James River Insurance Company (“James River”) seeks to quash the business records subpoena (“Subpoena”) from Old Republic General Insurance Corporation (“Old Republic”) directed to the law firm, Berman, Berman, Berman, Schneider & Lowary (“Berman Firm”), or alternatively, seeks a protective order that limits the production to communications on or after March 14, 2018 and permits James River to conduct a preliminary review of the materials to be produced regarding privilege issues.

The Subpoena seeks the Berman Firm’s entire litigation file related to its representation of Pacific Hydrotech Corporation (“PHC”) in the underlying action, Gonzalez v. Pacific Hydrotech Corporation, Orange County Superior Court, Case No. 2016-00861439 (“Gonzales Action”) (RPD 1); all communications between the Berman Firm and PHC (RPD 2); all communications between the Berman Firm and James River (RPD 3); all communications between the Berman Firm and James River’s counsel, Hinshaw & Culbertson LLP (“Hinshaw Firm”) (RPD 4); all communications between the Berman Firm and individual adjusters assigned to the PHC and B&F claims at James River (RPD 3, 5-8); and all communications between the Berman Firm and Wolfe & Wyman, LLP (“Wolf Firm”), defense counsel for B&F (RPD 9).  See Wall Decl., Ex. 1.  RPDs 2-9 are essentially subcategories of documents responsive to RPD 1.

Along with the Subpoena, Old Republic included a letter from PHC directing the Berman Firm to produce its entire file to the Branson Firm pursuant to the Subpoena and requesting a copy of the file.  Wall Decl., Ex. 1.

James River argues the Subpoena is defective because the RPDs are overly broad, seek documents not relevant or reasonably calculated to lead the discovery of admissible evidence, seek documents that are privileged and not subject to Evidence Code § 962, and Old Republic failed to pay the required witness fee.

CCP § 2017.010 sets forth the parameters of permissible discovery.  The Subpoena seeks relevant evidence and/or information that is reasonably calculated to lead to the discovery of admissible evidence since the subpoenaed records have some bearing on (a) Old Republic’s and James River’s respective duties to defend and indemnify PHC against the claims made in the Gonzalez Action, (b) PHC’s and B&F Supply Inc.’s respective liability for Gonzalez’s alleged injuries, (c) whether the Berman Firm provided a conflict-free defense to PHC, and (d) PHC’s right to Cumis counsel and reimbursement for Cumis counsel’s fees.

James River acknowledges the Berman Firm’s file does contain at least some relevant information.  James River agreed the Berman Firm’s bills and evidence of payment are discoverable.  See Sep. Statement, at pp. 18-19.  James River also admits that communications between the Berman Firm and PHC, between the Berman Firm and individuals other than Jeanne Magid and Andrew Barber, and between the Berman Firm and B&F’s counsel are discoverable.  See Sep. Statement, at pp. 19, 20 and 22.  Accordingly, the Berman Firm’s file in the Gonzales Action contains evidence/information that is directly relevant and/or reasonably calculated to lead to the discovery of admissible evidence.

The real issue is whether the RPDs improperly seek privileged communications.

A tripartite relationship exists between a liability insurer, its insured and the attorney it hires to defend a third-party claim against its insured.  The “triangular aspect” of the representation has been described as a “coalition for a common purpose—a favorable disposition of the claim—with the attorney owing fiduciary duties to both clients.”  (Purdy v. Pacific Auto. Ins. Co. (1984) 157 Cal.App.3d 59, 76; see Bank of America, N.A. v. Sup.Ct. (2013) 212 Cal.App.4th 1076, 1095-1096 (“Bank of America”) [tripartite relationship exists between title insurer, insured and counsel hired by insurer to prosecute action on behalf of insured (i.e., quiet title)].)  “As a consequence, confidential communications between either the insurer or the insured and counsel are protected by the attorney-client privilege, and both the insurer and insured are holders of the privilege.  In addition, counsel’s work product does not lose its protection when it is transmitted to the insurer.”)  (Bank of America, 212 Cal.App.4th at 1083.)

Old Republic argues that Evidence Code § 962 and Glacier Gen. Assurance Company v. Superior Court (1979) 95 Cal.App.3d 836 (“Glacier Gen.”) apply since PHC assigned its claims to Old Republic.

Evidence Code § 962 provides:

Where two or more clients have retained or consulted a lawyer upon a matter of common interest, none of them, nor the successor in interest of any of them, may claim a privilege under this article as to a communication made in the course of that relationship when such communication is offered in a civil proceeding between one of such clients (or his successor in interest) and another of such clients (or his successor in interest).  (Emphasis added.)

In Glacier Gen, the assignee of the insured alleged against the carrier a claim of “bad faith” failure to settle a medical malpractice claim within policy limits.  The assignee sought production of the entire litigation file of the attorney who represented the insured and the carrier in the underlying malpractice action.  The trial court ordered the production of the entire litigation file and the carrier filed a writ of mandamus attempting to limit the production just to the communications among counsel, the insured and the carrier.  (95 Cal.App.3d at 838-839.)  The Appellate Court rejected the carrier’s requested limitation, explaining that the assignee stood in the shoes of the insured, that counsel’s primary obligation was to the insured, the statute had no such limitation, and that when “an insurer, as required by its contract of insurance, employs counsel to defend its insured, any communication with the lawyer concerning the handling of the claim against the insured, is necessarily a matter of common interest to both the insured and the insurer” and is subject to disclosure under Evidence Code § 962.  (Id. at 842 and fn. 1.)

Although PHC assigned all its claims against James River to Old Republic, James River contends Evidence Code § 962 does not apply based on this Court’s ruling on Old Republic’s MSA.  Mem. Supp., at p. 11:13-21.

This is not correct.  The Court denied summary adjudication on the issue whether James River alone had a duty to pay 100% of the defense expenses made by Old Republic and a duty to pay 100% of the indemnity payments made by Old Republic, and found there were triable issues of material fact on the parties’ respective duties to defend and/or indemnify PHC/Old Republic.  ROA 189.  But this does not fully dispose of any of PHC’s assigned claims.

For example, to establish bad faith, the insured must show the insurer has unreasonably withheld benefits due under the policy, which includes the denial of benefits, paying less than due, or unreasonably delaying payments due.  (Major v. Western Home Ins. Co. (2009) 169 Cal.App. 1197, 1209-1210; Maslo v. Ameriprise Auto & Home Ins. (2014) 227 Cal. App. 4th 626, 633–34.)  PHC and Old Republic have repeatedly argued that James River was unreasonable in initially denying PHC’s tender and refusing to provide any defense to PHC from July 26, 2016 until December 29, 2017, that James River has failed to pay less than its required share, and that James River refused to appoint the Bullard Firm as independent counsel.  FAC, at ¶¶15-19, 37, 48.  These were not issues determined by the Court, nor are they precluded by the ruling on the MSA.

James River also contends that the work product doctrine applies to preclude disclosure of the Berman Firm’s files.  However, the attorney, in this case the Berman Firm, holds the work product privilege, not the client.  (Wells Fargo Bank v. Superior Court (2000) 22 Cal.4th 201, 214-215.)  Thus, James River may not assert the attorney work product privilege to preclude disclosure of materials that contain the Berman Firm’s attorney work product. (But see hereunder regarding the Berman Firm itself.)

For these reasons, Evidence Code § 962 applies and the attorney-client privilege may not be asserted for any communications on a “matter of common interest”, which includes any matter regarding the handling of the Gonzalez Action, including status reports, evaluations and coverage.  (Glacier Gen., supra, 95 Cal.App.3d at 842 and fn. 1.)

James River is correct that on their face the RPDs are overbroad.  However, Old Republic has represented that it is only seeking documents related to the Gonzalez Action, and the Court finds this limitation is appropriate and reasonable.

Regarding the witness fee, the Berman Firm was entitled to a fee of at least $15, regardless of whether it was requested, at the time of service of the Subpoena.  (Code Civ. Proc. § 2020.230(b); see also, Weil, et al., Cal. Prac. Guide: Civ. Proc. Before Trial (The Rutter Group June 2020 Update) § 8:553.)  However, this objection, by itself, does not require the Court to quash the Subpoena.  Old Republic may correct this defect by immediately paying the fee.

Based on the foregoing, the Court DENIES the motion to quash, GRANTS the motion for protective order to the extent that James River shall have an opportunity to review the Berman Firm’s file before it is produced, and MODIFIES the Subpoena to limit the production to documents/information related to or arising from the Gonzalez Action.

The Court notes that the Berman Firm made its own objections to the Subpoena on November 10, 2020.  Consistent with the analysis above, the Berman Firm may assert the attorney work product doctrine.  Additionally, Glacier Gen. recognizes that communications between a carrier and counsel that fall outside of Evidence Code § 962 may be privileged.  (95 Cal.App.3d 842.)  As such, James River and the Berman Firm may also assert the attorney-client privilege and James River is permitted to review the Berman Firm’s production in order to assert such claims of privilege.  If any documents are withheld on the basis of privilege, a privilege log must be produced.

The Berman Firm is ordered to produce the responsive documents, along with any applicable privilege log, within 45 days.

Moving party is ordered to give notice.