Prorokovic v. United Insurance Holdings Corp.

Background

The case concerns a November 5, 2020 fire at the plaintiffs’ premises. The plaintiffs submitted a total-loss claim under a homeowners insurance policy issued by the defendant. On January 19, 2021, the defendant denied the claim and rescinded the policy, asserting that the plaintiffs had made material misrepresentations or false statements on their insurance application. The defendant refunded the premiums paid to that point.

The opinion addressed two disputes during general pretrial supervision: the plaintiffs’ request for communications between the defendant and its outside counsel, and the defendant’s request for permission to amend its answer to add an accord-and-satisfaction affirmative defense.

Communications with Outside Counsel

The plaintiffs sought communications between the defendant and its outside counsel from November 17, 2020, when counsel was retained, through January 19, 2021, when coverage was denied. The defendant claimed attorney-client privilege because the communications concerned obtaining legal advice about investigating the claim and potentially rescinding the policy.

Applying New York law to attorney-client privilege, the court explained that an insurer’s claim-handling activities generally remain subject to discovery even when an attorney performs them. The relevant question was whether the attorney was primarily investigating the insurance claim or providing legal advice. The court concluded that the defendant’s decision to rescind the policy was inseparably connected to its denial of the plaintiffs’ claim. The communications therefore were not mainly legal in nature and were not protected by attorney-client privilege. The court ordered the defendant to produce all responsive communications with outside counsel from November 17, 2020, through January 19, 2021.

The court separately rejected any work-product protection. The work-product doctrine protects materials prepared in anticipation of litigation, but the communications occurred before the defendant denied the claim. The court concluded that litigation could not have been anticipated until the claim was denied, so the communications were not protected work product.

Motion to Amend the Answer

The defendant sought leave to amend its answer to assert an accord-and-satisfaction defense. The court noted that Federal Rule of Civil Procedure 15 ordinarily directs courts to freely allow amendments when justice requires. But because the request came after the September 27, 2021 deadline for amended pleadings in the scheduling order, the defendant first had to show good cause under Federal Rule of Civil Procedure 16.

The defendant’s written submissions did not address the good-cause requirement. During a February 2, 2022 conference, defense counsel acknowledged that the proposed amendment was based on reviewing and reconsidering facts known much earlier. The court held that the defendant had not shown the diligence required to justify missing the deadline and denied the application for leave to amend its answer.

Because the application was denied under Rule 16, the court declined to consider the plaintiffs’ separate argument that the proposed amendment would have been futile. Magistrate Judge Paul E. Davison stated that the ruling did not dispose of any existing claims and therefore did not require a report and recommendation.