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Holmgren v. State Farm Mutual Insurance Co.

United States Court of Appeals for the Ninth Circuit · 1992 · Civil Procedure

Civil ProcedureDiscoveryWork ProductRequests for AdmissionRule 37(c) SanctionsRule 26(b)(3)opinion work productat issue

Facts

Holmgren was injured when State Farm's insured, Sharon Cannon, ran a stop sign while intoxicated and struck the car in which Holmgren was riding. State Farm quickly concluded its insured's liability was clear and made some advance payments, but later offered $12,500 to settle despite information about Holmgren's continuing treatment and severe financial pressure; the underlying injury suit later settled for $40,000 while preserving Holmgren's bad-faith claim against State Farm. In the bad-faith action, Holmgren obtained two handwritten State Farm adjuster memoranda valuing her claim in a range from $78,000 to $145,000, and the district court admitted them over State Farm's work-product objection. During discovery, State Farm also flatly denied several requests for admission concerning basic historical facts about the accident and Cannon's intoxication, leading to a Rule 37(c) fee award.

Issue

Whether the district court erred in compelling production and admitting State Farm adjuster memoranda as opinion work product in a bad-faith insurance settlement case, and whether the court properly imposed Rule 37(c) expenses for State Farm's blanket denials of requests for admission. A further question was whether the amount of the Rule 37(c) award improperly included expenses not caused by the discovery denials in this litigation.

Rule

Opinion work product is not absolutely immune from discovery in all cases; it may be discovered and admitted when the mental impressions of the party's representative are directly at issue in the litigation and the requesting party's need for the material is compelling. Under Rule 36(a), when good faith requires a party to qualify an answer or deny only part of a requested admission, the party must specify what is true and qualify or deny the remainder. Under Rule 37(c), an expense award for failure to admit must be reasonable and confined to expenses incurred in the discovery process as a result of the wrongful denial.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Phoenix, Elena Ruiz sues Desert Crest Assurance for bad-faith refusal to settle her injury claim after a delivery van insured by the company struck her. During discovery, she seeks an internal claim note written by the insurer's adjuster during the underlying tort suit estimating the claim's settlement value and discussing whether the company could use her financial distress to force a cheaper settlement.

How should the court rule on the insurer's objection that the note is opinion work product and therefore categorically undiscoverable?

Explanation. The majority held that opinion work product is not absolutely protected in all cases. It may be discovered and admitted when the mental impressions of the party representative are directly at issue and the need for the material is compelling. In a bad-faith settlement case, the insurer's strategy, mental impressions, and opinions about handling and valuing the claim are central issues, so the court should order production if those mental impressions are directly at issue and Elena has a compelling need for the note. An approach requiring only the ordinary substantial-need and undue-hardship showing is incomplete because opinion work product demands more than that ordinary showing.