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Important Appellate Division Reported Opinion Regarding Disclosure of Investigatory Materials Under The Work Product Doctrine

The Appellate Division on June 6, 2019 rendered a reported Opinion on the issue of when disclosure of materials prepared or collected prior to the institution of litigation is required.  The matter is Paladino v. Auletto Enterprises, Inc. t/a Auletto Caterers, 2019 WL 2375475.

On October 9, 2015, Plaintiff was a guest at a wedding reception held at Defendant’s catering facility when she fell and injured her left knee, lower back, and right ankle while walking down a staircase.  She immediately reported the accident to Defendant, such that Defendant prepared an accident report that same day, and shortly thereafter gave notice to its insurance company. The insurance company promptly retained an investigator.

Two weeks after the accident, on October 22, 2015, a senior claims examiner spoke with Plaintiff, and sent Plaintiff a letter advising that an investigator was looking into the accident. The investigator was instructed to photograph the accident scene and obtain statements from both Plaintiff and representatives of Defendant.

The claims examiner later certified that the intent in retaining the investigator was to “prepare a defense for [Defendant] in the event that [Plaintiff] filed a lawsuit,” and further certified that as the insurer was not disputing coverage, it did not hire the investigator to look into coverage issues.

The investigator arranged to meet with and take a recorded statement from Plaintiff on October 26, 2015. However, on the appointment date, the investigator was contacted by an attorney who advised that he had been retained by Plaintiff, such that the appointment was canceled. The next day, Plaintiff’s recently retained counsel sent a letter of representation to the insurance carrier.

Therefore, on October 26, 2015, the investigator inspected Defendant’s catering facility.  In the process, the investigator took photographs of the scene and prepared a diagram of the area.  The investigator also obtained recorded oral statements from two of Defendant’s employees, and approximately one week later also obtained a recorded oral statement from a third employee.

On December 3, 2015, Plaintiff’s counsel and a photographer visited Defendant’s premises for a documentary inspection. Thereafter, in January 2016, Defendant’s insurance carrier provided Plaintiff’s counsel with a copy of video surveillance that had actually captured Plaintiff falling on the staircase, as well as a copy of the incident report.

Plaintiff and her husband subsequently filed suit and Defendant filed an Answer.  Thereafter, in Answers to Interrogatories, Defendant disclosed that the investigator had taken photographs of the staircase, had prepared a diagram, and had obtained recorded statements from three of Defendant’s employees, none of whom witnessed Plaintiff’s fall. Significantly, asserting that they were protected by the work-product privilege, Defendant did not produce the photographs, diagram, or statements,

Plaintiff filed a Motion to Compel the production of the photographs and the recorded statements by Defendant’s employees, having withdrawn a prior request for the diagram prepared by the investigator,

Without hearing oral argument, the Trial Court granted Plaintiff’s Motion, relying on Pfender v. Torres, 336 N.J. Super. 379 (App. Div. 2001), on the grounds that because the photographs and statements were obtained by the insurance carrier before litigation, the carrier “may have” had interests apart from protecting its insured’s rights.  Defendant sought leave to appeal the Order compelling the production. The Appellate Division initially denied leave, but the Supreme Court granted leave to appeal and remanded the same to the Appellate Division “to consider [it] on the merits.”

In the appeal, Defendant made two arguments. First, it contended that the Court should reject the rationale of Pfender and, instead, adopt the reasoning set forth in Medford v. Duggan, 323 N.J. Super. 127 (App. Div. 1999). Second, Defendant- applying the standard set forth in Medford– urged that the Appellate Division should reverse because Plaintiff did not satisfy the requirements of Rule 4:10-2(c).

 The Court began by noting that the Work Product Doctrine and Rule 4:10-2(c) should be understood as exceptions to New Jersey’s general policy of “encouraging full and open discovery of all relevant information.” 2019 WL 2375475 at Page 2.  In most situations, parties to litigation have the right to discovery of all relevant information concerning the action. See Rule 4:10-2(a).

One of the recognized privileges that is an exception to that general policy is the Work Product Doctrine. See O’Boyle v. Borough of Longport, 218 N.J. 168, 188 (2014). That doctrine was first recognized by the United States Supreme Court in Hickman v. Taylor, 329 U.S. 495 (1947).

 The Work Product Doctrine is set forth in Rule 4:10-2(c), which states:

“[A] party may obtain discovery of documents, electronically stored information, and tangible things otherwise discoverable under R[ule] 4:10-2(a) and prepared in anticipation of litigation or for trial by or for another party or by or for that other party’s representative (including an attorney, consultant, surety, indemnitor, insurer or agent) only upon a showing that the party seeking discovery has substantial need of the materials in the preparation of the case and is unable without undue hardship to obtain the substantial equivalent of the materials by other means. In ordering discovery of such materials when the required showing has been made, the court shall protect against disclosure of the mental impressions, conclusions, opinions, or legal theories of an attorney or other representative of a party concerning the litigation.” (Emphasis added.)

Defendant argued that a conflict exists in precedent concerning the scope of the Work Product Doctrine as discussed in Pfender compared to Medford. Defendant argued that Pfender essentially established a “bright line rule” that material obtained by an insurer before litigation is not protected by the Work Product Doctrine. Defendant urged that Medford established a “case-by-case test,” whereby material prepared by or for an insurer can be protected under the Work Product Doctrine if it was prepared in anticipation of litigation and the party seeking the same cannot establish a substantial need for it.

While the Appellate Division indicated that it did not find Pfender and Medford to be irreconcilable, as Defendant asserted, it did indicate that “the rationale and holding of Pfender needs to be clarified and properly understood as consistent with a case-by-case analysis.”  2019 WL 2375475 at Page 4.

 The Appellate Division thus stated that:

“[W]e clarify that there is no per se or presumptive rule that materials prepared or collected before litigation are not prepared in anticipation of litigation. Instead, as set forth in Rule 4:10-2(c), there is a multi-part, fact-specific test. The first inquiry is whether the materials were prepared or collected in anticipation of litigation or trial by another party or that party’s representative. See R. 4:10-2(c). The representative can be an ‘insurer or agent’ of the party. Ibid. If the materials were prepared in anticipation of litigation or trial, to obtain the materials, there is a two-part standard that must then be satisfied. See ibid. The party seeking the materials must (1) show a substantial need for the discovery; and (2) demonstrate that he or she is unable, without undue hardship, to obtain the substantial equivalent of the materials. Ibid. See also Carbis Sales, Inc., 397 N.J. Super. at 82, 935 A.2d 1236 (first citing Medford, 323 N.J. Super. at 133, 732 A.2d 533; then citing Pfender, 336 N.J. Super. at 391, 765 A.2d 208). Moreover, if such work-product materials are compelled to be produced, “the court shall protect against disclosure of the mental impressions, conclusions, opinions, or legal theories of an attorney or other representative of a party concerning the litigation.” R. 4:10-2(c). 2019 WL 2375475 at Page 5.

Significantly, the Court also noted that:

“The scope of the work-product doctrine has other limitations. It has long been established that the doctrine only protects documents or prepared materials; accordingly, it does not protect facts. See Hickman, 329 U.S. at 513, 67 S.Ct. 385; R. 4:10-2(c); O’Boyle, 218 N.J. at 188-89, 94 A.3d 299. Moreover, in considering statements, the doctrine does not protect statements that are prepared in the normal course of business. See Miller v. J.B. Hunt Transp., Inc., 339 N.J. Super. 144, 148, 770 A.2d 1288 (App. Div. 2001) (quoting Payton v. N.J. Tpk. Auth., 148 N.J. 524, 554, 691 A.2d 321 (1997)). Finally, we have previously clarified that the protection of a statement will usually be lost if the person who gave the statement is later called to testify at trial. See Dinter v. Sears, Roebuck & Co., 252 N.J. Super. 84, 100, 599 A.2d 528 (App. Div. 1991). In Dinter, we held that ‘where a fact witness testifies for an adverse party, the factual statement of that witness must be produced on demand for use in cross-examination as a potential tool for impeachment of credibility.’” 2019 WL 2375475 at Page 5.

Accordingly, the Appellate Division in this matter reversed the Order compelling Defendant to produce the photographs and recorded witness statements, and remanded with a specific instruction to the Trial Court to conduct further proceedings and apply a “case-by-case, fact-specific analysis” to determine whether the photographs and witness statements are within the ambit of the Work Product Doctrine.

Thus, this Opinion is a very helpful elaboration by the Appellate Division on exactly under what circumstances materials secured by an insurance company prior to litigation are subject to disclosure. The specific facts of a given case will accordingly determine whether disclosure is required.

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Appellate Division Revisits Contract and Insurance Policy Interpretation

The Appellate Division on January 22, 2019 decided an interesting case regarding insurance coverage which has been approved for publication. The matter is Katchen v. GEICO et al., No. A-5685-16T4, 2019 WL 272926 (App. Div. Jan. 22, 2019).

In December 2015, Plaintiff Katchen was injured in a motor vehicle accident. Significantly, at the time of the accident, he was operating a Harley-Davidson motorcycle which he owned. Before settling with the other driver or that driver’s $25,000 policy limit, Katchen submitted a UIM claim under three separate insurance policies he maintained:

1. A motorcycle policy issued by Rider Insurance Company;
2. A commercial automobile policy issued by Farmers Insurance Company of Flemington; and
3. A personal auto policy issued by GEICO.

GEICO “disclaim[ed] coverage” pursuant to an exclusion in Section IV of its policy, which addresses both uninsured motorist, or “UM,” and underinsured motorist, “UIM,” coverages.  That provision stated:

“LOSSES WE PAY.

We will pay damages for bodily injury and property damage caused by an accident which the insured is legally entitled to recover from the owner or operator of an uninsured motor vehicle or underinsured motor vehicle arising out of the ownership, maintenance[,] or use of that vehicle.”

However, Section IV also contained an exclusion of coverage for “bodily injury sustained by an insured while occupying a motor vehicle owned by an insured and not described in the declarations and not covered by the Bodily Injury and Property Damage liability coverages of this policy.”

Because while the motorcycle was owned by Plaintiff Katchen, it was not listed on the policy issued and GEICO determined that it did not constitute an “owned auto,” which the policy defined as a “vehicle described in this policy for which a premium charges shown for these coverages.”  As a result, GEICO denied the claim.

Plaintiff Katchen then filed a declaratory judgment action naming the three carriers, seeking a declaratory judgment that the UIM coverage of all three carriers applied to the subject accident. GEICO responded by filing a motion urging the court to find its “owned motor vehicle exclusion” to be “valid, unambiguous and enforceable.” The Motion Court denied that motion, finding that the language of GEICO’s policy was ambiguous.

The parties subsequently came to an agreement that Rider and Farmers would pay their respective pro rata share of the total of $975,000.00 in UIM coverage owed to Plaintiff Katchen, and GEICO would pursue this appeal. If GEICO did not prevail, it would pay its pro rata share as well. Plaintiff, Rider and Farmers all opposed GEICO’s appeal.

Accordingly, the Appellate Division indicated that “in this appeal, we consider whether an auto insurance form may combine uninsured (UM) and underinsured motorist (UIM) coverage in a single section and include exclusions not listed on the policy’s declaration page. We also consider if an insurer may exclude UIM coverage for an accident involving a vehicle owned by the insured but not covered under the subject policy.”

The Appellate Division accordingly held that “Because we find the exclusion does not violate public policy or result in ambiguity, we reverse.”

On appeal, contract interpretation is de novo.  Manalapan Realty, L.P. v. Twp. Committee of Manalapan, 140 N.J. 366, 378 (1995).  When an insurance contract terms are clear and unambiguous, the Court interprets the policy as written, using the “plain, ordinary meaning” of the words used.  Zacarias v. Allstate Insurance Co., 168 N.J. 590, 595 (2001).  But where an ambiguity arises, the policy is interpreted in favor of the insured and against the insurer. President v. Jenkins, 180 N.J. 550, 562-63 (2004).

An ambiguity exists when “the phrasing of the policy is so confusing that the average policyholder cannot make out the boundaries of coverage.”  Weedo v. Stone-E-Brick, Inc., 81 N.J. 233, 247 (1979).

Insurance policies are to be interpreted narrowly, but the provisions within are presumed valid and effective if “specific, plain, clear, prominent and not contrary to public policy.”  Princeton Ins. Co. v. Chunmuang, 151 N.J. 80, 95 (1997).

The Respondents argued that GEICO’s policy, which addressed both UM and UIM coverage in the same section, violated various statutory mandates. GEICO responded that the exclusion unambiguously bars UIM coverage for loss sustained by Plaintiff while operating a motor vehicle he owned but did not insure under GEICO’s policy.

The Appellate Division agreed with GEICO, finding that the policy was not ambiguous.  For example, the Court observed that any ordinary reasonable person understands that a motorcycle is a type of motor vehicle.

While acknowledging that the exclusions did not appear on GEICO’s declaration page, the Appellate Division noted that requiring such would result in even more “fine print” and run the risk of making insurance policies more difficult for the average insured to understand, and would also “eviscerate the rule that a clause should be read in the context of the entire policy.”

Thus, the Appellate Division stated that “The failure to list the exclusion at issue on the declaration page does not automatically render the contract ambiguous. Reading the GEICO policy in its totality, we conclude the exclusion is clear and unambiguous. The fact that the exclusion is not mentioned on the declaration sheet does not bar its enforcement.”

Accordingly, the Katchen opinion is a very instructive recent summary by the Appellate Division of the procedure that will be utilized in analyzing contracts and insurance policies.

Plaintiff Unable to Meet Permanency Threshold of Tort Claims Act Despite Knee Surgery

By: Chris Carlson, Esq.

The New Jersey Tort Claims Act (“TCA”), N.J.S.A. 59:1-1 to 59:13-10, requires that a Plaintiff seeking to recover damages from a public entity must prove as a threshold requirement that he or she sustained a “permanent loss of body function.”  N.J.S.A. 59:9-2(d). The Appellate Division of the Superior Court of New Jersey on January 3, 2017 issued an opinion, not yet approved for publication, which addresses this requirement in the matter of Moore v. Frucci, 2017 N.J. Super. Unpub. LEXIS 1 (App. Div. Jan. 3, 2017).

The fact pattern is fairly unusual in that, on December 1, 2013, Plaintiff John Moore was standing on a Camden sidewalk observing police activity at a crime scene. Plaintiff alleged that Defendant Detective Christopher Frucci drove an unmarked Camden City Police vehicle onto the sidewalk, and the vehicle struck Plaintiff in the rear of the right leg, causing Plaintiff to lose his balance, but not fall to the ground. Defendant Frucci denied that the vehicle struck Plaintiff, but liability was not an issue raised in Defendants’ Motion for Summary Judgment.  Rather, Defendants claimed that Plaintiff failed to meet the threshold to recover under the TCA.

Plaintiff sought treatment at an emergency department approximately 40 minutes after the incident.  X-rays of the right lower extremity were essentially negative. Plaintiff was also noted to be ambulating without difficulty. However, four days later, on December 5, 2011, Plaintiff commenced a course of physical therapy and chiropractic treatment, alleging injuries to his knee and ankle, as well as severe lower back pain. He continued this treatment for approximately six months.

On February 1, 2012, Plaintiff underwent an MRI of the right knee. The MRI report noted no fracture or contusions, but a “chronic appearing partial tear of the proximal ACL” and “small joint effusion.”

Plaintiff also came under the care of a board certified orthopedic surgeon on February 29, 2012. This doctor indicated that Plaintiff had suffered “aggravation of chronic lumbosacral sprain and strain” and a “right knee contusion with high-grade partial versus full thickness tear of the ACL.” Plaintiff was recommended to continue chiropractic treatment and physical therapy, and was fitted for a knee brace.

After periodic follow-ups with the surgeon and Plaintiff’s claims of persistent tenderness in the right knee, arthroscopic surgery was performed on August 30, 2012. The operative report describes the procedure as “diagnostic arthroscopy of right knee, partial synovectomy medial joint, lateral joint, notch, and suprapatellar pouch, and chondroplasty of patella.”  Plaintiff thereafter attended several post-surgical follow-up visits with the surgeon, as part of what the surgeon described as continuing “aggressive therapy,” which included two injections of the knee with Depo-Medrol and the lidocaine.

The surgeon also ultimately provided a permanency evaluation in which he stated that Plaintiff “has had an insult to his anterior cruciate ligament. There was a partial tear. He did have posttraumatic changes with chondromalacia patella and synovitis of the right knee.” The doctor also opined that Plaintiff might require knee replacement surgery in the future.

In his deposition, Plaintiff, who was employed as a public adjuster, claimed that he had difficulty climbing onto roofs, and when climbing stairs he experienced a “little bit” of pain in the knee. Plaintiff also testified that, given his condition, he paid more attention to his activities due to his knee.  He also claimed that given the right knee soreness and swelling, he was required to ice the knee three to four times per week. He claimed the problems with his knee limited his ability to participate in other activities of daily living, including hunting, riding dirt bikes and a motorcycle which he owned, and caused him pain and difficulty when he remained in the same position for an extended period of time.

The trial court ruled that the proofs set forth above were insufficient to create a triable issue as to whether Plaintiff had met the threshold of the TCA.  Accordingly, Defendants’ Motion for Summary Judgment was granted.

On appeal, the Appellate Division set forth the specific language of N.J.S.A. 59:9-2(d), which indicates that:

“No damages shall be awarded against a public entity or public employee for pain and suffering resulting from any injury; provided, however, that this limitation on the recovery of damages for pain and suffering shall not apply in cases of permanent loss of a bodily function, permanent disfigurement or dismemberment where the medical treatment expenses are in excess of $3,600.00.  For purposes of this section medical treatment expenses are defined as the reasonable value of services rendered for necessary surgical, medical and dental treatment of the claimant for such injury, sickness or disease, including prosthetic devices and ambulance, hospital or professional nursing service.”

Therefore, in circumstances where a Plaintiff has incurred in excess of $3,600.00 in medical expenses, the Appellate Division noted that “to recover pain-and-suffering damages against a public entity the plaintiff must also prove: (1) an objective permanent injury, and (2) a permanent loss of a bodily function that is substantial.”  Toto v. Ensuar, 196 N.J. 134, 145 (2008).”  Further, Plaintiffs “may not recover under the TCA for mere subjective feelings of discomfort.  Brooks v. Odom, 150 N.J. 395, 403 (1997).”  In Brooks, although Plaintiff Brooks had ongoing pain and permanent restrictions of motion in the neck and back, her claims were still dismissed due to the fact that she could function in her employment and as a homemaker.  Id. at 406-407.  The Appellate Division also referenced the opinion in Ponte v. Overeem, 171 N.J. 46 (2002), in which even though Plaintiff in that matter sustained a knee injury which required surgery, the same still was determined not to meet the threshold.

Given all of the foregoing, in Moore the Appellate Division held that Plaintiff did not meet his burden of proof to establish the objective evidence that he had as a result of the incident sustained a permanent substantial injury to his knee. The Court relied heavily upon the fact that following the surgery, plaintiff remained “fully capable of performing in his employment and none of his avocational pursuits were significantly impaired. The discomfort he experienced while performing such activities was insufficient to meet the TCA threshold. Further, (the surgeon’s) suggestion of the possibility of future surgery was insufficient to establish a permanent loss of bodily function that was substantial.”

Thus, this recent Appellate Division opinion stands for the proposition that Plaintiff’s burden to meet the threshold of the TCA is a significant one, as even surgery may not be found sufficient to meet the same. This case shows that, even with objection evidence of a permanent injury, if a plaintiff is unable to show that the loss is substantial with respect to a limitation of his ability to work or his recreational or daily activities, it may be subject to dismissal based upon the TCA’s permanency defense.