Askew v. Hardman

Page 469

918 P.2d 469

Julia Lee ASKEW, Plaintiff and Respondent, v. Paul HARDMAN, Defendant and Petitioner.

No. 940613.

Supreme Court of Utah.

June 7, 1996.

Gary A. Dodge, Mark F. James, Robert A. McConnell, Salt Lake City, for plaintiff.

Stephen G. Morgan, Mitchell T. Rice, Joseph E. Minnock, Salt Lake City, for defendant.

Paul M. Belnap, Michael S. Johnson, Salt Lake City, for amicus State Farm Mutual Auto Insurance.

Jack C. Helgesen, Edward B. Havas, Salt Lake City, for amicus Utah Trial Lawyers Association.

RUSSON, Justice:

Julia Lee Askew was injured in an automobile-horse accident and sued the owner of the horse, Paul Hardman, for damages. Prior to trial, she sought access to the claim file of Hardman's insurance company, Utah Farm Bureau Insurance Company, particularly the recorded statement of Hardman taken during Farm Bureau's investigation of the accident. The trial court denied access to the documents on the ground that they had been prepared in anticipation of litigation and therefore were protected from discovery pursuant to rule 26(b)(3) of the Utah Rules of Civil Procedure. The matter proceeded to trial, and the jury returned a verdict in favor of Hardman.

Askew appealed to this court, and we poured the case to the Utah Court of Appeals. Askew argued that the trial court unjustifiably denied her access to documents in the claim file of Hardman's insurer during discovery. The court of appeals reversed and remanded the matter for a new trial on the ground that the trial court erred in denying discovery of the claim file, and Hardman's statement in particular. Askew v. Hardman, 884 P.2d 1258 (Ct.App.1994), cert. granted, 892 P.2d 13 (Utah 1995). Hardman filed a writ of certiorari which this court granted. We reverse the decision of the court of appeals and reinstate the jury verdict and judgment.

BACKGROUND

In November 1989, the automobile in which Julia Lee Askew was a passenger struck a horse on the highway. The horse was owned by Paul Hardman. The morning after the accident, Hardman observed that a portion of his fence was down and contacted the sheriff's office to report suspected vandalism. Deputy Monson investigated and stated in his report that Hardman wanted to show him the fence inasmuch as he was afraid of being sued because his horse had caused an accident. Hardman also contacted his liability insurer, Utah Farm Bureau Insurance Company (Farm Bureau), which sent Robert Harmon to investigate the accident.

In September 1991, Askew filed suit against Hardman to recover damages for her injuries, alleging that he negligently constructed or maintained his pasture fence which allowed his horse to escape and enter the highway, causing the accident. Askew served upon Farm Bureau a notice of deposition and a subpoena duces tecum commanding it to bring to the deposition "all documents that refer, reflect, or relate" to the accident or to Askew and "any investigatory reports" relating to the accident.

Hardman moved to quash Askew's subpoena and to obtain a protective order to prevent discovery of Farm Bureau's file. Hardman argued that all of the documents Askew requested were prepared in anticipation of litigation and protected from discovery by rule 26(b)(3) of the Utah Rules of Civil Procedure. In support of his motion, Hardman filed a list of the contents of the claim file, entitled "Privileged Log," the affidavit of Farm Bureau's attorney, Stephen Morgan, and copies of letters from Morgan to Farm Bureau's claims manager, Greg Johnson, instructing claims managers as to how to investigate and handle information in preparation for litigation that might arise. Hardman also filed the affidavit of Johnson, averring to the procedures used when an insured contacts Farm Bureau after an accident involving a third party, particularly when the accident involves livestock of the insured.

Askew opposed Hardman's motion and moved to compel Farm Bureau to turn over the requested documents. Askew argued that the documents were not prepared "in anticipation of litigation," but in the ordinary course of Farm Bureau's business, and did not meet the test established for "work product" protection in Gold Standard, Inc. v. American Barrick Resources Corp., 805 P.2d 164 (Utah 1990). At the time of Askew's request, virtually no discovery had occurred.

The trial court denied Askew's motion to compel, ruling that the documents in Farm Bureau's claim file "were prepared by the insurance company, at the instruction of [its] attorney, in anticipation of litigation." After the trial judge's order, Hardman voluntarily delivered to Askew photographs Farm Bureau took of the accident scene the morning after the accident.

Later, after Askew deposed Hardman, she again moved to compel production of documents. This time, however, she requested only Hardman's recorded statement taken by Farm Bureau investigator Harmon following the accident. She argued that she needed the recording to prepare her case and that she was unable to obtain the substantial equivalent of the recording by other means. The trial court, however, held that Askew had in fact obtained the "substantial equivalent" of Hardman's recorded statement through her lengthy deposition of Hardman and the deputy sheriff's report. It thus again rejected Askew's motion for the recorded statement. The trial court did, however, allow Askew to depose Harmon to identify and describe the photographs he took the day after the accident and to obtain Harmon's observations of the accident scene at that time. Askew subsequently took Harmon's deposition, and the case proceeded to trial. The jury returned a verdict of no cause of action in favor of Hardman. Askew appealed.

The court of appeals reversed and remanded the case for a new trial on the ground that the trial judge had erred in denying Askew access to documents in the claim file. The court of appeals stated that "an insurance adjuster's report is generally discoverable," Askew, 884 P.2d at 1261, and that Hardman had failed to show that the documents in his insurance company's claim file were prepared in anticipation of litigation. Id. at 1262. It further stated that the fact that no attorney was involved in Farm Bureau's preparation of the Askew/Hardman accident claim file suggested that it was prepared in the ordinary course of business. Id.

On certiorari, Hardman argues that in holding that the claim file was not prepared in anticipation of litigation and thus was not protected under rule 26(b)(3) of the Utah Rules of Civil Procedure, the court of appeals failed to give appropriate deference to the trial court. Second, Hardman asserts that the court of appeals erred by shifting the burden of proving harmless error from Askew to him and then refusing to allow him an opportunity to show that the error was harmless.

ANALYSIS

In reviewing the court of appeals' decision, we must determine whether it correctly concluded that the trial court abused its discretion in ruling that the documents in Hardman's insurance claim file were prepared in anticipation of litigation and thus were protected from discovery under rule 26(b)(3) of the Utah Rules of Civil Procedure. State ex rel. Road Comm'n v. Petty, 17 Utah 2d 382, 387, 412 P.2d 914, 918 (1966) (trial court granted discretion to determine whether interrogatories were subject to question under Utah's former work-product rule); see also Utah Dep't of Transp. v. Osguthorpe, 892 P.2d 4, 6 (Utah 1995) (trial court granted broad discretion regarding imposition of discovery sanctions); First Fed. Sav. & Loan Assoc. v. Schamanek, 684 P.2d 1257, 1266 (Utah 1984) (same). Although trial courts have broad discretion in matters of discovery, the trial court, in exercising such discretion, must apply the correct law to its findings of fact, and its findings of fact must be supported by sufficient evidence. An appellate court will not find abuse of discretion absent an erroneous conclusion of law or where there is no evidentiary basis for the trial court's ruling. See State v. Pena, 869 P.2d 932, 937 (Utah 1994) (while appellate courts always decide what the law is, deference may be given to trial court's application of law to the facts); accord Brown v. Superior Court, 137 Ariz. 327, 670 P.2d 725, 729-30 (1983) (trial court discretion in discovery matters "includes the right to decide controverted factual issues, to draw inferences where conflicting inferences are possible and to weigh competing interests. It does not include the privilege of incorrect application of law or a decision predicated upon irrational bases."). Thus, we must first determine if the court of appeals correctly held that the trial court made an erroneous conclusion of law. If the court of appeals erred in this regard, its reversal may still be affirmed if the trial court's findings lack evidentiary support.

In the matter before us, the applicable law governing discovery of documents is set forth in rule 26(b)(3) of the Utah Rules of Civil Procedure. This rule provides that a party cannot discover documents prepared by an insurer in anticipation of litigation unless that party shows a substantial need for the materials to prepare his case and the inability to obtain the substantial equivalent by other means. The rule states in relevant part:

[A] party may obtain discovery of documents and tangible things otherwise discoverable under Subdivision (b)(1) of this rule and prepared in anticipation of litigation or for trial by or for another party or by or for that other party's representative (including his 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 his case and that he is unable without undue hardship to obtain the substantial equivalent of the materials by other means.

(Emphasis added.) This rule acknowledges that materials prepared by a party's insurance company ("insurer...