discre
inability
equivalent
to obtain
substantial
ruling
tion in
that the
Hard-
by other means. The rule
states
relevant
man’s
prepared
insurance claim file were
part:
anticipation
of
pro
and thus were
26(b)(3)
discovery
tected from
under
party may
discovery
obtain
[A]
of docu-
things
Utah Rules of Civil Procedure.
tangible
State ex
ments and
dis-
otherwise
(b)(1)
Petty,
rel. Road Comm’n v.
17 Utah 2d
coverable under Subdivision
of this
(1966)
(trial
prepared
court
rule and
liti-
granted
gation
discretion to determine whether in
or
or
trial
another
subject
terrogatories
question
party’s
to
or
other
representa-
under
or
rule);
consultant,
Utah’s
work-produet
(including
former
see
tive
also
indemnitor, insurer,
Dep’t
Transp.
Osguthorpe,
surety,
only
Utah
agent)
or
1995) (trial
(Utah
granted
seeking
court
a
showing
Inc.,
Standard,
Getty Mining
discovery
Gold
need
mate-
has substantial
venture,
mining
partners
of his case
in a
over the ade-
rials
hardship
feasibility study
quacy
is
without undue
of an economic
re-
he
unable
equivalent
quired
obtain
substantial
under
their contract. After Gold
by other means.
materials
obtained documents relevant to this
Standard
Getty employee, Getty
dispute from a former
added.)
acknowledges
(Emphasis
This rule
prod-
asserted that the documents were work
party’s
insur-
that materials
protective
uct and
order from the
received
(“insurer”)
company
protected from
ance
are
prevent
district
fur-
court
Gold Standard’s
if
they are
Standard,
ther
of the documents. Gold
use
litigation.
require
It does not
Thus,
is
fore applicable, Even if it were Gold Standard Bureau, clearly qualifies as an “insur- Farm attorney does make involvement the sine under the rule. er” work-product protection. qua We non however, court, reversing attorney although Standard that Gold mistakenly concluded that factor, “the lan- plain involvement remains a must be involved for document require guage of does [rule ] *5 file in an insurance claim to be deemed as attorney preparation of an be involved in the in anticipation litigation, of and that prepared the Id. at 169-70. We concluded material.” attorney in of involvement the the absence in question that the because memoranda of claim file preparation the Askew/Hardman solely “were at the insistence of man- written prepared suggested that the documents were employees agement-level and with no attor- Askew, ordinary course of business. in the attorney ney request or other involvement” apparently P.2d at 1262.1 It overlooked 884 that and that because there was no indication 26(b)(3) provision of specific the rule which litigation anticipated, the was memoranda recognizes prepared an that documents product. Id. at 170. were not work may qualify protection for under “insurer” sum, the of inaccu In Instead, it the rule. based its determination rately language from construed Gold Stan language in on this court used Gold Stan- 26(b)(3)’s specific despite rule inclusion dard Corp., v. Barrick dard American Resources work-product in the of of “insurers” ambit (Utah 1990). Askew, 164, P.2d 168 884 805 Thus, protection. the 1259, P.2d at 1262. by considering “attorney involvement” in the Standard, however, inapplicable to Gold is remains, question context of this case. The Although present Standard the case. Gold however, in an to what extent documents work-produet inquiry, the general addressed qualify file for work- insurance claim can third-party not it did involve product protection. party suing wherein one another claim considering in an In documents damages arising out of accident whether an seeks anticipa- prepared file in developed after accident insurance claim are the documents have one of liability litigation, tion of courts taken party’s insurer.2 Gold Stan- general positions. Some courts dispute three involved a contract between dard additionally attorney on Madsen v. United evaluating was 2. Askew relies whether involved 1. Inc., (Utah 1990), Television, 801 912 of claim Askew/Hardman investigative argument file her that Harmon’s only considered anticipation litigation. prepared in of not attorney instructing letter from Farm Bureau’s Madsen, However, routine we held in investigate managers how as to claims police reported inter- investigations in a officer's litigation may prepare arise. information anticipa- prepared "in nal affairs files not this letter insufficient to establish attor It found litigation” not tion and thus did fall under of ney v. 884 P.2d involvement. Askew Id, scope work-product protection. 917-18. at of 1258, granted, (Ct.App.1984), 1262 cert. of did address the issue Madsen Because (Utah 1995). 13 investigations, third-party it does control the issue before us. 474 See, anticipation prepared by litigation. is in of unless a document Denton, 342, subject e.g., Spaulding is not 68 the document v. F.R.D. (D.Del.1975) See,
work-product e.g., (considering protection. Thomas 345-46 facts Plovidba, Organ v. Slobodna each case to Co. Jadranska determine docu- (N.D.Ill.1972). However, Inc., 367, ments); Carriers, Basinger v. 54 F.R.D. Glacier 372 26(b)(3) (M.D.Pa.1985) (same); acknowledged, previously as we rule 107 F.R.D. Anderson, Haynes specifically party’s pre “insurer” to allows So.2d (Miss.1992) (“[Cjourts pare scope fall under the should ‘the documents which consider Furthermore, documents, although rule. we held nature of the the nature of investigation], relationship be relevant to [and involvement parties, any pecu- between determination of whether documents were other fact ” (alteration litigation, anticipation spe original) we liar to the case.’ cifically rejected Organ (quoting the Thomas rule in Pete Fast Foods v. Rinaldi’s Great Ins., at Gold Standard. 805 P.2d American F.R.D. (M.D.N.C.1988))). position Some courts have taken the light all previous an insurance claim file and our are cases, litigation, case-by-case approach without we find the regard partic- determining of each case or facts more sound whether docu- See, e.g., ular documents at pre- issue. Ashmead ments an insurance file were (Iowa Harris, 1983); pared litigation. N.W.2d The trial Maddocks, Harriman 518 A.2d court should consider the nature of re- (Me.1986). However, documents, quested we ac- reason the docu- knowledged Petty, 17 Utah 2d prepared, relationship at 412 ments were be- discovery process at preparer tween the involves a document and the grant discovery, balance liberal seeking protection between the of discov- its *6 ery requests recognition relationship and a litigating par- unbridled between the ties, discovery may any lead unfairness to toward the and other facts relevant to the issue. party diligently gathered requested Haynes, who See at 597 So.2d 619. information. The trial court’s discretion in discoverability may The of such documents discovery matters include “should consider- depending differ on the circumstances of respective parties’] ation of [the situations: case. obtained an Documents insurer resources, availability their of the infor- where its is the against own insured claimant means, mation other claim) it (first-party may well be treated being any which it sought, spe- is other differently from documents an obtained judge cial the trial may circumstances which insurer from insured potential its where the 387, consider at relevant.” 412 Id. P.2d at party. claimant is a third See Beck v. Farm balancing principle equally 918. This is ap- Exch., 2, ers Ins. 701 P.2d 798 n. 799- plicable to an documents insurance claim (Utah 1985) (recognizing 800 fundamental adopt position file. We therefore decline to a first-party distinction third-par between protection which affords blanket for such ty imposing duty fiduciary situations and documents. protect insurer to its insured’s interest situations); growing
A adopted third-party number of courts have Campbell accord case-by-case taking approach, into consid- State Farm Auto. Ins. Mut. 840 P.2d denied, eration various factors determine whether 138 cert. 897 (Ct.App.), 853 P.2d (Utah 1992).3 documents an insurance claim file were (not relying (Ala.Civ.App.1991) part on which So.2d cases most 867 insurance claims, first-party litigation); Langdon Champion, involve 752 P.2d (Alaska 1988) ignored (third-party between distinction first- and third- 1007 claim where recognized distinguish claims we in Beck and court disre- does not between first- Court, garded claims); third-party Superior the fact that the case before us Brown v. involves a (1983) third-party (first-party claim. It cited Ariz. also cases did not 670 P.2d Askew, claim); Court, companies. involve insurance 884 P.2d Hawkins v. District Bd., banc) claim); (Colo.1982) (en (citing (first-party at 1261-62 LaMonte Personnel Thus, protect any you might obtain statements the court generated your potential in the un- insured or witnesses holding that document in involving applicable work-prod- investigation of an accident law der the “generally is discov also and a third Hardman’s motion included the sured uct.” determining Johnson, the trial Greg erable” —therein affidavit of who stated: of law. made an erroneous conclusion court my experience It has been that once Askew, in an 1261. Documents at reported on claim is that involves livestock protected as may be claim file highway allegedly by a which is owned However, a docu whether product. work insured, anticipate Farm Bureau I Utah is prepared by an insurer ment may from that time forward a claim question fact litigation is a anticipation of filed in with the accident be connection trial on the by the court to be determined occupants ... the driver of the vehicle or Hence, it. af of the evidence before basis came contact with the livestock. appeals’ court ultimate conclu firming the trial court that the “[documents found if the reverse still be warranted sion to prepared subsequent accident evidentiary sup findings lack trial court’s prepared by at the port. next the evidence before We review attorney, in antici- instruction defendant’s court. pation litigation” they and that cre- “were motion, support of his Hardman submit- approach de- ated in of Farm Bureau’s a list of contents ted against conjunction fenses claims filed which transcribed claim file identified It further that As- with the accident.” cor- of Paul interoffice statement failed a “substantial kew had to demonstrate reports, respondence, photographs, status for the overcome need” documents Bu- to and from Farm and numerous letters product provided in rule protection for work attorney, including letters from Farm reau’s 26(b)(3).4 Therefore, pursuant to rule Hard- attorney to Paul Hardman. Bureau’s 26(b)(3), the denied mo- trial court Askew’s the affidavit of Farm man also submitted compel limited to docu- tion to Stephen Morgan, with Bureau’s prior created to the accident. ments by Morgan copies of letters did, indeed, it have before The trial Greg manager, to Farm Bureau’s claims upon which to find sufficient evidence ad- One letter instructed claims Johnson. statement, the acci- taken after after justers to take statements of insureds dent, as as well the other accident, “any persons as of other well *7 accident, were prepared file after the claims concerning obtained who have information litigation: anticipation Hard- prepared necessary you deem and the accident escaped from its enclosure and man’s horse basis an inves- information as the for use the informed highway; on the was free and law firm tigation on behalf of me this to be police going of his that he was fear potential legal prepare us for claims accident; causing for his horse’s Morgan to sued A from arise.” second letter company stated, “I Hardman contacted the specifically prepared Johnson liability letter, provided coverage is to which of which the enclosed “generally discover that such documents are able”)). Bureau Mut. 560 Burr v. United Farm Ins. 1990) (Ind.Ct.App. (first-party N.E.2d 1252 Enters., Smith, claim); Henry Kan. Inc. (1979) (third-party stated, exception provides an 4. As rule distinguish not between where court does claim product party requesting doc- for work when claims); third-party McHugh v. Chas first- and need that he "has substantial uments can show (first- tant, (La.Ct.App.1987) 503 So.2d of his materials Goodwin, claim); Hall hardship to that he is without undue and unable claim); (Okla.1989) (first-party Tank National equivalent materials the substantial obtain (Tex. Brotherton, 851 S.W.2d Co. v. However, exception was this other means.” 1993) (third-party where court held and is not addressed investiga during obtained whether statements or briefed either raised on certiorari anticipation litigation is prepared are tion this court. before circumstances,” "totality based on claims; company the insurance and investi- attorney’s
gated pursuant to its instructions SCHNUPHASE, Plaintiff Barbara potential legal might claims arise. Appellant, and Because sufficient evidence existed finding
which to base this MARKETS, STOREHOUSE Defendant applied correct rule of law to these fac- Appellee. tors, it be the trial court cannot said No. 940606. finding that the abused its discretion docu- file, including ments in the claim Supreme Utah. Court of Harmon, statement to in an- were June ticipation pro- and are therefore 26(b)(3). product tected as rule work under
CONCLUSION
Documents claim file
may qualify work-product protection if
there is sufficient evidence to show that such
documents were ease,
litigation. In this there was sufficient support finding
evidence to the trial court’s
that the documents Farm Bureau’s claim statement, including Hardman’s litigation,
thus were
26(b)(3) of the Utah Rules of Civil Procedure. in reversing
trial court’s decision. reverse We the deci
sion of the court of and reinstate the judgment.5 verdict
ZIMMERMAN, C.J., STEWART, DURHAM, J.,
Associate Chief Justice and opinion.
concur in Justice RUSSON’s Justice,
HOWE, concurring: adoption
I concur in the case-by- *8 approach my but limit concurrence to
holding trial court did not abuse its holding
discretion in that Hardman’s state- privileged.
ment to Harmon was case, disposition our shifting Because of in this we do whether the court of erred in appeal— showing not reach Hardman’s on final issue Hardman the burden of harmless error.