*1 This cause is before the Court on motions to compel filed by Plaintiff Gaudet & Company, Inc.'s (“Gaudet” or “Plaintiff”) and Defendants ACE Fire Underwriters Insurance Company and CHUBB Indemnity Insurance Company (“Ace” and “Chubb”), Docs. 73 and 67, respectively, and Defendants' objections, Docs. 71, 72, which followed the Court's informal pre-motion mediation process. In the wake of these filings, the Court, pursuant to other motions, terminated Defendant Chubb as a party and allowed Gaudet to amend its complaint so that the present Defendants include Ace Fire and a new Defendant, Ace American Insurance Company. (Docs. 106, 109).

The Court determines that any discovery issues related to Chubb are now MOOT and will not address those issues in this Order. The Court will address the discovery issues related to Gaudet and Ace Fire. These motions pertain to two main discovery issues: (1) whether the common interest doctrine is applicable to two emails as claimed by Plaintiff, and (2) whether Defendant Ace is required to produce certain discovery as previously determined by the Court. Following full briefing, a hearing on the respective motions, and an extensive review of the issues and positions presented, the Court finds as follows:

The Court's informal mediation of discovery disputes process in not always fully successful. The parties endeavored to resolve the problems, made some progress, but several informal discovery sessions seemed to deepen the issues in some respects. Accordingly, the Court ordered the parties to brief the issues fully (see Docs. 67, 71, 72, 77, 85, 86, 87, 88, 90, 93, 94) and heard oral argument on April 7, 2023. (Doc. 97). The parties and this Court are well versed in the facts of this case and the complicated underlying state court litigation that led us here. For this reason, the Court will not restate those points in this Order. (But cf., Docs. 67-1 at 1-9; 71 at 1-6). With this, the Court turns to discuss the outstanding discovery motions and objections.

1. Common Interest Issue.

Ace seeks production of two unredacted emails between counsel for Gaudet and Right at Home (“RAH”). The emails are dated February 4 and 15, 2021. (See Doc. 77-1). Ace contends that the common interest doctrine is inapplicable to these emails and that the redacted portions of the two emails should be produced because the communications were between adverse parties during pending litigation and no formal settlement agreement between the parties had been signed. While the Court agrees with Ace that settlement negotiations between Gaudet and RAH fail to justify a common interest, the undisputed timeline (agreed upon by the parties at the hearing) supports Plaintiff's position that on February 4 and 15, 2021, Gaudet and RAH shared a common legal interest in establishing Ace's obligations for indemnity and defense for the claims in the underlying litigation. (See Doc. 77 at 2-5).

*2 Covey v. Colonial Pipeline Co., 336 F.R.D. 514, 520–21 (N.D. Ala. 2020) (emphasis added). Based on the timeline before the Court and the arguments put forth by Gaudet, the emails at issue were shared when Gaudet and RAH had formulated a joint legal strategy and a common legal enterprise, as opposed to a joint business strategy, which happens to include as one of its elements a concern about litigation. Indeed, the emails concern specific discussions about pending or anticipated litigation and/or litigation strategy in furtherance of the claims alleged by Gaudet in this current lawsuit. Gaudet and RAH shared a common legal interest on February 4 and 15, 2021 in establishing Ace's obligations for indemnity and defense in the underlying litigation, especially after Ace withdrew from the defense and indemnity of Gaudet on December 17, 2020. The Court finds that the February 4 and 15, 2021 emails are protected by the common interest doctrine, and the protection is not negated by the fact that no judgment had been entered in the Alabama or Nebraska lawsuits. Nor is the protection negated by any challenge Ace attempts to assert or pursue as to the reasonableness (and/or legitimacy) of the $5.2 million judgment. But see Ex parte Emp'rs. Mut. Cas. Co., Inc., 845 So. 2d 773, 776-77 (Ala. 2002) (insurer is permitted to challenge the reasonableness of a judgment to determine if it was reached by consent); see also Doc. 88. Here, the parties in question were sufficiently aligned, as to the common legal issue discussed in the two email threads, to preserve the privilege asserted. Lynch v. Hamrick, So. 2d 11, 16 (Ala. 2007).

Both parties request supplemental direction as to the reach of the common interest doctrine in this case, with Ace requesting “clarification of the scope of the [common interest] doctrine's application in this case, specifically the date range, the subject matter, and parties to whom that interest applies” (Doc. 67-1 at 10) and Plaintiff positing “that the common interest doctrine protects all communications in furtherance of said common interest from [December 17, 2020] forward.” (Doc. 77 at 12, n.5). Currently, however, the only ripe question before the Court is whether Gaudet is required to produce the redacted portions of the February 4 and 15, 2021 emails between Gaudet and RAH in response to Defendants' discovery request. Generally, the Court views December 17, 2020, the date Ace completely withdrew from defense and indemnity of Gaudet, as the date Gaudet and RAH developed a common interest to establish Ace's obligations for defense and indemnity in underlying litigation. Communication between counsel for Gaudet and RAH which falls within the parameters set out in the Colonial Pipeline citation above would likewise be protected. If the parties require Court participation to determine application of the doctrine as to specific requests not mentioned herein and that may arise in the future, the Court is available to assist.

Also, in support of their motion to compel, Ace filed notice of the existence and their possession of the February 4, 2021 email. (See Doc. 93). At the hearing, Ace stated “the law firm” furnished the email thread approximately nine months ago in response to a subpoena. Gaudet now asks that the document be clawed back. The Court in this Order has determined the common interest doctrine protects that and other qualifying communications. The Court therefore considers that email unavailable for use in the discovery process.

2. Ace Discovery Issues.

a. Claims of Privilege.

Ace contends the 9 emails,1 claim note, and 2 drafts of the March 2020 denial letter to Philadelphia Insurance Company are not discoverable based on attorney-client privilege (and work product protection with respect to the two draft letters and one associated email). According to Ace, these documents contain communications with Ace's in-house counsel concerning coverage issues and legal opinions. It is settled in Alabama that communications with in-house counsel are privileged where counsel is asked to provide a legal opinion. See Exxon Corp. v. Dep't of Conservation & Not. Res., 859 So. 2d 1096, 1103 (Ala. 2002) (letter drafted by in-house counsel privileged where it “represents a communication of legal advisee pertaining to the interpretation of a contract”). It is also clear that this is Ace's burden to bear. See In re Vioxx Prod. Liab. Litig., 501 F. Supp. 2d 789, 798-99 (E.D. La. 2007). Because Ace previously failed to carry this burden, the Court found Ace's privilege assertion to be misplaced as to the twelve documents. To be clear, at the time the Court made this determination, set out in paragraph 1 of Doc. 66, Ace had failed to show in its pre-motion mediation position statement(s) or at the December 19, 2022 hearing that the primary purpose of any of the withheld documents was the solicitation of legal advice. Neither did Ace offer the documents for in camera review, as it does now.

*3 Following a thorough briefing of the issue by Ace, oral arguments by the parties, and with there being no opposition to an in camera inspection of the twelve documents, the Court will review these documents in camera. Accordingly, the Court determines consideration of Ace's claims of privilege is proper, as is an in camera inspection of the 9 emails,1 claim note, and 2 drafts of the March 2020 denial letter to Philadelphia Insurance Company prior to issuing a formal ruling on this issue. (Doc. 71). Ace should produce the documents at issue on or before June 30, 2023 via email to Deanne_Dunson@alsd.uscourts.gov.

b. Reserves Issue.

“[T]o conclude that reserve information is discoverable, a court must find that such information is not privileged and is relevant to the issues in the case.” Nicholas v. Bituminous Cas. Corp., 235 F.R.D. 325, 329 (N.D.W. Va. 2006). Currently, no clear argument exists as to the privileged nature of the reserve information. Instead, the dispute resides with the relevance of the information. Ace contends reserves are not relevant because Ace paid its policy limits to settle the wrongful death suit against Gaudet. Ace further contends reserves do not exist as to RAH and the cross claim because RAH was never covered under the policy. (Doc. 72 at 7-10). Plaintiff on the other hand asserts that reserves set for the underlying claim are relevant as they reflect the risk anticipated and argues the amount set impacts decisions made throughout litigation and Ace's conduct. (See Doc. 71-6 at 3-6).

“The overwhelming majority of courts, [ ] find reserves discoverable, especially in cases involving bad faith claims because ... the reserves do bear some relationship to the insured's calculation of its potential liability.” St. Paul Fire & Marine Ins. Co. v. Drummond Co., Inc., No. 2:11-CV-02695-JEO, 2012 WL 12897960, at *6 (N.D. Ala. May 1, 2012) (internal citation omitted). The parties here dispute the amount of benefits payable under the policy and/or the duty to defend. In such a case, “the reserve may reveal what the insurer understood the benefit to be at the time it entered into the agreement.” Id. (citing Central Ga. Anesthesia Servs., P.C. v. Equitable Life Assur. Soc. of U.S., 2007 WL 2128184 at *3 (M.D. Ga. July 25, 2007)). Accordingly, reserve information is relevant in this case which centers on claims of bad faith.

To the extent Ace insists reserves were never set, as the Court previously stated, you cannot produce what you do not have. However, evidence put forth by Plaintiff reveals that a simple “tab in the system” can reveal the reserve amounts, including expenses, that are set for a policy. (See Doc. 71-6 at 4, n.6 and April 7, 2023 hearing). There is no excessive burden to produce the financial page indicating what amount, if any, was set for reserve for Gaudet in the underlying policy. As to any argument that the information is proprietary, the Court agrees with Gaudet that the information should be produced pursuant to a Protective Order. If the existing Protective Order in this case (Docs. 26, 27) is insufficient for any reason, the parties may submit another one, but the reserve information must be produced.

c. Requests for Production (under Paragraph 3, Doc. 66).

RFP 19: Ace has objected to Plaintiff's request for “documents evidencing coverage litigation undertaken by or against Ace wherein a nonpolicy holder took the position it was entitled to defense and/or indemnity from [ACE] pursuant to one or more of the following policy forms during the last ten (10) years,” on the basis that it is overly broad and unduly burdensome. (Doc. 72 at 10). Based on the arguments put forth by the parties in letter briefs, pleadings, and orally, the Court finds the information Gaudet seeks, while relevant and ordinarily discoverable in bad faith cases, is disproportionate to the needs of this case for the reasons stated by Ace at the hearing. See Fed. R. Civ. P. 26(b)(1). Specifically, the burden and/or expense of the proposed discovery outweighs its likely benefit. (See Docs. 72 at 10-11; 72-7). The Court thus SUSTAINS Ace's Objection to RFP 19.

*4 RFP 7, 8, 9, 16: Plaintiff's requests for materials regarding employee evaluations and financial incentives for claims handling personnel is relevant for the reasons Plaintiff provides on the record. Plaintiff put forth testimony from claims handler Mr. Patel that part of his compensation was based on performance (Doc. 72-8); thus, the compensation program reflects a motivating factor in the handling of claims. Caselaw further supports that compensation program information is discoverable. (See Doc. 71-6 at 6). The Court limits Ace's required response to any policies which touch on or apply to the claim at issue in this case and/or to any claim handler or other employee involved in the handling of the claim at issue in this case. The relevant period ends on December 31, 2020. With this limitation, Ace must respond fully to these requests. To the extent Ace has privacy concerns about the production of these materials, the Court orders the production be made pursuant to the parties' Protective Order. The Court is mindful that Ace has responded that it does not possess documents responsive to certain of these requests.

RFP 12, 13, 15: In response to Plaintiff's requests for “policies, procedures, training materials, guidelines, and claims forms for claims handling,” and specifically relating to the “following policy forms at issue: BUSINESS OWNERS COVERAGE FORM (BP 00 03 07 13); HEALTHCARE PROFESSIONAL LIABILITY – CLAIMS MADE (BOP-48132); BUSINESS OWNERS LIABILITY ENHANCEMENTS FOR HOME HEALTHCARE AGENCIES (BOP-48200); EXCLUSION – INJURY TO PATIENTS (BOP-48137)” (Doc. 71-6 at 8), Ace produced a less than 20-page document titled “Best Practices” but claims it cannot produce what it does not have. Plaintiff disputes Ace's claims that there are no other responsive “policies, procedures, training materials, guidelines, and claims forms for claims handling” beyond the best practices document with the contradictory deposition testimony of Mr. Patel – who affirmed “[t]here were a number of resources that claim handlers had access to. I couldn't recall all of them. And I'm sure I didn't even know all of them during my time at Chubb because there were so many resources.” (Doc. 71-6 at 9).

In response, Ace has offered to produce the “training transcript” for the three claims handlers that were deposed, and the Court so ORDERS. To the extent that these documents fall short of a full response, Plaintiff is allowed a 30(b)(6) deposition from a corporate representative to testify under oath as to the request and response produced.

RFP 10: Plaintiff seeks the personnel files for individuals involved in the handling of the subject claim. For the reasons stated on the record and in Plaintiff's pleadings, the Court finds the discovery request is relevant and narrowly tailored, as Plaintiff has limited the request to “performance evaluations, disciplinary matters, and financial incentive materials.” (Doc. 71-6 at 8). Ace requests that if production is ordered that the Court undertake an in camera review of the produced files, and Gaudet posits that it can be done pursuant to a protective order. The Court finds that production can and shall occur as limited in scope and pursuant to the Protective Order in place in this case.

RFP 1, 2, 21, 22: These requests for production relate to electronic communications which Gaudet asserts exist but have not been produced and/or that have been produced in PDF format versus the agreed upon near-native format. (See Doc. 73, Gaudet's Motion to Compel). Ace asserts it has supplemented production, explained its position on the production, and still is undertaking a further review and will produce any additional responsive emails. Ace further contends that responsive material to some of Plaintiff's requests simply does not exist, including the internal chat system logs. (See Docs. 85, 86, 87). Plaintiff contends that Ace's inability to locate and produce responsive ESI warrants the Court's reconsideration of its previous determination that Ace did not have to respond further to Requests Nos. 21 and 22, as these requests would be directly relevant to proving that Defendants spoliated any responsive materials that they were required by their own policies and procedures to maintain. (Doc. 73 at 9).

*5 The Court finds that Plaintiff's requests are relevant and proportional, seek discoverable material and thus GRANTS Gaudet's Motion to Compel, as to all four of these RFPs, over Defendant's opposition. The Court recognizes that Ace's position is that “ACE produced its entire claim file....” (Doc. 87 at 3). The Court's granting of this motion formalizes beyond the FRCP Ace's obligation to respond fully to these requests. Ace must search for and produce any chat log/chat system communications responsive in its possession, even though its policy should lead to a migration of substantive chat information into an email which would have been produced already. Ace must complete its full response to these RFPs within 30 days of the date of this Order.

3. Scheduling

Consistent with the discussion during the Status Conference on June 15, 2023, the Court ORDERS the parties to meet, confer and submit a joint amended scheduling order within 21 days of the date of this Order.

DONE and ORDERED this the 22nd day June, 2023.