Motorola Solutions, Inc. v. Zurich Insurance Co. , 2017 IL App (1st) 161465 ( 2017 )

Digitally signed by
Reporter of Decisions
Illinois Official Reports Reason: I attest to the
accuracy and integrity
of this document
Date: 2017.10.25
Appellate Court 09:05:56 -05'00'
Motorola Solutions, Inc. v. Zurich Insurance Co., 2017 IL App (1st) 161465
Appellate Court MOTOROLA SOLUTIONS, INC., Plaintiff-Appellant, v. ZURICH
Caption INSURANCE COMPANY; ASSOCIATED INDEMNITY
CORPORATION; CONTINENTAL CASUALTY COMPANY;
NATIONAL FIRE INSURANCE COMPANY OF HARTFORD;
TRANSPORTATION INSURANCE COMPANY; AMERICAN
CASUALTY INSURANCE COMPANY OF READING,
PENNSYLVANIA; LIBERTY MUTUAL FIRE INSURANCE
COMPANY; and LIBERTY INSURANCE COMPANY, Defendants
(Zurich Insurance Company and Associated Indemnity Corporation,
Defendants-Appellees).
District & No. First District, Fifth Division
Docket No. 1-16-1465
Opinion filed June 30, 2017
Rehearing denied July 26, 2017
Modified opinion filed August 4, 2017
Decision Under Appeal from the Circuit Court of Cook County, No. 11-L-001902; the
Review Hon. Margaret A. Brennan, Judge, presiding.
Judgment Reversed; contempt finding vacated.
Counsel on Jones Day, of Chicago (James A. White and Brian J. Murray, of
Appeal counsel), and Jones Day, of Pittsburgh, Pennsylvania (Peter D. Laun
and Matthew R. Divelbiss, of counsel), for appellant.
Joshua G. Vincent, Michael M. Marick, and Karen M. Dixon, of
Hinshaw & Culbertson LLP, of Chicago, for appellee Zurich
Insurance Company.
No brief filed for other appellee.
Panel PRESIDING JUSTICE GORDON delivered the judgment of the
court, with opinion.
Justice Hall concurred in the judgment and opinion.
Justice Lampkin dissented, with opinion.
OPINION
¶1 The instant appeal arises from a discovery dispute between plaintiff Motorola Solutions,
Inc., and defendants Zurich Insurance Company (Zurich) and Associated Indemnity
Corporation (Associated) concerning the production of documents that plaintiff claims are
privileged. The parties are engaged in insurance coverage litigation, stemming from several
underlying personal injury actions in which claims were asserted against plaintiff. Plaintiff
filed a motion for summary judgment with respect to Zurich’s duty to defend one of the actions
and the trial court stayed briefing on the motion to permit limited discovery concerning a late
notice defense asserted by defendants. As part of discovery, defendants sought the production
of several documents that plaintiff claimed were privileged. The trial court ordered plaintiff to
turn over the documents, and plaintiff refused. The trial court then held plaintiff in friendly
civil contempt to permit plaintiff to appeal. For the reasons that follow, we reverse the trial
court’s order requiring production of the documents and vacate the friendly contempt order.
¶2 BACKGROUND
¶3 We note that the parties’ briefs and portions of the record on appeal were permitted to be
filed under seal. While we respect the parties’ wishes to keep confidential material private, our
consideration of the issues on appeal necessarily requires us to discuss details of some of these
documents. However, we include only those details necessary to our resolution of the issues on
appeal.
¶4 The instant appeal is the third time the parties have been before this court with respect to
the insurance coverage litigation: we considered the scope of releases executed by the parties
in Motorola Solutions, Inc. v. Zurich Insurance Co., 2015 IL App (1st) 131529, and considered
underlying plaintiffs’ requests to intervene in Motorola Solutions, Inc. v. Continental Casualty
Co., 2015 IL App (1st) 131724-U. To the extent that these earlier decisions discuss facts that
are helpful to our understanding of the issues in the instant appeal, we repeat them here.
¶5 On February 18, 2011, plaintiff filed a complaint for declaratory judgment and breach of
contract against a number of insurance companies, including Zurich and Associated; the
complaint was amended on July 1, 2011, and again on February 22, 2013. Plaintiff sought for
-2-
the insurers to provide it legal representation to defend plaintiff and/or coverage for defense
costs under insurance policies issued by each of the insurers for four underlying personal
injury actions in which claims were asserted against plaintiff.
¶6 The four underlying actions (the clean room cases) alleged that plaintiff was liable for
injuries that children of plaintiff’s former employees and contractors allegedly sustained as a
result of exposure to various chemicals in “clean rooms” in plaintiff’s manufacturing facilities.
According to plaintiff’s complaint, from the 1960s through 2003, plaintiff operated facilities
that manufactured, among other things, semiconductor products. These facilities included
certain rooms that were designated as “clean rooms” in which the semiconductor products
were manufactured, which “were designed to prevent dust and other similar materials from
contacting semiconductor components during the manufacturing process.” The clean room
cases all involved substantially similar allegations, in general alleging that hazardous or toxic
materials were present in the “clean rooms” and that “either the father, the mother, or both
worked in [plaintiff’s] clean room facility for some period of time before, and in a number of
cases after, the [underlying] plaintiff child was born; often the period of employment [was]
alleged to have continued through the in utero period. The [underlying] plaintiffs generally
claim[ed] that the children were injured as a result of parents working in clean rooms” as a
result of toxic exposure.
¶7 Plaintiff’s complaint alleges that one or more of the insurer defendants had a duty to defend
and/or pay defense costs in the clean room cases and that, by failing to do so, the insurers had
breached their obligations to plaintiff under the insurance policies.
¶8 Both of the defendants in the instant appeal filed answers and affirmative defenses and
included counterclaims in which they alleged that plaintiff had released all of its claims for
coverage for the clean room cases in settlement agreements and releases that the parties had
executed in 2003. The parties then engaged in litigation concerning the scope of the releases,
which culminated in a bench trial on the issue in December 2012 and defendants’ first appeal
before this court in 2015, in which we affirmed the trial court’s finding that the releases did not
encompass the claims in the clean room cases. See Motorola Solutions, Inc. v. Zurich
Insurance Co., 2015 IL App (1st) 131529. During the pendency of the appeal, the trial court
stayed all action in the coverage litigation. However, the underlying plaintiffs in one of the
clean room cases sought to intervene in the coverage litigation in order to seek a modification
of a protective order covering discovery that had been conducted concerning the scope of the
releases. The trial court declined to assert jurisdiction on the motion to intervene in light of the
order staying the proceedings, and the appeal of that order was the basis for our second
decision in this matter. See Motorola Solutions, Inc. v. Continental Casualty Co., 2015 IL App
(1st) 131724-U.
¶9 According to plaintiff’s brief, while the issue concerning the scope of the releases was
being litigated, plaintiff was “effectively denied a defense” of the clean room cases “for several
years.” During that time, the underlying clean room cases were proceeding, and on September
3, 2015, plaintiff filed a motion for summary judgment against Zurich, seeking a declaratory
judgment regarding Zurich’s duty to defend one of those underlying claims.1 In response,
Zurich filed a motion pursuant to Illinois Supreme Court Rule 191(b) (eff. Jan. 4, 2013),
seeking leave to take discovery concerning the timeliness of plaintiff’s notice to Zurich prior to
1
According to the parties, the underlying claim has since been settled.
-3-
responding to plaintiff’s summary judgment motion. The trial court granted Zurich’s motion
on November 12, 2015, but ordered the parties to meet and confer about the scope of discovery
and the entry of a protective order. The parties negotiated an agreed protective order, which the
trial court entered on January 12, 2016.
¶ 10 The discovery sought by Zurich, later joined by Associated, included two categories of
documents at issue on appeal. One consisted of documents pertaining to plaintiff’s clean room
safety program (CRSP documents). In the 1990s, a number of lawsuits had been filed against
IBM, a competitor of plaintiff’s, concerning alleged birth defects found in children whose
parents worked in the manufacturing process in creating semiconductors in IBM’s clean room
facilities. According to plaintiff, “[plaintiff], as a prudent company also operating in that
manufacturing sector, engaged counsel and formed a working group to conduct an analysis of
[plaintiff’s] practices in and risks arising from its clean rooms.” This was known as plaintiff’s
“Clean Room Safety Program.” The efforts of the program resulted in the creation of the CRSP
documents in 1996, reports prepared by, or at the direction of, plaintiff’s outside counsel.
These CRSP documents had been sought by defendants since discovery began in the coverage
litigation, with plaintiff withholding the documents on the basis of both the attorney-client
privilege and the work product doctrine. Production of these documents has also previously
been considered by this court on appeal, where we affirmed the trial court’s finding that the
CRSP documents were not relevant to the issue of determining the scope of the releases in the
first appeal. See Motorola Solutions, 2015 IL App (1st) 131529, ¶¶ 135-42. Documents
concerning plaintiff’s knowledge of the clean room risks are also of great interest to the
underlying clean room plaintiffs, who sought to intervene during the pendency of the first
appeal in order to obtain access to documents covered by a protective order.2 See Motorola
Solutions, 2015 IL App (1st) 131724-U, ¶ 3.
¶ 11 The second category of documents sought by defendants concerned plaintiff’s 2003 sale of
its semiconductor manufacturing business to a new entity, Freescale Semiconductor, Inc. In
the course of that sale, plaintiff was required to file a United States Securities and Exchange
Commission Form S-1 Registration Statement (S-1 documents). The form contains a section
entitled “Risk Factors,” which informs potential investors about “significant risk factors
currently known and unique to” the seller of the securities. In this disclosure, plaintiff stated:
“In the last few years, there has been increased media scrutiny and associated reports
focusing on a potential link between working in semiconductor manufacturing clean
room environments and certain illnesses, primarily different types of cancers ***
Because we utilize these clean rooms, we may become subject to liability claims.”
Defendants sought access to the documents related to the S-1 securities filing.
¶ 12 In response to defendants’ discovery requests, plaintiff declined to produce the CRSP
documents or the S-1 documents and, on January 20, 2016, defendants filed a motion to
compel production of the documents. In the motion, defendants claimed that these documents
were material evidence showing that plaintiff had been aware of the facts underlying the clean
room actions since at least 1996 and that defendants intended to rely on this evidence to
support their late notice defense. Defendants argued that under the Illinois Supreme Court case
of Waste Management, Inc. v. International Surplus Lines Insurance Co., 144 Ill. 2d 178
2
According to plaintiff, the underlying clean room plaintiffs again sought to intervene shortly after
the trial court granted the Rule 191(b) motion for discovery but were again unsuccessful.
-4-
(1991), the attorney-client privilege and work product doctrines did not apply to shield
production of such documents from plaintiff’s insurers. In its response, plaintiff contended that
the CRSP documents were not prepared in connection with the defense of the clean room
actions and that plaintiff did not learn until December 2007 that any individuals were
considering pursuing any action against plaintiff, information which plaintiff promptly
forwarded to its insurers.
¶ 13 On March 8, 2016, the trial court granted defendants’ motion to compel, ordering plaintiff
to produce:
“All documents comprising the CRSP Notebook, as identified on the privilege logs
attached as Exhibits 2 and 17 to the Affidavit of Karen M. Dixon.
All communications to or from [plaintiff’s] legal and/or risk management
departments concerning the Clean Room Safety Program or any other assessments of
[plaintiff’s] potential liability for bodily injury claims arising out of the Clean Rooms
and/or the Clean Room Chemicals, Substances and Radiation.
All documents in the possession of [plaintiff’s] Corporate Insurance Department
(a/k/a risk management) that refer in any way to the Clean Rooms.
All documents, including all communications with [plaintiff’s] risk management or
legal department, concerning the disclosure of potential clean room related liabilities to
investors in *** December 2003 (the SEC S-1 Filing).
All documents/communications that refer in any way to potential clean room
related claims and/or liabilities that were received, sent, or created by [plaintiff’s] legal
and/or risk management departments prior to [plaintiff’s] first notice to
Associated/Zurich.”
¶ 14 On March 29, 2016, plaintiff filed a motion for reconsideration or, in the alternative, for a
finding of friendly contempt in order for plaintiff to appeal. On May 4, 2016, the trial court
denied plaintiff’s motion for reconsideration and found plaintiff in friendly contempt for
refusing to comply with its discovery order, imposing a $100 penalty. This appeal follows.3
¶ 15 ANALYSIS
¶ 16 The instant appeal was filed pursuant to Illinois Supreme Court Rule 304(b)(5) (eff. Mar. 8,
2016), which permits an interlocutory appeal of “[a]n order finding a person or entity in
contempt of court which imposes a monetary or other penalty.” Here, the trial court found
plaintiff in contempt of court and imposed a monetary penalty. Accordingly, we have
jurisdiction to consider plaintiff’s appeal. “Because discovery orders are not final orders, they
are not ordinarily appealable.” Norskog v. Pfiel, 197 Ill. 2d 60, 69 (2001). “However, it is well
settled that the correctness of a discovery order may be tested through contempt proceedings.”
Norskog, 197 Ill. 2d at 69. “When [a party] appeals contempt sanctions imposed for violating,
or threatening to violate, a pretrial discovery order, the discovery order is subject to review.
[Citation.] Review of the contempt finding necessarily requires review of the order upon which
it is based. [Citation.]” Norskog, 197 Ill. 2d at 69.
3
We note that Associated did not file a separate brief on appeal but joined in and adopted Zurich’s
brief.
-5-
¶ 17 On appeal, plaintiff argues that the trial court erred in ordering it to produce the CRSP
documents and the S-1 documents. We note that before the trial court, plaintiff argued that the
documents were shielded by both the attorney-client privilege and the work product doctrine;
however, on appeal, plaintiff focuses only on the attorney-client privilege, and accordingly, we
will do the same. “Although a trial court’s discovery order is ordinarily reviewed for a manifest
abuse of discretion [citation], the proper standard of review depends on the question that was
answered in the trial court [citation].” Norskog, 197 Ill. 2d at 70. “If the facts are
uncontroverted and the issue is the trial court’s application of the law to the facts, a court of
review may determine the correctness of the ruling independently of the trial court’s
judgment.” Norskog, 197 Ill. 2d at 70-71. In the case at bar, the facts are uncontroverted and we
are considering whether the trial court properly applied the law concerning privilege between
an insured and its insurer to the uncontroverted facts. Accordingly, this is an issue of law that
we review de novo. De novo consideration means we perform the same analysis that a trial
judge would perform. Khan v. BDO Seidman, LLP, 408 Ill. App. 3d 564, 578 (2011).
¶ 18 I. Waste Management
¶ 19 As the parties recognize, the primary case concerning this issue is our supreme court’s
decision in Waste Management. Accordingly, we must consider the case, and its holding, in
considerable detail. In Waste Management, the insureds owned and operated a hazardous
waste disposal site that was the subject of a lawsuit alleging that the insured was responsible
for personal injury and property damage arising from the migration of toxic waste (the Miller
litigation). Waste Management, 144 Ill. 2d at 186. During the pendency of the Miller litigation,
the prior owners of the hazardous waste disposal site filed suit against the insureds and the
insureds filed a counterclaim, alleging negligent design, construction, and operation of the site
(the Nunn litigation). Waste Management, 144 Ill. 2d at 186. The insureds obtained a $10.675
million judgment in their favor against the prior owners in the Nunn litigation and ultimately
settled with some of them for $1.5 million. Waste Management, 144 Ill. 2d at 186. The
insureds also retained counsel, defended, and settled the Miller lawsuit. Waste Management,
144 Ill. 2d at 186. After doing so, pursuant to their insurance policy, the insureds sought
indemnification from their insurers for $2.15 million in settlement costs and $850,000 in
defense costs, but the insurers denied coverage. Waste Management, 144 Ill. 2d at 186.
¶ 20 Both the insurers and the insureds filed declaratory judgment actions, seeking a
determination of their respective rights and liabilities under the insurance policy. Waste
Management, 144 Ill. 2d at 186. In their complaint, the insurers alleged that one reason for
their denial of coverage for the Miller litigation was the insureds’ failure to advise them of the
Nunn litigation, which the insurers alleged constituted a breach of the cooperation clause and
other conditions of the insurance policy. Waste Management, 144 Ill. 2d at 187. The parties
engaged in discovery and, during discovery, the insurers requested production of defense
counsel’s files in the underlying Miller and Nunn litigations. Waste Management, 144 Ill. 2d at
187. The insureds produced some of the requested documents from the Miller litigation but
withheld others on the basis of the attorney-client privilege and work product doctrine; they
did not produce any of the files from the Nunn litigation. Waste Management, 144 Ill. 2d at
187. The trial court ordered the insureds to produce the files from the Miller litigation but
denied the insurers’ request for production of the files from the Nunn litigation; the insureds
refused to produce any additional documents, and the trial court found them in friendly civil
-6-
contempt. Waste Management, 144 Ill. 2d at 187. The appellate court affirmed in part and
reversed in part, and the supreme court granted the insureds’ petition for leave to appeal. Waste
Management, 144 Ill. 2d at 187.
¶ 21 The supreme court found that “the attorney-client privilege has no application in this case.”
Waste Management, 144 Ill. 2d at 191. The court found both of the insurers’ arguments to be
equally significant and dispositive. Waste Management, 144 Ill. 2d at 191. The court first
considered the insurers’ argument that the cooperation clause of the insurance policy rendered
the attorney-client privilege unavailable. The court noted that “[t]he scope of the duties
imposed upon an insurer and its insured are defined and controlled by the terms of the
insurance contract. Any condition in the policy requiring cooperation on the part of the insured
is one of great importance [citation], and its purpose should be observed [citation].” Waste
Management, 144 Ill. 2d at 191. The court further noted that “[t]he basic purpose of a
cooperation clause is to protect the insurer’s interests and to prevent collusion between the
insured and the injured party.” (Emphasis in original.) Waste Management, 144 Ill. 2d at 191.
¶ 22 The court looked to the cooperation clause contained in the insurance policy at issue,
noting that “[t]he cooperation clause in this case imposes upon insureds the duty to assist
insurers in the conduct of suits and in enforcing any right to contribution or indemnity against
persons potentially liable to insureds. Further, the policy provides that insurers are entitled to
conduct any claim, in the name of insureds, for indemnity or damages against persons, and that
insureds ‘shall give all such information and assistance as the insurers may reasonably
require.’ ” 4 Waste Management, 144 Ill. 2d at 192. The court found:
“Here, the cooperation clause imposes a broad duty of cooperation and is without
limitation or qualification. It represents the contractual obligations imposed upon and
accepted by insureds at the time they entered into the agreement with insurers. In light
of the plain language of the cooperation clause in particular, and language in the policy
as a whole, it cannot seriously be contended that insureds would not be required to
disclose contents of any communications they had with defense counsel representing
them on a claim for which insurers had the ultimate duty to satisfy.” Waste
Management, 144 Ill. 2d at 192.
The court rejected the insureds’ argument that their duty to cooperate was rendered moot once
the underlying lawsuit was terminated, finding that the “[i]nsureds’ duty to cooperate
concerning matters covered by the insurance agreement did not end with the termination of the
underlying lawsuit, but rather continues for as long as insureds seek to enforce its terms, and
certainly to the point when insurers were requested to perform their end of the bargain. The fact
that the parties are now adverse concerning the interpretation of such terms does not negate
4
We note that the dissent appears to take issue with our reliance on this aspect of the Waste
Management analysis, given that the Waste Management insureds in their petition for rehearing
claimed that the language of the policy at issue did not actually contain this language. See Waste
Management, 144 Ill. 2d at 201-02. However, the insureds’ later arguments have no bearing on this
portion of the court’s discussion, which remains good law. In its supplemental opinion, the court
expressly makes no finding as to the merits of the insureds’ claims concerning the contractual language
but finds that, assuming arguendo the insureds were correct, a duty to cooperate nevertheless “could
reasonably be inferred based merely on principles of fairness and good faith.” Waste Management, 144
Ill. 2d at 202. Thus, the Waste Management court merely finds an additional basis for its holding and
does not in any way invalidate its earlier discussion concerning the language of the policy.
-7-
insureds’ contractual duty.” Waste Management, 144 Ill. 2d at 192. The court concluded that
“[a] fair reading of the terms of the contract renders any expectation of attorney-client
privilege, under these circumstances, unreasonable. We conclude that the element of
confidentiality is wanting and, therefore, the attorney-client privilege does not apply to bar
discovery of the communications in the underlying lawsuits.” Waste Management, 144 Ill. 2d
at 192-93.
¶ 23 The supreme court found the insurers’ second argument, that the attorney-client privilege
is unavailable to insureds under the common interest doctrine, to be “equally compelling.”
Waste Management, 144 Ill. 2d at 193. The court noted that “[e]vidence scholars have
variously stated that under the common interest doctrine, when an attorney acts for two
different parties who each have a common interest, communications by either party to the
attorney are not necessarily privileged in a subsequent controversy between the two parties.
[Citations.] This is especially so where an insured and his insurer initially have a common
interest in defending an action against the former, and there is a possibility that those
communications might play a role in a subsequent action between the insured and his insurer.
[Citations.]” Waste Management, 144 Ill. 2d at 193-94. The court found that, “[c]learly, here
both insurers and insureds had a common interest either in defeating or settling the claim
against insureds in the Miller litigation. We believe that the communication by insureds with
defense counsel is of a kind reasonably calculated to protect or to further those common
interests.” Waste Management, 144 Ill. 2d at 194.
¶ 24 The court rejected the insureds’ argument that the common interest doctrine did not apply
because the insurers provided no defense in the underlying suits, finding that “we believe that
the doctrine may properly be applied where the attorney, though neither retained by nor in
direct communication with the insurer, acts for the mutual benefit of both the insured and the
insurer. [Citations.] It is the commonality of interests which creates the exception, not the
conduct of the litigation.” Waste Management, 144 Ill. 2d at 194. The court found:
“On these facts, a less flexible application of the doctrine effectively defeats the
purpose and intent of the parties’ agreement. Insureds and insurers share a special
relationship; they are in privity of contract. In a limited sense, counsel for insureds did
represent both insureds and insurers in both of the underlying litigations since insurers
were ultimately liable for payment if the plaintiffs in the underlying action received
either a favorable verdict or settlement. To deny discovery in this instance would be to
disregard considerations of public policy which require encouragement of full
disclosure by an insured to his insurer.” Waste Management, 144 Ill. 2d at 194-95.
The court also found that, despite the fact that the insureds were not seeking attorney fees or
settlement costs in the Nunn lawsuit, the insurers were still entitled to the files in that suit
because the insureds’ position “overlooks insurers’ interest in any potential recovery for
contribution from the prior owners of the site. Moreover, insureds’ duty to cooperate with
insurers is not limited solely to situations where insureds seek recovery of costs. We believe
insurers and insureds shared a common interest in the conduct and outcome of the Nunn
litigation as well as in the Miller litigation. Thus, insurers are entitled to the Nunn files.” Waste
Management, 144 Ill. 2d at 195.
¶ 25 The supreme court concluded: “In sum, insurers’ entitlement to production of the files
arises out of the contractual obligations and the common interest doctrine. Their right to
complete disclosure is not only necessary to proper resolution of the pending lawsuit, but exists
-8-
irrespective of the now adversarial nature of the parties’ relationship. The attorney-client
privilege simply has no application in this case.” Waste Management, 144 Ill. 2d at 195.
¶ 26 II. Cooperation Clause
¶ 27 In the case at bar, we agree with plaintiff that Waste Management does not encompass the
situation present in the instant case, as Waste Management involved a factual scenario in which
the insurers were seeking documents from the litigation for which the insureds were seeking
indemnification. By contrast, in the case at bar, defendants have not sought the files from the
litigation in the underlying clean room cases; instead, they are seeking files that were created
years prior to any litigation. The difference this distinction makes becomes apparent when
examining the cooperation clause of the Zurich policy, which Zurich claims is “virtually
identical” to the one at issue in Waste Management. The cooperation clause requires plaintiff
to “cooperate with the company and, upon the company’s request, assist in making
settlements, in the conduct of suits and in enforcing any right of contribution or indemnity
against any person or organization who may be liable to the insured ***.” In Waste
Management, this clause applied to the files the insurers sought, as they were files that
concerned the conduct of the suits and the enforcement of rights of contribution or indemnity.
By contrast, nothing in this cooperation clause touches on the disclosure of the contents of
plaintiff’s CRSP documents, which were created by different attorneys over a decade before
any lawsuit was filed. It is thus unclear how the reports created under the CRSP would assist
defendants in “making settlements, in the conduct of suits, [or] in enforcing any right of
contribution or indemnity against any person or organization who may be liable to the
insured.” At most, such documents would help defeat plaintiff’s claims against defendants,
which is not a subject included in the cooperation clause. The same is true of the S-1
documents, which are even further removed from the defense of any litigation for which
plaintiff seeks coverage, as they are related to securities filings.5
¶ 28 The language of the cooperation clause in the instant case further distinguishes the
situation here from that present in Sharp v. Trans Union L.L.C., 364 Ill. App. 3d 64 (2006), a
case that defendants rely on to expand the holding of Waste Management to encompass the
present situation. In Sharp, after a number of lawsuits were filed against the insured based on
allegations that the insured improperly sold consumer information to third parties in violation
of the Fair Credit Reporting Act (FCRA) (15 U.S.C. § 1681 et seq. (2006)), the insurers filed a
complaint for declaratory judgment, seeking a declaration that the lawsuits were not covered
under the insurance policy. Sharp, 364 Ill. App. 3d at 69. Prior to the inception of the policy,
the insured had been the subject of an administrative complaint filed by the Federal Trade
Commission (FTC) based on alleged FCRA violations, and had also been the subject of several
lawsuits containing similar allegations. Sharp, 364 Ill. App. 3d at 66-68. The insurers claimed
that the new lawsuits were based on the same acts, errors, violations, and omissions that were
known prior to the inception of the policy because they were based on the same allegations as
the prepolicy suits. Sharp, 364 Ill. App. 3d at 69. During discovery, the insurers sought
5
In their petition for rehearing, defendants point to additional language in the cooperation clause,
which requires plaintiff to “assist in effecting settlements, securing and giving evidence, obtaining the
attendance of witnesses and in the conduct of suits.” (Emphasis added.) However, we do not find that
this language changes any of our analysis.
-9-
“pre-policy documents that reflect, potentially reflect, or pertain to [the insured’s] and/or its
general counsel’s knowledge and/or analysis of the FCRA, the FTC litigation, and private
litigation arising from the same allegations as the FTC litigation.” Sharp, 364 Ill. App. 3d at
70. The trial court found that the policy’s cooperation clause required the insured to produce
the documents, and the appellate court affirmed.
¶ 29 The appellate court looked to Waste Management and noted that, while Sharp involved
documents that were created prior to the inception of the policy, it nevertheless found the
Waste Management court’s analysis “instructive” (Sharp, 364 Ill. App. 3d at 72) because
“[t]he broad policies articulated by the supreme court in Waste Management are equally
applicable to our interpretation of the insurance contract at issue here” (Sharp, 364 Ill. App. 3d
at 72). The court found that “[o]ur application of principles of contract interpretation and the
policies articulated in Waste Management reveals that the parties’ manuscripted insurance
policy was negotiated and written to require the disclosure of [the insured’s] general counsel’s
knowledge, work product, and communications regarding the pre-policy litigation.” Sharp,
364 Ill. App. 3d at 72.
¶ 30 The court pointed to exclusion (g) of the policy, which excluded “ ‘any Claim arising out of
acts, errors, violations or omissions that took place prior to the effective date of this Insurance,
if the [general counsel6] of the Named Assured on the effective date knew that such acts,
errors, violations or omissions might be expected to be the basis of a Claim.’ ” Sharp, 364 Ill.
App. 3d at 68. The court found that the policy protected the insurers from insuring a known
loss and “effectively defines known losses in terms of the general counsel’s knowledge by
excluding errors and omissions that [the insured’s] general counsel knew might be the basis of
a future claim. The only way to determine whether [the insured’s] general counsel knew that a
particular act might be the basis of a claim would be to look at the general counsel’s legal
reasoning and analysis of that act.” Sharp, 364 Ill. App. 3d at 73. The court further pointed to
the policy’s cooperation clause, which provided that “ ‘[t]he Assured shall co-operate with the
[insurers] in all investigations, including investigations regarding the application and coverage
under this Policy.’ ” Sharp, 364 Ill. App. 3d at 68. The court found that reading the specific
language of the cooperation clause together with exclusion (g), the insured “agreed to share the
legal reasoning and analysis of its general counsel regarding whether there might be future
claims based on its sale of target marketing information.” Sharp, 364 Ill. App. 3d at 73. The
court noted that, “[a]lthough such information may be privileged because it is legal advice
given by the general counsel to the corporation about whether its actions could result in
liability [citation], [the insured], in agreeing to a policy with such particular language, has
agreed to share this information with [the insurers] under these circumstances.” Sharp, 364 Ill.
App. 3d at 73.
¶ 31 The court further found that its reading of the insurance contact was supported by Illinois
public policy, which, as the Waste Management court had found, “encourag[ed] disclosure
between insurer and insured, ‘with an eye toward ascertaining that truth which is essential to
the proper disposition of a lawsuit.’ ” Sharp, 364 Ill. App. 3d at 73-74 (quoting Waste
Management, 144 Ill. 2d at 190). Additionally, “[t]he supreme court has also emphasized that
the purpose of an insurance contract is to protect the insured against loss, damage, or liability
The policy originally stated “Chief Financial Officer,” but the policy was amended to change the
6
term to “General Counsel.” Sharp, 364 Ill. App. 3d at 68.
- 10 -
arising from an unknown or contingent event and is applicable only to some contingency or act
to occur in [the] future.” (Emphases in original and internal quotation marks omitted.) Sharp,
364 Ill. App. 3d at 74 (quoting Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154
Ill. 2d 90, 103 (1992)). “If the insured knows that a loss will occur, it is not a contingency and
would not be covered under an insurance contract absent an express agreement to do so.
[Citation.] Thus, public policy would favor requiring an insured to share information with its
insurer that would reveal whether a risk was known. The provisions of the insurance contract
between [the insurers] and [the insured] promote these policies by requiring [the insured] to
share information regarding whether its general counsel knew of particular losses.
Accordingly, public policy supports enforcing the policy as written.” Sharp, 364 Ill. App. 3d at
74.
¶ 32 In the case at bar, as noted, the insurance policy at issue is significantly different than that
present in Sharp. The policy itself does not define a “known loss” in terms of plaintiff’s
general counsel’s knowledge, nor does the cooperation clause expressly require plaintiff’s
cooperation in investigations of coverage questions. Defendants do not even acknowledge the
extremely different language of the policies in the two cases, despite the fact that the Sharp
court expressly relied on the policy’s language in finding that disclosure was required.
Furthermore, as plaintiff notes, the coverage issue in Sharp was the “known loss” exclusion,
while the issue in the instant case was whether there was a timely notice of occurrence.
Accordingly, we find Sharp of limited usefulness to the instant case.
¶ 33 As noted, in the case at bar, the factual situation is quite different from that present in
Waste Management because, here, defendants are not seeking the files of the attorneys
engaged in litigation of the underlying cases, as was the case in Waste Management. Instead,
defendants are seeking documents created well before any litigation had commenced. While
“[a]ny condition in the policy requiring cooperation on the part of the insured is one of great
importance [citation], and its purpose should be observed [citation]” (Waste Management, 144
Ill. 2d at 191), this duty is not boundless. It must remain tied to the language of the cooperation
clause itself. Here, the cooperation clause requires plaintiff to “cooperate with the company
and, upon the company’s request, assist in making settlements, in the conduct of suits and in
enforcing any right of contribution or indemnity against any person or organization who may
be liable to the insured.” Defendants have not explained how either the CRSP documents or the
S-1 documents would “assist in making settlements, in the conduct of suits and in enforcing
any right of contribution or indemnity against any person or organization who may be liable to
the insured.” Instead, defendants are seeking the documents to determine whether they can
defeat plaintiff’s request for coverage as a result of a late notice. Consequently, we cannot find
that Waste Management encompasses the situation in the case at bar with respect to the
cooperation clause contained in the insurance policy.
¶ 34 We are unpersuaded by the arguments raised in the dissent and in defendants’ petition for
rehearing concerning the applicability of a common law duty to cooperate. In its supplemental
opinion upon denial of rehearing, the Waste Management court noted that the insureds claimed
in their petition for rehearing that the language of the insurance policy at issue was different
than that analyzed in the original opinion. Waste Management, 144 Ill. 2d at 202. The court
noted that in the case of a “cooperate-and-assist” clause, as was present in Waste Management
and as is present in the case at bar, “the purpose of the provision is to require the insured to
- 11 -
cooperate in good faith with the insurer in its defense of a claim.” Waste Management, 144 Ill.
2d at 203.
¶ 35 The court further noted that, typically, the insurer has limited knowledge of the facts
surrounding a claimed loss, while the insured has exclusive knowledge of such facts, meaning
that “[t]he insurer is, therefore, dependent on its insured for fair and complete disclosure;
hence, the duty to cooperate.” Waste Management, 144 Ill. 2d at 204. Thus, “[w]hile the
insured has no obligation to assist the insurer in any effort to defeat recovery of a proper claim,
the cooperation clause does obligate the insured to disclose all of the facts within his
knowledge and otherwise to aid the insurer in its determination of coverage under the policy.
[Citation.] The insurer is entitled, irrespective of whether its duty is to defend or to indemnify,
to gain as much knowledge and information as may aid it in its investigation, or as may
otherwise be significant to the insurer in determining its liability under the policy and in
protecting against fraudulent claims. To hold otherwise effectively places the insurer at the
mercy of the insured and severely handicaps it in contesting a claim.” Waste Management, 144
Ill. 2d at 204. The court found:
“Where the insurer provides the defense it is directly involved in the generation of
the defense litigation files and, obviously, has access to the whole of them. Where the
insurer is bound instead to indemnify for the cost of litigation, it plays a different but no
less vulnerable role in the claims process. Thus we do not believe that the insurer, as
indemnifier, is relegated to a less secure position with only limited rights to disclosure.
The insurer-indemnifier is no less interested or entitled to protect its financial interests
and to minimize unwarranted liability claims than if it were actually participating in or
providing the defense. We conclude that while the insurance contract may not, as
insureds assert, expressly state that insureds have a duty to provide all information and
assistance, by our interpretation of the clause no less is required.” Waste Management,
144 Ill. 2d at 204-05.
¶ 36 Despite defendants’ and the dissent’s arguments otherwise, we cannot find that this
language means that a common law duty to cooperate rendered the attorney-client privilege
inapplicable in the instant case. As noted, the Waste Management analysis occurred in the
context of the litigation of claims for which the insurers sought defense files. By contrast, in
the case at bar, defendants are not seeking the defense files in the underlying litigation but are,
instead, seeking to obtain documents that were prepared years prior to the commencement of
the instant litigation. Contrary to the dissent’s statement otherwise, the instant case and Waste
Management thus do not contain remotely “similar facts.” Neither the dissent nor defendants’
petition for rehearing cites any authority for the proposition that an insured must disclose
documents that were prepared by separate counsel years prior to any litigation. Instead, both
apply an expansive interpretation of Waste Management that strips it of the factual context in
which that case was decided. Nothing in Waste Management suggests that it is intended to
apply to situations in which an insurer is seeking prelitigation documents prepared by
completely different counsel from the counsel involved in litigating the underlying claims, and
we cannot interpret the case to stand for something it simply does not hold.
¶ 37 III. Common Interest Doctrine
¶ 38 We also find that the Waste Management court’s discussion of the common interest
doctrine is inapplicable to the instant case. In Waste Management, as noted, the supreme court
- 12 -
found that “[c]learly, here both insurers and insureds had a common interest either in defeating
or settling the claim against insureds in the Miller litigation. We believe that the
communication by insureds with defense counsel is of a kind reasonably calculated to protect
or to further those common interests.” Waste Management, 144 Ill. 2d at 194. The court further
found that “[i]nsureds and insurers share a special relationship; they are in privity of contract.
In a limited sense, counsel for insureds did represent both insureds and insurers in both of the
underlying litigations since insurers were ultimately liable for payment if the plaintiffs in the
underlying action received either a favorable verdict or settlement. To deny discovery in this
instance would be to disregard considerations of public policy which require encouragement of
full disclosure by an insured to his insurer.” Waste Management, 144 Ill. 2d at 194-95.
¶ 39 In the case at bar, however, as noted, there was no “underlying litigation” from which
defendants are seeking disclosure. Instead, they are seeking documents prepared years before
the first lawsuit was filed. While an insurer would certainly have an interest in communications
concerning ongoing litigation against its insured, it would be straining the Waste Management
court’s reasoning to stretch that commonality of interest to the situation that presents itself in
the instant case. Consequently, we agree with plaintiff that Waste Management is inapplicable
to the instant case.
¶ 40 We note that our decision does not necessarily mean that all of the documents withheld by
plaintiff are properly shielded by the attorney-client privilege. “[I]t is the privilege, not the
duty to disclose, that is the exception. [Citation.] Therefore, the privilege ought to be strictly
confined within its narrowest possible limits.” Waste Management, 144 Ill. 2d at 190. Any
documents withheld by plaintiff will need to be evaluated to determine whether they are
privileged, as would ordinarily be done. In other words, our decision only means that the
attorney-client privilege may apply, not that it does apply to each document withheld by
plaintiff. That is a question more properly considered by the trial court in the first instance, as
the trial court should conduct an in camera examination of the documents.
¶ 41 As a final matter, we must address the dissent’s confusion as to this aspect of our decision,
as the dissent claims that it is incoherent and renders our opinion “what amounts to an advisory
opinion.” The dissent seems to believe that our task was to determine whether plaintiff “failed
to meet its burden to show that the withheld documents were covered by the attorney-client
privilege.” Infra ¶ 71. However, this represents a fundamental misunderstanding of the issue
on appeal. The sole issue concerning the attorney-client privilege that plaintiff raised on appeal
concerns the interpretation of Waste Management and whether the attorney-client privilege is
available at all in the context of an insurer-insured coverage dispute. See Waste Management,
144 Ill. 2d at 191, 195 (“the attorney-client privilege has no application in this case,” and “The
attorney-client privilege simply has no application in this case.”). Answering this question, our
holding is that the attorney-client privilege is available because Waste Management does not
encompass the factual circumstances present in the instant case. Neither party addresses the
next question that will have to be answered, namely, “if the attorney-client privilege is
available, does it apply to these documents?” Since it is not at issue on appeal and was not
addressed by the parties, we likewise will not address it for the first time on appeal sua sponte
but will leave it to the parties to argue before the trial court. This in no way renders our opinion
an “advisory opinion” but simply recognizes that the trial court should make this determination
in the first instance.
- 13 -
¶ 42 The dissent’s misunderstanding of the issue on appeal is also evident by the fact that it
places great significance on the idea that plaintiff has placed its compliance with the notice of
occurrence provision at issue by filing a motion for summary judgment. “An implied waiver
[of the attorney-client privilege] may be found when the client asserts claims or defenses that
put his or her communications with the legal advisor at issue in the litigation.” Center
Partners, Ltd. v. Growth Head GP, LLC, 2012 IL 113107, ¶ 66. However, again, this is the
second step of the analysis—if the attorney-client privilege is available, does it apply to these
documents?—that is not the question we are asked to consider on appeal. The “at issue”
exception to the attorney-client privilege simply has no bearing on the question of whether the
attorney-client privilege may be asserted in an insurer-insured coverage dispute. Indeed, in
Waste Management, the court noted that the insurers argued that the documents sought were
not privileged because they were at issue in the coverage litigation but quickly dismissed the
argument, finding that “the attorney-client privilege has no application in this case. Therefore,
it is of no moment that the files are relevant, and further analysis of the ‘at issue’ exception
would only be superfluous.” Waste Management, 144 Ill. 2d at 190-91. In other words, if the
attorney-client privilege cannot be asserted at all, it is irrelevant whether the documents are at
issue. Here, we have determined that the attorney-client privilege may be asserted. It will be up
to the trial court to determine whether the privilege actually applies, a determination that
certainly may include consideration of whether plaintiff has put the documents at issue.
However, the dissent’s discussion of this exception serves merely to muddy the waters of the
question on appeal.
¶ 43 IV. Peppers Doctrine
¶ 44 Plaintiff also argues that the trial court’s order requiring it to produce the documents is
especially inappropriate because defendants are attempting to litigate facts that overlap with
the facts at issue in the underlying litigation in contravention of the “Peppers doctrine,” which
was set forth by our supreme court in Maryland Casualty Co. v. Peppers, 64 Ill. 2d 187 (1976).
Even though we have determined that the attorney-client privilege remains available to shield
these documents, a discussion of plaintiff’s Peppers argument is nevertheless useful.
¶ 45 “Under the Peppers doctrine, ‘it is generally inappropriate for a court considering a
declaratory judgment action to decide issues of ultimate fact that could bind the parties to the
underlying litigation.’ ” Landmark American Insurance Co. v. NIP Group, Inc., 2011 IL App
(1st) 101155, ¶ 59 (quoting Allstate Insurance Co. v. Kovar, 363 Ill. App. 3d 493, 501 (2006)).
“This proscription specifically precludes determination of any ultimate facts upon which
liability or recovery might be predicated in the underlying case.” NIP Group, Inc., 2011 IL
App (1st) 101155, ¶ 59. Thus, it is an abuse of discretion for a trial court in a declaratory
judgment action to make such a determination. Peppers, 64 Ill. 2d at 196; Empire Fire &
Marine Insurance Co. v. Clarendon Insurance Co., 267 Ill. App. 3d 1022, 1027 (1994).
¶ 46 In the case at bar, we agree with defendants that the Peppers doctrine is inapplicable to the
instant situation. The trial court is not being asked to “ ‘decide issues of ultimate fact that could
bind the parties to the underlying litigation.’ ” NIP Group, Inc., 2011 IL App (1st) 101155,
¶ 59 (quoting Kovar, 363 Ill. App. 3d at 501). Instead, the question before the trial court is
simply whether defendants are permitted to view certain documents that plaintiff claims are
privileged in order to oppose plaintiff’s motion for summary judgment. As defendants note,
“ ‘[t]he purpose of summary judgment is not to try an issue of fact but *** to determine
- 14 -
whether a triable issue of fact exists.’ ” Schrager v. North Community Bank, 328 Ill. App. 3d
696, 708 (2002) (quoting Luu v. Kim, 323 Ill. App. 3d 946, 952 (2001)). Thus, in deciding
plaintiff’s motion for summary judgment, the trial court is asked only to determine whether
there is a question of fact as to the issue of notice and is not asked to determine the issue of
notice as a matter of law. We acknowledge that, in the future, the trial court may be asked to
decide whether plaintiff provided a timely notice of occurrence. However, that is not the issue
before this court today and, despite plaintiff’s urging to the contrary, we will not speculate as to
whether the future issues that the trial court will be asked to determine violate the Peppers
doctrine.
¶ 47 We also note that, in situations where the Peppers doctrine is at issue, a court will often
order a stay of the coverage litigation pending the resolution of the underlying litigation. See,
e.g., Sentry Insurance v. Continental Casualty Co., 2017 IL App (1st) 161785 (appeal of a trial
court’s stay of insurance coverage litigation due to Peppers concerns). In the case at bar,
however, neither party at oral argument indicated that it desired a stay. Furthermore, a stay
would not seem to be in the parties’ best interest, as the resolution of the underlying litigation
would have no effect on the late notice defense asserted by defendants, which concerns
whether plaintiff timely provided notice of occurrence.
¶ 48 CONCLUSION
¶ 49 For the reasons set forth above, we find that the situation present in the case at bar is not
encompassed by our supreme court’s holding in Waste Management. Accordingly, the
attorney-client privilege is available to shield any appropriate documents from discovery.
¶ 50 Reversed; contempt finding vacated.
¶ 51 JUSTICE LAMPKIN, dissenting.
¶ 52 I respectfully dissent. I would hold that the attorney-client privilege has no application to
the discovery sought in this coverage dispute between the insured Motorola Solutions, Inc.
(Motorola), and its insurers Zurich and Associated (the insurers). I disagree with the majority’s
conclusion that “Waste Management does not encompass the situation present” in this case.
Supra ¶ 27. I would conclude, consistent with the principles of Waste Management, that the
trial court properly granted the insurers’ motion to compel the sought discovery based on (1)
Motorola’s duty to cooperate in accordance with the insurance policy and the principles of
fairness and good faith and (2) the common interest doctrine. Although I agree with the
majority’s decision to vacate the contempt finding and the majority’s conclusion that the
Peppers doctrine does not apply to the discovery issue before the court, I would affirm the trial
court’s order that granted the insurers’ motion to compel the sought discovery.
¶ 53 The majority mischaracterizes the nature and relevance of the sought discovery as
documents merely “related to securities filings” (supra ¶ 27) or useful only to determine
whether the insurers’ late-notice affirmative defense can defeat Motorola’s coverage claim. To
properly determine the issue on appeal, this court must consider the sought discovery within
the procedural context of the challenged order granting the discovery, i.e., the insurers sought
the discovery about Motorola’s knowledge of the risk of clean room litigation because the
insurers must respond to Motorola’s summary judgment motion, which argues, inter alia, that
Motorola has complied with the notice of occurrence provisions of the insurance contracts and,
- 15 -
thus, the insurers are obligated to pay Motorola’s defense costs in the underlying clean room
litigation.
¶ 54 Specifically, Motorola’s declaratory relief claim against the insurers for coverage had been
stayed by the trial court while this court reviewed the insurers’ interlocutory appeal about the
scope of settlement release agreements. Upon remand, Motorola moved the trial court to lift
the stay and thereafter filed the motion for summary judgment against the insurers on their duty
to pay Motorola’s defense costs in the underlying clean room litigation. At the hearing on the
motion to lift the stay, Motorola argued that the coverage case should proceed on Motorola’s
claim for defense costs but remain stayed on the insurers’ coverage defenses until the
underlying clean room tort actions were resolved. Motorola asserted that the trial court should
decide the issue of the insurers’ duty to pay defense costs now, based only on Motorola’s
complaint and the insurance policies, and that the insurers should litigate the factual issues
concerning their late-notice defense later.
¶ 55 The insurers objected, arguing that the issue of Motorola’s timely notice to the insurers was
a condition precedent to coverage, extrinsic facts about any Motorola clean room liability
investigation were relevant to the issue of coverage, and the insurers’ late-notice issue in the
coverage action overlapped with issues in the underlying clean room tort actions. The insurers
asserted that it would be improper for the trial court to adjudicate any portion of the coverage
issue prior to the resolution of the overlapping issues in the clean room tort actions.
¶ 56 The trial court granted Motorola’s motion to lift the stay, noting that the first clean room
tort action was scheduled to begin in six weeks and Motorola had moved for summary
judgment against the insurers on the coverage claim. However, before the court would set a
briefing schedule on Motorola’s summary judgment motion, the trial court allowed the
insurers time to file an Illinois Supreme Court Rule 191(b) (eff. Jan. 4, 2013) motion to obtain
necessary discovery to respond to the summary judgment motion.
¶ 57 Thereafter, the insurers filed their Rule 191(b) motion and asked the court to stay the
briefing and decision on Motorola’s summary judgment motion. The insurers argued that the
Peppers doctrine, as set forth in Maryland Casualty Co. v. Peppers, 64 Ill. 2d 187 (1976), was
not applicable because the court would not be adjudicating the merits of either party’s claims
or defenses; rather, the court would determine merely whether the insurers would get
discovery before responding to Motorola’s summary judgment motion. Motorola argued that
the insurers must litigate their coverage defense later because they should not be allowed to
prejudice Motorola by attempting to prove in the coverage action the exact same facts at issue
in the underlying clean room tort actions. The trial court granted the insurers’ Rule 191(b)
motion and instructed the parties to draft an appropriate protective order and narrow the
discovery to what the insurers needed to respond to the summary judgment motion.
¶ 58 After the trial court issued the parties’ stipulated protective order, Motorola refused to
produce to the insurers certain information for their response to Motorola’s summary judgment
motion. The insurers moved the court to compel Motorola’s production, arguing they were
entitled to the sought discovery based on Motorola’s duty to cooperate and the common
interest doctrine. The insurers also argued that Motorola failed to carry its burden to sustain its
claim that the sought discovery was privileged and protected.
¶ 59 Motorola objected, asserting that the CRSP documents were protected by the work product
privilege and the S-1 documents were protected by an unspecified privilege. Motorola,
however, did not provide a privilege log describing the nature of the S-1 documents that were
- 16 -
not being produced. Motorola argued that the insurers had all the facts they needed to respond
to the summary judgment motion and the protective order would not eliminate the risk of the
clean room plaintiffs obtaining the privileged information. Also, Motorola claimed the sought
information was irrelevant to the insurers’ late notice defense because any clean room
pre-litigation risk analysis by Motorola occurred dozens of years before Motorola received any
notice of a clean room cause of action. Motorola asserted that if it had submitted the sought
discovery for in camera judicial review, the trial court would agree with Motorola that the
sought discovery was irrelevant to the insurers’ late notice defense.
¶ 60 On March 8, 2016, the trial court granted the insurers’ motion to compel because the case
was “still in the discovery stage.” The court explained that it would not conduct an in camera
inspection of the documents because the stipulated protective order was in place and such an
inspection would unduly burden the court’s limited resources. The court stated Motorola could
not “have it both ways” by claiming that any 1996 clean room litigation risk analysis by
Motorola was “in anticipation of litigation” and thus privileged, while simultaneously
claiming that Motorola was not aware of any risk triggering the insurance notice-of-occurrence
provisions until 2007, when the clean room plaintiffs began filing their tort lawsuits.
¶ 61 Thereafter, Motorola moved the court to reconsider the order and require the insurers to
respond to Motorola’s summary judgment motion, using the non-privileged documents
available to them. The trial court denied the motion to reconsider but granted Motorola’s
request for a finding of non-contumacious contempt so that Motorola could obtain appellate
review of the March 8, 2016, order.
¶ 62 The attorney-client privilege may be waived as to a communication put “at issue” by a
party who is a holder of the privilege. Shapo v. Tires ’N Tracks, Inc., 336 Ill. App. 3d 387, 394
(2002); Fischel & Kahn, Ltd. v. Van Straaten Gallery, Inc., 189 Ill. 2d 579, 585 (2000); Waste
Management, 144 Ill. 2d at 190-91. In the present case, Motorola successfully moved, over the
insurers’ objections, to lift the stay in the coverage dispute and then moved for summary
judgment on the issue of the insurers’ duty to pay Motorola’s defense costs in the underlying
clean room litigation. Motorola has placed at issue in the coverage dispute and waived as to its
insurers the attorney-client privilege with respect to any 1996 clean room litigation risk
analysis. By asking the court to find that there is no genuine issue of material fact concerning
Motorola’s entitlement to payment of its clean room defense costs, Motorola asks the court to
find that it has complied with the terms of the insurance contracts, including the notice of
occurrence provisions, which are a condition precedent to coverage. Motorola’s 1996 clean
room risk analysis is not merely relevant to the dispute; rather, Motorola’s compliance with the
notice of occurrence provisions can only be fairly determined by disclosure of that risk
analysis. See Western States Insurance Co. v. O’Hara, 357 Ill. App. 3d 509, 520-21 (2005).
¶ 63 In Waste Management, 144 Ill. 2d at 193, the court held that the attorney-client privilege
did not apply to bar discovery of communications or documents created in defense of two
previously-settled lawsuits in a subsequent coverage dispute regarding one of the lawsuits. In
so holding, the court looked at the insured’s contractual duty to cooperate with the insurer,
which was designed to protect the insurer’s interests and prevent collusion between the insured
and the injured party. Id. at 191-92, 202. The court also considered the duty to cooperate
reasonably “inferred based merely on principles of fairness and good faith” (id. at 202), noting
that the insurer typically has little or no knowledge of the facts surrounding a claimed loss and
thus is dependent on its insured for fair and complete disclosure (id. at 204).
- 17 -
¶ 64 Furthermore, Waste Management held that the insurers’ entitlement to production of the
files also arose out of the common interest doctrine, even though the case did not involve a
situation where an attorney either provided joint or simultaneous representation to the parties
or a situation where the attorney was either retained by or in direct communication with the
insurer. Id. at 194. Although the insured and insurer were adverse to each other in the coverage
litigation, they shared a common interest in defeating or settling the underlying litigation (id.),
and the denial of discovery to the insurer in the coverage action would disregard public policy
considerations “which require encouragement of full disclosure by an insured to [its] insurer”
(id. at 195).
¶ 65 Based on a straightforward application of Waste Management to the instant case, I would
hold that Motorola’s duty to cooperate, which is based on both the broad language in the
contractual cooperation clause and the principles of fairness and good faith, and the common
interest doctrine render the attorney-client privilege inapplicable in the instant coverage
dispute between Motorola and the insurers. I would affirm the trial court’s ruling that the
insurers are entitled to the sought discovery to respond to Motorola’s motion for summary
judgment.
¶ 66 The majority’s attempt to distinguish Waste Management on its facts is unpersuasive. First,
concerning the insured’s duty to cooperate with its insurer, the majority believes there is some
significance to the fact that, here, the insurers seek information created by Motorola years
before the underlying clean room tort actions had commenced, whereas the insurers in Waste
Management sought the litigation files in underlying tort actions that had already commenced.
This distinction hardly serves to minimize Motorola’s duty to cooperate with the insurers.
Here, the issue of cooperation arises in the context of Motorola’s claim that it has complied
with the insurance policies’ notice provisions and thus is entitled to summary judgment now on
the issue of the insurers’ duty to pay Motorola’s defense costs in the underlying clean room
litigation. Accordingly, Motorola has affirmatively placed at issue its alleged compliance with
the notice of occurrence provisions, and any 1996 clean room litigation risk analysis conducted
by Motorola is a relevant and necessary source of discovery for the insurers, who must respond
to Motorola’s motion for summary judgment. The fact that no clean room tort lawsuit had been
filed when Motorola conducted the 1996 risk analysis is completely irrelevant to the court’s
analysis of Motorola’s duty to cooperate.
¶ 67 Second, as discussed above, the majority attempts to minimize the clear relevance of the
sought discovery by mischaracterizing it as mere securities filings or support for the insurers’
affirmative defense to coverage. The majority then utilizes this mischaracterization to support
its conclusion that such documents are not subjects included within the parties’ contractual
cooperation clause, which the majority erroneously believes is narrower and drastically
different from the cooperation clause at issue in Waste Management. Specifically, the majority
cites the portion of Waste Management that discussed the cooperation clause requirement that
the insured must assist the insurers in the conduct of suits and in enforcing any right to
contribution or indemnity and “give all such information and assistance as the insurers may
reasonably require.” (Internal quotation marks omitted.) Id. at 192. The majority then contrasts
this board cooperation clause language with the provision in the instant case—which requires
Motorola to cooperate with the insurers and, upon request, assist them in making settlements,
in the conduct of suits, and in enforcing any right of contribution or indemnity—to conclude
that Motorola’s contractual duty to cooperate does not even touch upon the sought discovery.
- 18 -
¶ 68 The majority’s analysis, however, disregards Waste Management’s supplemental opinion
upon denial of rehearing, which established that the existence of the insureds’ duty to
cooperate with its insurers concerning the coverage dispute was not dependent upon the broad
cooperation clause language cited by the majority. Id. at 202. Specifically, the insureds in
Waste Management informed our supreme court that it had misapprehended the facts
concerning the language of the cooperation clause, which did not include the “shall give all
such information and assistance as the insurers may reasonably require” provision. (Internal
quotation marks omitted.) Id. at 201-02. Rather, the applicable cooperation clause in Waste
Management was essentially identical to the “insureds shall cooperate with the company”
language of the cooperation clause at issue here. (Internal quotation marks omitted.) See id. at
202.
¶ 69 In its supplemental opinion, the court accepted as true the insureds’ version of the contract
terms, but concluded that even if “the express words, ‘duty to cooperate,’ [were] omitted from
the contract, such a duty could reasonably be inferred based merely on principles of fairness
and good faith.” Id. In determining the scope of the duty, the court noted that an insurer is
dependent on its insured for fair and complete disclosure because the insurer typically has little
or no knowledge of the facts surrounding a claimed loss, whereas the insured has exclusive
knowledge of such facts. Id. at 204. Accordingly,
“[w]hile the insured has no obligation to assist the insurer in any effort to defeat
recovery of a proper claim, the cooperation clause does obligate the insured to disclose
all of the facts within his knowledge and otherwise to aid the insurer in its
determination of coverage under the policy. [Citation.] The insurer is entitled,
irrespective of whether its duty is to defend or to indemnify, to gain as much
knowledge and information as may aid it in its investigation, or as may otherwise be
significant to the insurer in determining its liability under the policy and in protecting
against fraudulent claims. To hold otherwise effectively places the insurer at the mercy
of the insured and severely handicaps it in contesting a claim. [Citation.]” Id.
The majority’s analysis of Motorola’s duty to cooperate is inconsistent with, and refuted by,
Waste Management, which determined under similar facts and essentially identical
cooperation clause language that the attorney-client privilege was not applicable to bar the
disclosure to the insurer of defense litigation files about the underlying litigation.
¶ 70 Third, concerning the common interest doctrine, the majority again erroneously attaches
significance to the fact that the sought discovery involves Motorola’s litigation risk analysis,
which occurred years before any clean room plaintiffs gave Motorola notice of their cause of
action. As discussed above, this fact is completely irrelevant in this discovery dispute because
Motorola has placed at issue its knowledge of the risk of clean room litigation by successfully
moving the trial court, over the insurers’ objections, to lift the stay in the coverage litigation
and by arguing that Motorola has complied with the insurance contract provisions and thus is
entitled to summary judgment on the issue of the insurers’ duty to pay Motorola’s defense
costs. Moreover, the majority’s vague analysis of the common interest issue in supra ¶¶ 38-40
cites no support for the proposition that Waste Management’s common interest analysis is
somehow limited to situations where the underlying litigation in a coverage dispute has
commenced. Waste Management clearly states that in coverage disputes between insurers and
their insureds, until there is a declaration to the contrary, the insurers continue to bear potential
responsibility for settlement and litigation costs in the underlying action and thus the insurers
- 19 -
and insureds have a common interest in documents generated in anticipation of minimizing
liability in the underlying defense litigation. Waste Management, 144 Ill. 2d at 194-95, 209.
Although Motorola and the insurers are now adverse concerning the issue of coverage, no such
adversity exists as to the underlying litigation. See id. at 209.
¶ 71 Finally, after the majority concludes that Waste Management’s duty to cooperate and
common interest doctrine analysis of attorney-client privileged documents does not apply to
the documents withheld here, the majority incoherently states that its “decision does not
necessarily mean that all of the documents withheld by [Motorola] are properly shielded by the
attorney-client privilege” and that the trial court should conduct an in camera examination to
determine if the attorney-client privilege even applies. Supra ¶ 40. If the majority thinks
Motorola failed to meet its burden to show that the withheld documents were covered by the
attorney-client privilege, then the majority should not have issued what amounts to an advisory
opinion.
- 20 -