Third Party Beneficiary Liability / Discovery of Claim Investigation Files in Coverage Litigation
Third Party Beneficiary Liability/Discovery of Claim Investigation Files in Coverage Litigation

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The U.S. District Court for the Middle District of Florida in Ft. Myers [ ] has issued an interesting opinion about the discovery that may be obtained from an insurance company in a declaratory action seeking a determination of coverage — Redfish Key Villas Condo. Ass’n v. Amerisure Ins. Co., 2014 U.S. Dist. LEXIS 46096 (M.D. Fla. Apr. 3, 2014).

The plaintiff obtained a default judgment against the contractor and then sued the contractor’s insurance carrier alleging the association was a third party beneficiary of the insurance policy.

As an aside, in Florida, in order to impose third party beneficiary liability on a party to a contract, the third party must prove (1) the existence of a contract, (2) the clear or manifest intent of the contracting parties that the contract primarily and directly benefit the third party, (3) breach of the contract by a contracting party, and (4) damages to the third-party resulting from the breach. A non-party is the specifically intended beneficiary only if the contract clearly expresses an intent to primarily and directly benefit the third party or a class of persons to which that party belongs…; it is not sufficient to show only that one of the contracting parties unilaterally intended some benefit to the third party [or that the third party received only an incidental or consequential benefit from the contract. Biscayne Inv. Group, Ltd. v. Guarantee Mgmt. Servs., Inc., 903 So. 2d 251 (Fla. 3d DCA 2005).]

Now, back to this case. The discovery issue was whether certain correspondence sought from the insurer pertaining to its investigation of the claim made by the association was work product, a doctrine that protects from discovery documents generated based on the anticipated probability that litigation will follow at the time the documents were drafted. The insurer argued that all correspondence pertaining to the investigation of the claim and the applicable defenses was work product, including internal memoranda containing the thought processes and opinions of non-lawyer employees after the insurer was put on notice of the claim but prior to the entry of default judgment against the insured, as well as internal memoranda and notes created after the insurer was under notice that the default judgment had been entered.

The court disagreed. Under the appropriate standard, as fully discussed in Cutrale Citrus Juices USA, Inc. v. Zurich Am. Ins. Group, 17 Fla. L. Weekly Fed. D 1166, 2004 U.S. Dist. LEXIS 22487 (M.D. Fla. Sept. 10, 2004), the memoranda created after the insurer knew of the default against its insured were work product, but that the documents pertaining to the claims investigation undertaken after initial notice of the claim were not. The court noted that numerous cases hold that an insurer’s claim investigation is not work product. There can be a fine line between memoranda and correspondence made in anticipation of litigation and memoranda and correspondence made in factual investigation of a claim. The mere fact that correspondence is from an attorney does not make it work product.

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