Nationwide Agribusiness Ins. Co. v. Heidler

[Cite as Nationwide Agribusiness Ins. Co. v. Heidler, 2016-Ohio-455.]
IN THE COURT OF APPEALS
TWELFTH APPELLATE DISTRICT OF OHIO
CLINTON COUNTY
NATIONWIDE AGRIBUSINESS :
INSURANCE COMPANY, et al., CASE NO. CA2015-07-013
:
Plaintiffs-Appellants, OPINION
: 2/8/2016
- vs - :
:
JONATHAN W. HEIDLER, et al.,
:
Defendants-Appellees
:
CIVIL APPEAL FROM CLINTON COUNTY COURT OF COMMON PLEAS
Case No. CVH 20140532
Subashi & Wildermuth, Nicholas E. Subashi, Tabitha Justice, The Greene Town Center,
Suite 230, 50 Chestnut Street, Dayton, Ohio 45440, for plaintiffs-appellants, Nationwide
Agribusiness Insurance Co. and Nationwide Mutual Fire Insurance Co.
Lane Alton Horst, LLC, Thomas J. Keener, Michael J. Kelley, Two Miranova Pl., Suite 220,
Columbus, Ohio 43215, for defendant-appellee, Jonathan W. Heidler
Michael N. Schaeffer, Scott N. Schaeffer, 88 West Mound Street, Columbus, Ohio 43215, for
defendant-appellee, Wilmington Savings Bank
RINGLAND, J.
{¶ 1} Plaintiffs-appellants, Nationwide Agribusiness Insurance Company and
Nationwide Mutual Fire Insurance Company, appeal from a decision of the Clinton County
Court of Common Pleas granting a motion to compel discovery in a declaratory judgment
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action regarding an insurance coverage dispute. For the reasons stated below, we affirm in
part and reverse in part the decision of the trial court.
{¶ 2} On May 6, 2014, the home and vehicle of defendant-appellee, Johnathan W.
Heidler, were completely destroyed in a fire. Heidler insured the home and the vehicle
through a homeowner's policy and an automobile policy issued by Nationwide. The home
and real property were mortgaged to defendant-appellee, Wilmington Savings Bank.
Heidler's estimated losses due to the fire amounted to approximately $1,250,000. Heidler
and Wilmington Savings claimed coverage for the loss under the insurance policy issued by
Nationwide.
{¶ 3} After receiving notice of the fire, Nationwide retained Tom Bensen, a Certified
Fire Investigator, to determine the cause and origin of the fire. Bensen conducted a
comprehensive inspection of the scene the day after the fire. After examining the scene,
Bensen informed Nationwide employees that he believed the fire to be a result of arson.
Subsequently, on May 11, 2014, Nationwide assigned a Special Investigations Unit
investigator to the claim. Bensen filed a fire analysis report regarding the fire loss dated July
8, 2014. In that report, Bensen opined that the fire originated in multiple places throughout
the structure, the fire pattern was irregular, and the pattern was consistent with being started
from an ignitable liquid. The report concluded: "The cause of the fire is INCENDIARY in
nature and the direct result of an intentional human act." Bensen filed a second report dated
February 18, 2015 and came to the same conclusion.
{¶ 4} On November 12, 2014, Nationwide filed a declaratory judgment action against
Heidler and Wilmington Savings. Heidler counterclaimed for breach of contract and bad faith
denial of coverage. During discovery of the contractual claim, Heidler submitted to
Nationwide a set of interrogatories, requests to admit, and requests to produce certain
documents. Nationwide refused to answer some of the interrogatories and withheld
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production of the underwriting file, the claim file created and maintained as part of the fire
loss investigation, and a copy of the insurance agent file created by Pittser Insurance
Agency. Thereafter, Heidler filed a motion to compel.
{¶ 5} The trial court granted Heidler's motion to compel in part. Specifically, the court
ordered Nationwide to produce all the documents created or obtained before October 16,
2014 in the underwriting file, the claim file, and the insurance agent file. The court reasoned
that after October 16, 2014, the documents were protected by the work product doctrine
because litigation became imminent against Heidler. The court also ordered Nationwide to
answer several of the interrogatories that required it to state its knowledge of evidence or
evidence in its possession that supports its policy defenses and affirmative defenses to
Heidler's counterclaims.
{¶ 6} Nationwide now appeals, asserting two assignments of error for review.
{¶ 7} Assignment of Error No. 1:
{¶ 8} THE TRIAL COURT ERRED IN ORDERING APPELLANTS TO PRODUCE
CLAIM FILES AND OTHER INVESTIGATION DOCUMENTS PROTECTED BY THE WORK
PRODUCT DOCTRINE.
{¶ 9} Nationwide challenges the trial court's order requiring it to produce the
documents created before October 16, 2014. Nationwide argues the work-product doctrine
protects from disclosure all the documents it generated after May 11, 2014, as this was the
date Nationwide's Special Investigations Unit was assigned to the claim and litigation was
anticipated.
{¶ 10} Our review of the trial court's discovery order involves both legal and factual
questions. We will conduct a de novo review of the legal questions and "independently
review[] the record without giving deference to the trial court's decision." Roberts v. Mike's
Trucking, Ltd., 12th Dist. Madison Nos. CA2013-04-011 and CA2013-04-014, 2014-Ohio-
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766, ¶ 24. However, we will review factual questions, such as the trial court's determination
regarding whether specific materials are protected by the work-product doctrine and the
determination of good cause pursuant to Civ.R. 26(B)(3) under an abuse of discretion
standard. State ex rel. Greater Cleveland Regional Transit Auth. V. Guzzo, 6 Ohio St. 3d
270, 271 (1983); Sherwin-Williams Co. v. Rice, 8th Dist. Cuyahoga No. 96927, 2012-Ohio-
809, ¶ 34. An abuse of discretion implies that the trial court's decision was unreasonable,
arbitrary, or unconscionable, and not merely an error of law or judgment. Ginn v. Stonecreek
Dental Care, 12th Dist. Fayette Nos. CA2015-01-001 and CA2015-01-002, 2015-Ohio-4452,
¶ 10.
{¶ 11} The work-product doctrine protects from discovery "documents and tangible
things prepared in anticipation of litigation." Baker v. Meijer Stores Ltd. P'ship, 12th Dist.
Warren No. CA2008-11-136, 2009-Ohio-4681, ¶ 13, quoting Civ.R. 26(B)(3). The party
claiming that documents or statements are work product has the burden of showing that the
materials should not be discoverable. Peyko v. Frederick, 25 Ohio St. 3d 164, 166 (1986). A
party seeking discovery of documents protected by work product must demonstrate good
cause. Civ.R. 26(B)(3).
{¶ 12} To fall under the work-product doctrine, the documents sought to be discovered
must have been "prepared in anticipation of litigation" and not merely in the ordinary course
of business. Stegman v. Nickels, 6th Dist. Erie No. E-05-069, 2006-Ohio-4918, ¶ 15. In
cases involving policy coverage disputes, material held by an insurance company can contain
a range of information some of which was prepared in anticipation of litigation and some of
which was prepared in the ordinary course of business while the insurance company was
evaluating the claim. As explained by the Sixth District, "an insurance company has a routine
duty to investigate accidents and, thus, such materials generated are not prepared in
anticipation of litigation but prepared in the ordinary course of business." Roggelin v. Auto-
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Owners Ins. Co., 6th Dist. Lucas No. L-02-1038, 2002-Ohio-7310, ¶ 15.
{¶ 13} Therefore, "in determining whether the materials are prepared in the ordinary
course of business or are work product prepared in anticipation of litigation, the facts of each
case must be carefully reviewed because 'at a certain point an insurance company's activity
shifts from the ordinary course of business to anticipation of litigation.'" Roggelin at ¶ 16,
quoting Tayler v. Travelers Ins. Co., 183 F.R.D. 67, 71 (N.D.N.Y.1998). See DeMarco v.
Allstate Ins. Co., 8th Dist. Cuyahoga No. 100192, 2014-Ohio-933, ¶ 22-23. There is no bright
line test between these two types of activity. Roggelin at ¶ 19, quoting Weitzman v. Blazing
Pedals, Inc., 151 F.R.D. 125, 127 (D.Colo.).
{¶ 14} In its discovery order, the trial court reasoned that the documents Nationwide
created or obtained before October 16, 2014 were not protected by the work-product
privilege. In so holding, the court rejected earlier dates proposed by Nationwide reasoning
that it failed to set forth evidence showing the "type of litigation [that] might ensue or the
possible parties that might be involved in the future litigation." The court went on to state that
although "there may have been an early likelihood that some sort of litigation may later occur
* * * it is not clear * * * when that likelihood became an imminent likelihood focused on
Heidler." Therefore, the court relied on a October 15, 2014 document between two
Nationwide employees investigating the claim, showing this was the first time the employees
became aware Nationwide would file a declaratory judgment action against Heidler.
{¶ 15} We find that the trial court did not err in its legal analysis regarding when
documents are prepared in anticipation of litigation for purposes of the work-product doctrine.
Determining when the protections of work product apply necessarily involves looking at all
the facts and circumstances of the case to determine the moment the insurance company's
activities shift from the ordinary course of claims evaluation to preparing for litigation.
Therefore, in determining when Nationwide began to prepare for litigation, the trial court did
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not err in considering when Nationwide decided the type of litigation and when that litigation
became imminent. See Perfection Corp. v. Traveler's Cas. & Sur., 153 Ohio App. 3d 28,
2003-Ohio-2750, ¶ 27-28 (8th Dist.); Roggelin at ¶ 19.
{¶ 16} However, upon a thorough review of the record, we find that the trial court
abused its discretion in determining that October 16, 2014 was the date on which
Nationwide's activities shifted from the ordinary course of business to anticipating litigation.
Instead, due to the nature of the property loss, the subsequent arson investigation, and the
suspicious circumstances surrounding the claim, we find that Nationwide began preparing for
litigation on July 8, 2014, the day after it received Bensen's fire analysis report. In support of
its position, Nationwide filed two affidavits of its employees averring Bensen believed the loss
was a result of arson on May 7, 2014, they learned this information from Bensen, and the
claim was transferred to Special Investigations Unit on May 9, 2012. These employees
stated that due to the facts of the case and the suspicions of arson, they believed litigation
over the claim was likely.1 Despite these affidavits, Bensen's report concluding that the fire
was arson was not given to Nationwide until July 7, 2014. In Bensen's 49-page report, he
explained his investigation of the scene and concluded that due to the burn patterns and
other evidence found in the home, the cause of the fire was incendiary and directly caused
by an intentional human act.
{¶ 17} This court believes that at this point in Nationwide's evaluation of the claim, the
likelihood that litigation would ensue was substantial. The trial court's finding that Nationwide
did not begin preparing for litigation until October 16, 2014 when two of its employees
became aware that Nationwide was preparing to file a declaratory judgment action
1. The affidavits do not provide a date in which the employees believed litigation became likely. David Heller
averred he was assigned the case on May 12, 2014 and believed litigation became likely soon after. Jennifer
Sailor only averred litigation over the claim "was likely."
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undervalues Bensen's report and the other suspicious circumstances surrounding the loss.
Consequently, the work-product doctrine protects all documents created or obtained by
Nationwide on or after July 8, 2014.
{¶ 18} Nationwide's first assignment of error is sustained.
{¶ 19} Assignment of Error No. 2:
{¶ 20} THE TRIAL COURT ERRED IN ORDERING APPELLANTS TO ANSWER
INTERROGATORIES THAT SEEK ATTORNEY OPINION, MENTAL IMPRESSIONS, AND
LEGAL STRAGETY.
{¶ 21} Nationwide also challenges the trial court's order directing it to answer
interrogatories requiring Nationwide to state its knowledge of evidence or evidence in its
possession that supports its specific policy defenses and affirmative defenses to Heilder's
counterclaims. Nationwide maintains that answering these interrogatories would divulge
attorney work product.
{¶ 22} Parties have a right to liberal discovery of information under the Rules of Civil
Procedure. Ward v. Summa Health Sys., 128 Ohio St. 3d 212, 2010-Ohio-6275, ¶ 9. "The
purpose of the liberal discovery policy contemplated by the Ohio Rules of Civil Procedure is
the narrowing and sharpening of the issues to be litigated." State ex rel. Daggett v.
Gessaman, 34 Ohio St. 2d 55, 56-57, (1973). To this end, Civ.R. 33(B), which was patterned
after Fed.R.Civ.P. 33(B), provides that "an interrogatory otherwise proper is not objectionable
merely because the answer to the interrogatory involves an opinion, contention, or legal
conclusion * * *." Id. These interrogatories are known as "contention interrogatories," and
are generally a perfectly permissible form of discovery, to which a response ordinarily would
be required. Starcher v. Corr. Med. Sys., Inc., 144 F.3d 418 (6th Cir.1998), fn. 2. Contention
interrogatories may seek information regarding facts or the application of the law to the facts
pursuant to Civ.R. 33(B) and are generally not prohibited by the work-product doctrine. In re
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Continental Capital Inv. Servs., Inc., Bankr.N.D. Ohio No. ADV 03-3370, 2009 WL 1661918,
*6 (Mar. 6, 2009); see Graff v. Haverhill North Coke Co., S.D. Ohio No. 1:09-cv-670, 2012
WL 5495514, *51 (Nov. 13, 2012).
{¶ 23} In the present case, the trial court ordered Nationwide to answer interrogatories
regarding its defenses. Specifically, the trial court ordered Nationwide to answer the
interrogatories regarding Nationwide's insurance policy defenses:
Interrogatories No. 11, No. 12, and No. 13 regarding
knowledge of evidence or evidence in their possession that
supports their very specific policy defense of arson * * * (No.
11 involves specific evidence implicating Jon Heidler or Terri
Heidler, No. 12 involves specific evidence of arson. No 13
involves specific evidence of arson implicating Ron Howard.)
* * * Interrogatory No. 14 regarding knowledge of evidence or
evidence in their possession that supports their very specific
policy defenses of concealment, misrepresentation, or fraud *
**
* * * Interrogatory 15 regarding knowledge of evidence or
evidence in their possession that Heidler did notify the Pittser
Insurance Agency of the discontinuation of the operation of
the alarm or protective system at the Heidler residence. * * *
The trial court also ordered Nationwide to answer the interrogatories regarding affirmative
defenses:
Interrogatory No. 24, regarding knowledge of evidence or
evidence in their possession that supports plaintiffs' affirmative
defenses * * * (regarding facts concerning Heidler's acts,
errors, omissions, misrepresentations, and/or concealment of
facts.)
* * * Interrogatory No. 25, regarding knowledge of evidence or
evidence in their possession that supports plaintiff's affirmative
defenses * * * (regarding facts that would support the doctrine
of laches, waiver, estoppel, and/or unclean hands).
* * * Interrogatory No. 26, regarding knowledge of evidence or
evidence in their possession that supports plaintiff's affirmative
defenses * * * (regarding facts that would support findings of
Heidler's failure to comply with all necessary terms, obligations,
and preconditions found within the insurance policies at issue,
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including failure to properly prepare and submit appropriate
sworn statements in proof of loss).
Lastly, the trial court ordered Nationwide to answer Interrogatory 28, "regarding knowledge of
evidence or evidence in their possession that supports any other policy defenses of which
plaintiffs are aware, beyond those specifically referenced in the plaintiff's Complaint * * *
and/or the Answer * * *."
{¶ 24} We find that the trial court did not abuse its discretion in ordering Nationwide to
answer the interrogatories. The interrogatories request Nationwide to identify the evidence
upon which it will base its defenses, affirmative defenses, or defenses that Nationwide is
aware of but has not yet pled. Parties are entitled to inquire to the factual basis of a legal
claim by means of an interrogatory. Nationwide put this information at issue or is planning to
put this information at issue by asserting the defenses in its complaint and answer to
Heidler's counterclaim and now cannot withhold evidence regarding these issues. See Civ.R.
26(B)(3). Moreover, interrogatories are not objectionable simply because they seek
information that might contain an opinion, contention, or legal conclusion. See In re
Continental at *5-6; Alpha Benefits Agency, Inc. v. King Ins. Agency, Inc., 134 Ohio App. 3d
673, 680-681 (8th Dist.1999); In re Dayco Corp. Derivative Secs. Litigation, S.D. Ohio Nos.
C-3-82-184, C-3-82-254, C-3-82-329, and C-3-82-405 (Oct. 21, 1983). Further, the trial court
crafted the discovery order to protect Nationwide's legitimate claims of work-product and
attorney-client privilege by stating that it is not required to reveal explicit impressions,
opinions, or legal theories. Under these circumstances, we do not find the trial court abused
its discretion.
{¶ 25} Nationwide's second assignment of error is overruled.
{¶ 26} We hereby reverse the trial court's judgment requiring Nationwide to produce
documents created before October 16, 2014, and find that the work-product doctrine protects
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all documents created or obtained by Nationwide on or after July 8, 2014. In all other
respects, the trial court's judgment is affirmed.
S. POWELL, P.J., and HENDRICKSON, J., concur.
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