Judge must review documents in insurance dispute before releasing them

A Hamilton County couple injured in a car accident sued their insurance company, accusing it of dragging its feet before paying a claim. The couple wanted to see everything in their claims file, including the communications between claims handlers and company attorneys.

In a 5-2 decision, the Supreme Court of Ohio last week ruled that a trial judge must first inspect the communications in a claims file before turning over any portions of it. The decision reversed a First District Court of Appeals order directing Farmers Property Casualty Insurance to hand over the materials to Melissa and Alexis Eddy without such review.

Writing for the Court majority, Justice R. Patrick DeWine explained that state lawmakers in 2007 modified a statute governing the attorney-client privilege in cases explicitly involving claims of bad faith against an insurer. That law requires the judge to conduct an in camera review of claims file materials before turning them over to the opposition.

In addition, Justice DeWine stated that under the Ohio Rules of Civil Procedure, the trial judge must also inspect the documents that attorneys created when a lawsuit was anticipated or in progress before allowing them to be disclosed.

"In this case, an in camera review was not only necessary as a matter of sound judicial administration, it was also required by R.C. 2317.02(A)(2)," Justice DeWine wrote.

Chief Justice Sharon L. Kennedy and Justices Joseph T. Deters, Daniel R. Hawkins, and Megan E. Shanahan joined Justice DeWine's opinion. Justices Patrick F. Fischer and Jennifer Brunner dissented without a written opinion and noted they would have dismissed the appeal as improvidently accepted.

Couple Sues Their Insurer Twice Over Accident

The Eddys were injured in an auto accident in 2020. They were not at fault, and the other driver's insurance company paid them $100,000, the maximum available under the driver's policy.

Because the Eddys did not believe the payment fully compensated them for their injuries, they turned to their insurer, Farmers. Their policy had a $250,000 limit for injuries caused by underinsured motorists. The Eddys sought $150,000 from Farmers, the difference between their policy limit and the amount already paid by the other driver.

Farmers offered the Eddys $33,312. After negotiations stalled, they filed a breach of contract lawsuit against Farmers in August 2021. Farmers agreed to pay the Eddys the $150,000 they sought in April 2022. The company stated it agreed to pay the full amount after it was presented with new medical information showing the extent of Melissa Eddy's injuries. The coverage case was dismissed in May 2022.

A few months later, the Eddys filed a second lawsuit against Farmers, alleging bad-faith misconduct in handling their claim. They asserted that Farmers dragged its feet from the time they submitted the claim following the 2020 accident until the insurer paid the full amount in April 2022.

Trial Court Directs Insurer to Turn Over Claims File

As part of the bad-faith lawsuit, the Eddys requested Farmers' entire claims file. Farmers produced most of it, but refused to hand over documents created from August 2021, when the Eddys initiated the lawsuit after negotiations failed, until April 2022, when the company ultimately agreed to pay the $150,000 the couple requested.

The Eddys asked the Hamilton County Common Pleas Court to compel Farmers to comply with the discovery request and turn over all information in the file. Farmers objected, stating that producing the entire file would reveal attorney-client communications during the coverage lawsuit. It would also require the attorneys to reveal "work product" materials created to defend Farmers against the Eddys in litigation.

While the request was pending, Farmers produced a "privilege log" identifying 20 documents it withheld from the Eddys. The log briefly described each document and cited the attorney-client privilege or the attorney work-product privilege as the reason for not disclosing it.

At a hearing, Farmers explained why it believed it did not have to provide the Eddys the documents, and also noted the trial court was required to conduct an in camera review before allowing the Eddys access to the materials.

The trial court ordered Farmers to produce the entire file up to the point at which Farmers paid the $150,000. While the court indicated an in camera review was required, the court did not order an inspection of the documents.

Farmers appealed to the First District, which affirmed the trial court's decision. Farmers then appealed to the Supreme Court.

Supreme Court Analyzed Information Release Requirements

Justice DeWine explained that the attorney-client privilege has been recognized for centuries and that communication between an attorney and a client for the purpose of obtaining legal advice may not be disclosed without the client's consent.

Ohio established the attorney-client privilege in 1863 and granted the General Assembly the right to modify it, the opinion noted.

Two Supreme Court decisions, in 1994 and 2001, created exceptions to the attorney-client privilege in cases where insurance companies were accused of acting in bad faith when handling claims and ultimately declining payment.

In reaction to the decisions, the General Assembly amended R.C. 2317.02(A)(2) to create a process for revealing attorney communications regarding allegations of bad-faith claims handling.

Under the law, the person seeking the attorney communications must present a prima facie case explaining how the insurer engaged in bad faith, fraud, or criminal conduct. If a trial court believes the allegations are sufficient, the court must review communications between the client and the attorney "that are related to the attorney's aiding or furthering an ongoing or future commission of bad faith by the client," the opinion stated.

Because the law provides a process for resolving privilege issues in the context of bad-faith insurance claims, the law completely overrides prior Court decisions on the matter, the opinion stated.

Work-Product Rules Examined

The Court noted that R.C. 2317.02(A)(2) does not fully address the Eddys' document request from Farmers. The company claims the couple wants documents that are also covered by the work-product exemption, which are files that attorneys prepare in anticipation of litigation and as they prepare their cases.

Under Ohio Civil Rule 26, a party may obtain attorney work product from the opposition, if "good cause" is established. The opinion stated the good-cause requirement is met when the work product "is directly at issue in the case, the need for the information is compelling, and the evidence cannot be obtained elsewhere."

To assess whether there is good cause to direct Farmers to turn over materials claimed to be work product, the trial court must conduct an in camera inspection, the Court concluded.

The Court remanded the case to the trial court to first determine whether the Eddys made a prima facie showing of their bad-faith claim against Farmer and which documents, if any, need to be disclosed.

2024-0623. Eddy v. Farmers Property Cas. Ins. Co., Slip Opinion No. 2026-Ohio-626.

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