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Velsicol Chemical, LLC v. Westchester Fire Insurance Co.

United States District Court, N.D. Illinois, Eastern Division

August 18, 2016

VELSICOL CHEMICAL, LLC, Plaintiff,
v.
WESTCHESTER FIRE INSURANCE COMPANY, as successor in interest to INTERNATIONAL INSURANCE COMPANY, Defendant.

          MEMORANDUM OPINION AND ORDER

          M. David Weisman United States Magistrate Judge

         Velsicol Chemical, LLC sues Westchester Fire Insurance Company for its alleged failure to provide insurance coverage. The case is before the Court on plaintiff’s motion to compel production of documents withheld on the grounds of privilege. For the reasons set forth below, the motion is granted in part and denied in part.

         Background

         At the times relevant to this suit, “Velsicol and its predecessors in interest, engaged in the manufacture, distribution, sale, marketing, and disposal of a variety of specialty chemical products.” (Compl. ¶ 9.) Velsicol purchased primary and excess insurance policies to address the risks associated with its business, including an excess policy for the period January 1, 1983 through January 1, 1986 from Westchester’s predecessor (hereinafter, defendant). (Id. ¶¶ 11, 17.) All of the primary liability insurance coverage that Velsicol purchased for that period “has been exhausted by payment of claims, settlements or through the insolvency of the insurance carriers.” (Id. ¶ 16.)

         Velsicol has been sued by three individuals who claim they were injured by exposure to chemicals it manufactured and by federal and state agencies that claim Velsicol’s operations caused environmental damage in various locations. Velsicol tendered defense of these claims to defendant, which defendant refused. Velsicol contends that refusal was a breach of the parties’ contract and seeks damages and declaratory relief.

         Motion to Compel

         Velsicol has moved to compel production of twenty-one documents defendant withheld from production on the grounds of attorney client and/or attorney work product privilege. The Court has reviewed the contested documents in camera.

         Under Illinois law, the attorney client privilege bars the Court from compelling disclosure of “privileged communications between a party or his agent and the attorney for the party.” Ill. S.Ct. R. 201(b)(2); see Ctr. Partners, Ltd. v. Growth Head GP, LLC, 981 N.E.2d 345, 355 (Ill. 2012) (“Where legal advice of any kind is sought from a lawyer in his or her capacity as a lawyer, the communications relating to that purpose, made in confidence by the client, are protected from disclosure by the client or lawyer, unless the protection is waived.”).[1] “Illinois adheres to a strong policy of encouraging disclosure . . . .” Id. at 356 (quotation omitted). Thus, the privilege is “limited solely to those communications which the claimant either expressly made confidential or which he could reasonably believe under the circumstances would be understood by the attorney as such.” Id. The party asserting the privilege has “the burden of showing facts which give rise to [it].” Consol. Coal Co. v. Bucyrus-Erie Co., 432 N.E.2d 250, 257 (Ill. 1982).

         The work product doctrine protects from disclosure “documents and tangible things that are prepared in anticipation of litigation or for trial by or for another party or its representative (including the other party’s attorney, consultant, surety, indemnitor, insurer, or agent)” unless “the [requesting] party shows that it has substantial need for the materials to prepare its case and cannot, without undue hardship, obtain their substantial equivalent by other means.” Fed.R.Civ.P. 26(b)(3)(A). “There is a distinction between precautionary documents ‘developed in the ordinary course of business’ for the ‘remote prospect of litigation’ and documents prepared because ‘some articulable claim, likely to lead to litigation, [has] arisen.’” Sandra T.E. v. S. Berwyn Sch. Dist. 100, 600 F.3d at 612, 622 (7th Cir. 2009) (alteration and emphasis in original) (quoting Binks Mfg. Co. v. Nat’l Presto Indus., Inc., 709 F.2d 1109, 1120 (7th Cir. 1983)). “Only documents prepared in the latter circumstances receive work-product protection.” Id. “[T]he party seeking to assert the work product privilege has the burden of proving that at the very least some articulable claim, likely to lead to litigation, has arisen.” Binks, 709 F.2d at 1119 (quotation and alteration omitted).

         Prepared In Anticipation of Litigation

         Velsicol argued in its brief that documents significantly pre-dating the 2015 filing of this case could not have been prepared in anticipation of litigation. (See Doc. #36, p. 9.) However, as defendant points out, and Velsicol admitted at oral argument, the parties have been litigating these claims, albeit in different forms and forums, since November 3, 1997. Thus, that date is the starting point, in this case, for determining whether a document was prepared in anticipation of litigation.

         Undated and Unknown Author / Recipient Document

         Velsicol takes issue with Westchester’s claim of protection to three documents that are not dated, nor are the author(s) and recipient(s) identified. (Doc. #37, p. 6.) In its response, Westchester indicates that two of the three so-called “undated documents” have been produced. (Doc. #40, n. 6.) Thus, this Court is left to resolve what protection, if any, is afforded to only one of the “undated documents.” Because it is well-settled that the party asserting protection must establish the protected status of the document at issue, see Logan v. Commercial Union Insurance Co., 96 F.3d 971, 976 (7th Cir. 1996), the Court afforded Westchester the opportunity to address this issue. (Doc. #43.) Rather than presenting factual support to show the potentially protected nature of the document, Westchester relied on legal precedent to establish protection by referring this Court to inter alia, Coltec Industries v. American Motorist Insurance Co., 197 F.R.D. 368 (N.D. Ill. 2000).

         We have reviewed Coltec, and while recognizing its general applicability to the issue before the Court, we are not persuaded that the legal underpinning of Coltec provides a basis for protection of the “undated document.” As argued by Westchester’s counsel, Coltec supports Westchester’s position because Coltec acknowledges that information related to insurance reserves is generally not considered relevant in insurance coverage disputes. Id. at 372. Westchester is correct that the “undated document” does, in part, discuss insurance reserves. However, the document also reviews other areas of interest. Moreover, and more importantly, the “undated document” lacks an author and a recipient.[2] Thus, we are left to speculate as to who prepared this document, and more significantly, who received this document. There are certainly indications that this document may have been prepared by a Westchester (or predecessor) employee. Additionally, the document has a footer on each page reading, “Privileged & Confidential Includes Attorney/Client Communication & Attorney Work Product Material.” However, as the withholding party, Westchester has the burden of establishing the ...


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