United States District Court, S.D. New York
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, Plaintiff,
H&R BLOCK, INC., et al., Defendants.
OPINION AND ORDER
HENRY PITMAN, Magistrate Judge.
I write to resolve the parties' lingering dispute concerning defendant's requests for certain reserve information. For the reasons set forth below, defendant's request for reserve information is granted.
This action arises out of a dispute concerning whether an insurance policy issued by plaintiff in favor of Tax Group covered claims asserted against Tax Group in an action brought under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), and certain parallel state statutes. Plaintiff National Union Fire Insurance Company of Pittsburgh, PA ("National Union") issued a commercial umbrella general liability insurance policy in favor of Tax Group with an effective period of May 10, 2010 through May 1, 2011 (Amended Complaint, dated Mar. 29, 2012 (Docket Item 6) ("Am. Compl.") ¶ 10). Among other things, the policy provided coverage for personal injury and advertising injury, both of which were defined in the policy (Am. Compl. ¶¶ 11-14). The policy also contained provisions requiring Tax Group to provide National Union with prompt notice of any claims and to cooperate with National Union concerning the investigation, settlement of defense of any claim (Am. Compl. ¶ 18). The policy also excluded certain types of claims from the definition of personal injury and advertising injury (Am. Compl. ¶ 19).
On or about January 31, 2011, Jackson Hewitt Inc. ("Jackson Hewitt") commenced an action against Tax Group and its affiliates, Jackson Hewitt Inc. v. H&R Block Tax Servs. L.L.C., 11 Civ. 641 (AKH) (S.D.N.Y.) (the "Underlying Action"), alleging that certain of Tax Group's advertisements falsely represented that Tax Group's tax preparation services were superior to those provided by Jackson Hewitt (Am. Compl. ¶¶ 20-22).
As a result of both Tax Group's alleged failure to cooperate and National Union's contention that the claims in the Underlying Action were excluded from the policy's definitions of personal injury and advertising injury, National Union seeks in this action a declaration that it has no obligation to indemnify Tax Group in connection with either the settlement of or the defense costs incurred in connection with the Underlying Action.
Tax Group disputes both its alleged failure to cooperate and National Union's contention that the claims in the Underlying Action were excluded from the policy. Tax Group alleges that National Union is guilty a "vexatious refusal to pay, " (Answer and Counterclaims, dated June 28, 2013 (Docket Item 42) ("Counterclaims") ¶ 1). Tax Group claims, in substance, that it provided National Union with all the information that it could provide concerning the Underlying Action, but that it was unable to provide additional information due to National Union's ultimate refusal to sign the protective order that was entered in the Underlying Action and a common interest agreement. In response to a request from Tax Group for National Union's position concerning coverage, National Union advised Tax Group on November 21, 2011 that it "purported to reserve rights to deny coverage on various grounds...." (Counterclaims ¶ 26). Tax Group alleges that although discussions between it and National Union continued after National Union's November 21, 2011 letter, National Union continued to refuse to agree to the protective order in the Underlying Action and the proposed common interest agreement (Counterclaims ¶¶ 27-32).
In December 2011, Tax Group began having discussions with Jackson Hewitt concerning the possibility of settling the Underlying Action (Counterclaims ¶ 33). Tax Group alleges that as a result of National Union's unreasonable and ongoing refusal to be bound by the protective order and the common interest agreement, it was unable to share with National Union all the information concerning the settlement discussions that it otherwise would have been able to share, and that National Union refused to consent to any of the settlement proposals being discussed (Counterclaims ¶¶ 34-36). According to Tax Group, National Union instead accused Tax Group of failing to cooperate with it (Counterclaims ¶ 37).
On February 23, 2012, Tax Group and Jackson Hewitt entered into a confidential settlement and on February 24, 2014, the Underlying Action was dismissed (Counterclaims ¶ 38). National Union commenced this declaratory judgment action five days later on February 29, 2012 (Counterclaims ¶ 39). In its counterclaims, Tax Group seeks, among other things, (1) a declaration that the claims in the Underlying Action are covered by the policy in issue, (2) the expenses it incurred in connection with the defense and settlement of the Underlying Action, (3) statutory damages under Missouri law and (4) its attorneys' fees.
Tax Group seeks "[a]ll documents that refer or relate to any reserve amounts that have been set for, relating to, or regarding the Underlying Action..." (Letter of Edward Tessler, Esq., to the undersigned, dated Apr. 4, 2014, at 2). Tax Group argues that discovery of reserve information is appropriate to test National Union's argument that it lacked sufficient information to value the claims in the Underlying Action and that the information is also relevant to its assertion that National Union refused to pay in bad faith. Tax Group's argument appears to be that National Union's establishing a reserve implies that it had sufficient information to value Jackson Hewitt's claims against Tax Group. National Union opposes the production, arguing that the information may be subject to the attorney-client privilege and/or the work product doctrine and that it is irrelevant to the issue of coverage.
To the extent National Union asserts the attorneyclient privilege and work-product protection, its argument is unavailing. Although a number of courts have noted that reserve information may be protected by these privileges, Lava Trading, Inc. v. Hartford Fire Ins. Co., 03 Civ. 7037 (PKC)(MHD), 2005 WL 66892 at *2 (S.D.N.Y. Jan. 11, 2005) (Dolinger, M.J.); In re Pfizer Inc. Secs. Litig., 90 Civ. 1260 (SS)(NRB), 1994 WL 263610 at *1-*2 (S.D.N.Y. June 6, 1994) (Buchwald, M.J.), it is beyond question that the party asserting the attorney-client privilege or work-product protection bears the burden of proving the applicability of either privilege. von Bulow v. von Bulow, 811 F.2d 136, 144 (2d Cir. 1987), citing In re Grand Jury Subpoena dated January 4, 1984, 750 F.2d 223, 224 (2d Cir. 1984); accord McNamee v. Clemens, No. 09 CV 1647 (SJ)(CLP), 2014 WL 1338720 at *4 (E.D.N.Y. Apr. 2, 2014); Chen-Oster v. Goldman, Sachs & Co., 293 F.R.D. 547, 554 (S.D.N.Y. 2013) (Francis, M.J.); Bowne of N.Y.C. Inc. v. AmBase Corp., 150 F.R.D. 465, 470 (S.D.N.Y. 1993) (Dolinger, M.J.) (collecting cases). "Th[is] burden is not, of course, discharged by mere conclusory or ipse dixit assertions...." In re Bonanno, 344 F.2d 830, 833 (2d Cir. 1965), accord In re Grand Jury Subpoena dated July 6, 2005, 256 F.Appx. 379, 382 (2d Cir. 2007).
Although the parties have proceeded by way of letter briefs in lieu of formal motion practice, National Union has not even proffered any facts suggesting the involvement of counsel in the establishment of reserves with respect to the Underlying Action. All that National Union has done is cited other cases that have recognized that reserve information may be protected by the attorney-client privilege or work-product doctrine. It makes no ...