United States District Court, D. New Mexico
MEMORANDUM OPINION AND ORDER
MATTER comes before the Court on Defendant Loya Insurance
Company's Motion for Protective Order (Doc. 37),
filed November 16, 2018. Having reviewed the submissions of
the parties and the relevant law, the Court will grant
Defendant's Motion for Protective Order in part.
October 3, 2016, Plaintiff Nicolita Montoya was involved in a
motor vehicle accident with an unknown driver. Following the
accident, Plaintiff made a claim with Defendant Loya
Insurance Company (“Loya”) for uninsured motorist
(“UM”) coverage. Loya assigned Plaintiff 100
percent fault for the accident. See Doc. 37-1 at 2.
Another claim was opened for this same accident, but under
the wrong policy, creating some confusion between Plaintiff
and Loya. Loya denied coverage on that claim as being outside
the policy period.
February 22, 2017, Plaintiff filed suit for UM benefits and
punitive damages (“the underlying lawsuit”) in
state court. Doc. 37-2. The case proceeded to trial,
and on January 25, 2018, the jury found the UM driver to be
100 percent at fault and awarded damages to Plaintiff.
Plaintiff filed the current lawsuit in state court on May 17,
2018, alleging insurance breach of contract, bad faith,
negligence, and unfair practices for Loya's failure to
pay the claim, including paying the jury verdict, and for
Loya's handling of the claim through the underlying
lawsuit. Loya removed the case to this federal district court
on June 25, 2018 based upon diversity of citizenship. It was
only on or about June 29, 2018 - after removal - that Loya
paid the jury verdict's award to Plaintiff. In the
instant motion, Loya seeks a protective order to prohibit
discovery of Loya employees' conduct and communications
during the underlying lawsuit, arguing such information is
protected by work product and attorney-client privilege. Loya
also seeks to shield the production of materials related to a
presentation on bad faith by current defense counsel to Loya
adjusters as protected by attorney-client privilege.
Rule of Civil Procedure 26(b)(1) allows discovery of
“any nonprivileged matter that is relevant to any
party's claim or defenses and proportional to the needs
of the case . . . .” Yet, a court may “for good
cause, issue an order to protect a party or person from
annoyance, embarrassment, oppression, or undue burden or
expense, ” including “forbidding the disclosure
or discovery” or “forbidding inquiry into certain
matters, or limiting the scope of disclosure or discovery to
certain matters.” Fed.R.Civ.P. 26(c)(1). “The
good cause standard of Rule 26(c) is highly flexible, having
been designed to accommodate all relevant interests as they
arise.” Rohrbough v. Harris, 549 F.3d 1313,
1321 (10th Cir. 2008) (quotations omitted). The burden is on
the party seeking the protective order to show good cause
exists for one. Sedillo Elec. v. Colo. Cas. Ins.
Co., No. CIV 15-1172 RB/WPL, 2017 WL 3600729, at *1
(D.N.M. Mar. 9, 2017) (quotation omitted).
diversity case, state law governs attorney-client privilege.
Valencia v. Colo. Cas. Ins. Co., No. CIV 06-1259
JB/RHS, 2007 WL 5685148, at *6 (D.N.M. Dec. 6, 2007). Under
New Mexico law, the elements of attorney-client privilege
are: “(1) a communication (2) made in confidence (3)
between privileged persons (4) for the purpose of
facilitating the attorney's rendition of professional
legal services to the client.” Santa Fe Pac. Gold
Corp. v. United Nuclear Corp., 2007-NMCA-133, ¶ 14,
175 P.3d 309 (citing Rule 11-503(A)(4) NMRA). Specifically,
“[i]n order to be covered by the attorney-client
privilege, a communication between a lawyer and client must
relate to legal advice or strategy sought by the
client.” Am. Auto Ins. Co. v. First Mercury Ins.
Co., No. 13-CV-0439 MCA/LF, 2016 WL 7395219, at *2
(D.N.M. Oct. 22, 2016) (citing United States v.
Johnston, 146 F.3d 785, 794 (10th Cir. 1998)). There is
no blanket privilege covering all attorney-client
communications; rather, “[t]he party asserting
privilege must show that each document or communication
qualifies for privilege.” Id. (citing
Santa Fe Pac. Gold Corp., 2007-NMCA-133, ¶ 25).
work-product privilege, on the other hand, protects
“documents and tangible things that are prepared in
anticipation of litigation or for trial by or for another
party or its representatives unless the materials are
otherwise discoverable and the party seeking the materials
shows substantial need.” Id. at *3 (citing
Fed.R.Civ.P. 26(b)(3)). “But even if a court orders
discovery of such materials, the court ‘must protect
against disclosure of the mental impressions, conclusions,
opinions, or legal theories of a party's attorney or
other representative concerning the litigation.'”
Id. (citing Fed. R. Civ.
26(b)(3)(B)). The work-product doctrine does not protect
facts contained within a work product or facts about the
creation of a work product. Id. Rather, it is
“intended only to guard against divulging the
attorney's strategies and legal impressions . . .
Conduct and Communications During the Underlying
seeks to depose Loya litigation adjusters and employees
involved in the litigation of the underlying lawsuit.
Specifically, Plaintiff seeks to depose Vice President of
Claims Ed Meza, a Loya employee who attended the underlying
trial, and Loya litigation adjusters Genaro Rojas and Jose
Balanos. Plaintiff also seeks production of written reports
by Loya's UM counsel, Mr. Grossman. Loya responds that
the handling of Plaintiff's claim during the underlying
lawsuit is protected from disclosure by the work product
doctrine and attorney-client privilege.
first argues that discovery of its employees' conduct
during the underlying UM lawsuit is irrelevant and
disproportionate to the needs of the current bad faith
lawsuit. The Tenth Circuit has explained that “[i]n
general, an insurer's litigation tactics and strategy in
defending a claim are not relevant to the insurer's
decision to deny coverage.” Timberlake Constr. Co.
v. U.S. Fid. & Guar. Co., 71 F.3d 335, 340 (10th
Cir. 1995) (citation omitted). As such, “once
litigation has commenced, the actions taken in its defense
are not . . . probative of whether [an insurer] in bad faith
denied the contractual lawsuit.” Id. However,
the court in Timberlake further held that in some
rare cases, evidence of an insurer's litigation conduct
may be admissible to show bad faith. Id. at 341.
Similarly, Judge Lynch surmised that New Mexico courts would
allow evidence of litigation conduct “to be admissible
as evidence of bad faith in rare cases involving
extraordinary facts.” Sinclair v. Zurich Am. Ins.
Co., 129 F.Supp.3d 1252, 1258 (D.N.M. 2015).
as explained in Timberlake, litigation conduct by
Loya adjusters and employees during the underlying litigation
is not relevant to whether Loya acted in bad faith by failing
to pay Plaintiff's claim. While Plaintiff also alleges
Loya acted in bad faith in its handling of the underlying
lawsuit, “[a]llowing litigation conduct to serve as
evidence of bad faith would undermine an insurer's right
to contest questionable claims and to defend itself against
such claims.” Timberlake Constr. Co., 71 F.3d
at 341. Further, there is no evidence that this is a rare
case or that an extraordinary circumstance exists to make the
conduct of Loya employees during the underlying lawsuit