Liberty Mutual Insurance Company v. Day to Day Imports Inc.

Background

The parties had been litigating the case for nearly two years, and the deadline for completing fact discovery had been extended five times. After a February 1, 2024 conference, the court limited the remaining fact discovery through March 10, 2024 to specified depositions and allowed additional discovery only upon a showing of extraordinarily good cause. Defendants did not identify Fennell’s deposition as a desired deposition at that conference.

On February 29, 2024, defendants filed a letter-motion seeking a conference in anticipation of a motion to compel Fennell’s deposition and a motion to quash Liberty Mutual’s subpoena to depose Mark Kremer, defendants’ former counsel. Liberty Mutual filed ECF 81 and ECF 84, both seeking to quash the subpoena for Fennell. The court held a conference on March 11, 2024.

The Court’s Analysis

The court first held that defendants had not shown the required extraordinarily good cause to expand the permitted scope of fact discovery. Defendants said they had not raised the possible Fennell deposition at the February 1 conference because they did not yet have the transcript of a claims handler’s deposition and had not yet met and conferred about the issue. The court found that the same lawyers attended the claims handler’s deposition and the later discovery conference, so there was no excuse for failing to raise the possibility earlier.

The court separately ruled that it would not compel Fennell’s deposition even if defendants had timely raised it. Defendants argued that Fennell had engaged in claims handling because he drafted two reservation-of-rights letters sent to defendants after the fire involved in their insurance claims. Liberty Mutual argued that Fennell acted as coverage counsel, not as a claims investigator, and that his communications were protected by the attorney-client privilege.

Applying New York law, the court explained that attorney-client privilege protects confidential communications between a lawyer and client made to obtain or provide legal advice. The privilege protects communications, not the underlying facts. In insurance disputes, factual claim investigation is generally discoverable even when performed by a lawyer, but communications that are primarily legal advice remain protected.

The court found that the evidence showed Fennell acted as coverage counsel. Liberty Mutual’s claims handler testified that he approved the letters, while Fennell stated that he did not decide whether the claim should be accepted or rejected and did not independently investigate the claim. Instead, he prepared draft letters based on information supplied by Liberty Mutual or its investigators. The claims handler conducted the investigation and made the ultimate coverage decision, while Fennell analyzed coverage and made legal recommendations.

The court also rejected defendants’ argument that sending the letters to them waived the privilege. Defendants had the letters and could question the claims handler about them and the basis for approving and sending them, so long as the questions did not seek Fennell’s legal advice. They could not depose Fennell to ask about that legal advice. Because the court found the communications privileged, it did not decide when work-product protection began.

Disposition

ECF 80, seeking to compel Fennell’s deposition, was DENIED. ECF 81 and ECF 84, both seeking to quash the Fennell deposition subpoena, were GRANTED. Each party was ordered to bear its own costs and attorney fees, and the clerk was asked to terminate those three docket entries. The court also declined to extend the existing deadlines for exchanging summary-judgment statements and completing expert discovery absent very good cause.