The opinion of the court was delivered by: Honorable B. Lynn Winmill Chief U. S. District Judge
MEMORANDUM DECISION AND ORDER
The Court has before it a motion to compel filed by plaintiff United Heritage, and a motion to quash subpoena to produce documents filed by defendant Farmers Alliance Mutual Insurance Company (FAMI). The motions are fully briefed and at issue. For the reasons expressed below, the Court will reserve ruling on the motions until it has had an opportunity to conduct an in camera review of the documents.
The two motions present a single issue: Are certain documents contained in FAMI's claims file discoverable by United Heritage? More specifically, the issue is whether correspondence between FAMI's counsel and its claims adjusters is protected by the attorney client privilege, and whether the notes of FAMI claims adjustor Alice Lloyd are protected by that privilege and the work product doctrine.
On April 3, 2003, minor Kiana Zarate fell into a stairwell and suffered injuries at an apartment leased to her parents by the owners, the Beddes family and their partnership. The Beddeses were insured by FAMI. At the time of the accident, the apartment was managed by Rentmaster under a Property Management Agreement with the Beddeses.
In November 2003, the Zarates made a claim with FAMI for damages against the Beddeses, and FAMI retained counsel for the Beddeses. About two years later, the Beddeses and FAMI settled the Zarates' claim for $300,000.00 under the FAMI policy. The Release and Settlement Agreement drafted by FAMI released FAMI and the Beddeses but expressly reserved all claims the Zarates may have had against Rentmaster:
This release is not intended to release any other tortfeasor...and is specifically intended to exclude and does hereby exclude Rentmaster of Rexburg, any of its owners, or assigns as possible tortfeasor in this matter of Releasors. Such claims are specifically reserved and are not compromised or released by his document.
The Zarates then made a claim against Rentmaster under a policy of insurance issued by United Heritage. On April 4, 2006, the Zarates filed a lawsuit against Rentmaster for negligence. Rentmaster filed a third-party complaint against the Beddeses, and FAMI provided the Beddeses with a defense.
Rentmaster tendered the defense and indemnity of this lawsuit to United Heritage, and United Heritage accepted. United Heritage alleges that it made numerous requests of FAMI for a copy of its policy to the Beddeses -- including one request made by subpoena -- but never received an answer. It was not until 2010, United Heritage alleges, that it received a copy of the FAMI policy when a mediator ordered that it be produced, and discovered a provision stating that an insured includes "any organization while acting as your real estate manager."
This provision, United Heritage asserts, means that FAMI was the primary insurer not only for the Beddeses but also for Rentmaster. Accordingly, United Heritage and Rentmaster tendered the defense of the Zarate's lawsuit to FAMI and demanded a refund of attorney fees and costs incurred to date and payment of any indemnity dollars required to be paid by United Heritage in order to protect Rentmaster. Eventually, the Zarates agreed to settle with Rentmaster, and United Heritage paid the $500,000 policy limit under its policy insuring Rentmaster.
Some months prior to that settlement, when FAMI resisted the tender, Rentmaster assigned its claims to United Heritage. United Heritage then filed this lawsuit, alleging, among other claims, that FAMI engaged in bad faith in failing to represent Rentmaster, its ...