Geneva Mtge. Corp. v Certain Underwriters at Lloyd's, London

[*1] Geneva Mtge. Corp. v Certain Underwriters at Lloyd's, London 2006 NY Slip Op 52576(U) [14 Misc 3d 1233(A)] Decided on May 31, 2006 Supreme Court, Nassau County Bucaria, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on May 31, 2006
Supreme Court, Nassau County

Geneva Mortgage Corp. a/k/a PMCC Financial Corp. a/k/a PMCC Mortgage Corp. a/k/a Premier Mortgage Corp. d/b/a PMC Mortgage Co., Plaintiff,

against

Certain Underwriters at Lloyd's, London, Defendant.



013041/04

Stephen A. Bucaria, J.

This motion, by plaintiff Geneva Mortgage Corp. (hereinafter referred to as "PMCC"), for an order pursuant to CPLR 3124 compelling defendants Certain Underwriters at Lloyd's, London (hereinafter referred to as "Lloyd's" or "defendants") to produce their claims and investigation files relating to PMCC's insurance claim and

directing defendants to produce a witness for oral deposition within the State of New York or to defray the costs incurred for a deposition in a foreign venue is granted to the extent hereinafter provided.

In this action, plaintiff seeks to recover monetary damages based upon breach of contract and duty of good faith. Plaintiff also seeks a judgment declaring that defendants are obligated to defend and/or indemnify PMCC for claims made against it by Wells Fargo Funding, Inc. f/k/a Norwest Funding, Inc. (hereinafter referred to as "Wells Fargo").

Background

Lloyd's issued a policy of insurance known as Mortgage Bankers/Brokers Errors and Omissions Insurance to PMCC for the period of February 17, 2000 through February 17,2001.

On October 4, 2000, Wells Fargo commenced an action against PMCC in the United States District Court of New Jersey seeking to recover monetary damages based upon PMCC's alleged failures in providing professional mortgage broker or banker services with respect to five loans that PMCC had sold to Wells Fargo. The Wells Fargo complaint alleges causes of action for breach of contract, violation of Minnesota Prevention of Consumer Fraud Act, and unjust enrichment.

On October 26, 2000, defendants' attorneys, Mendes & Mount, LLP, advised PMCC that it did not believe the claims asserted by Wells Fargo were afforded coverage under the subject insurance policy. By letter dated December 19, 2000, Mendes & Mount LLP expressly stated that "there is no coverage for this matter under the professional liability subscribed by our clients."

As a result of Lloyd's failure or refusal to defend PMCC or provide coverage, PMCC retained its own counsel and paid for its own defense. In addition, PMCC had to pay all of the damages to Wells Fargo plus interest dating from October 4, 2000.

Thereafter, PMCC commenced this action based upon Lloyd's wrongful or improper failure and refusal to defend and/or indemnify PMCC for the claims asserted against PMCC by Wells Fargo.

On this application, plaintiff seeks to compel production of defendants' "claims

and investigation files." Plaintiff argues that defendants' counsel, Mendes & Mount, LLP, acted as their primary investigator in the factual investigation and adjustment of PMCC's claim under the policy, a role rooted in the regular course of insurance business. Plaintiff further requests that defendants' oral deposition be conducted in the State of New York.

Defendants oppose the motion, claiming, inter alia, that their claims and investigation documents are protected by the attorney-client privilege (CPLR 3101; and 4503[a]). As to the deposition, defendants contend it would suffer substantial hardship if the oral deposition was conducted in the State of New York since their witness resides and works in London, England. Lloyd's, therefore, requests that the oral deposition be held in London, England or under letters rogatory pursuant to CPLR 3113(a)(3).

Discussion[*2]

Generally, where the deponent is a party to the action, the deposition may be scheduled within the deponent's residence or business county, or in the county where the action is pending (CPLR 3110[1]; Hoffman v Kraus, 260 AD2d 435 [2nd Dept. 1999]). "Statutory disclosure provisions apply to non-residents as well as to residents of the State" (Levine v St. Luke's Hosp. Ctr., 109 AD2d 694 [1st Dept. 1985]) and in the absence of a showing of substantial hardship, the deposition should be held in the forum of the litigation (CPLR 3110[1]; Hoffman v Kraus, supra; Swiss Bank Corp. v Geecee Exportaciones, Ltda, 260 AD2d 254 [1st Dept. 1999]; Kahn v Rodman, 91 AD2d 910, 911[1st Dept. 1983]; Gazerwitz v Adrian, 28 AD2d 556, 557 [2nd Dept. 1967]).

On this record, Lloyd's has not sufficiently established that submitting to an oral deposition in the forum of the litigation would result in substantial hardship (Swiss Bank v Geecee, supra; Kahn v Rodman, supra; cf. Hoffman v Kraus, supra).

Accordingly, PMCC's motion is granted to the extent that Lloyd's is directed to produce a witness for oral deposition within the State of New York no later than 30 days prior to the trial date (see, ZVI Englander & Co. v Leslie Kleyman Corp., 36 AD2d 529 [1st Dept. 1971]). In the event that Lloyd's prevails in this action, Lloyd's may recover its travel expenses as taxable disbursements. (Levine v St. Luke's Hosp. Ctr. , supra; Jungua v Tobey and Kirk, 34 AD2d 740 [1 st Dept. 1970]; B.B. & D. Productions, Inc. v Screen Gems, Inc., 29 AD2d 747 [1st Dept. 1968]).

As to the production of defendants' claims and investigation files, this Court is not persuaded that the documents requested are protected by the attorney-client privilege

(CPLR 4503[1]).

Reports prepared by attorneys resulting from the examination of claims which are made prior to an insurance carrier's denial of coverage are not protected from disclosure either as work product or materials prepared in anticipation of litigation (Bertalo's

Restaurant, Inc. v Exchange Insurance Company, 240 AD2d 452, lv to app dism. 91 NY2d 838; see, Westhampton Adult Home Inc. v National Union Fire Ins. Co. of Pittsburgh, Pa., 105 AD2d 627, 628 [1st Dept. 1984]). Here, the documents submitted for inspection indicate that "they consist primarily of reports made by attorneys who conducted the investigation of the claim on behalf of the defendant carrier, and communications from the carrier to those attorneys." (Bertalo's Restaurant, Inc. v Exchange Insurance Co., supra).

In order to invoke the attorney-client privilege, the party seeking to withhold the information must demonstrate that "it was a confidential communication' made between the attorney and the client in the context of legal advice or services" (Bertalo's [*3]Restaurant, Inc. v Exchange Insurance Co., supra; see, Matter of Priest v Hennessy, 51 NY2d 62, 69, 1980).The communication must be primarily or predominantly of a legal character and made "for the purpose of facilitating the rendition of legal advice or services, in the course of a professional relationship." (Rossi v Blue Cross & Blue Shield of Greater New York, 73 NY2d 588, 594, 1989). " [T]he payment or rejection of claims is a part of the regular business of an insurance company. Consequently, reports which aid it in the process of deciding which of the two indicated actions to pursue are made in the regular course of its business' " (Landmark Ins. Co. v Beau Rivage Rest., 121 AD2d 98, 101 [2nd Dept .1986], quoting Millen Industries, Inc. v American Mut. Liab. Ins. Co., 37 AD2d 817 [1st Dept. 1971]). Further, "[m]erely because such an investigation was undertaken by attorneys will not cloak the reports and communications with privilege (see, Spectrum Sys. Intern. Corp. v Chemical Bank, 78 NY2d 371, 377, 1991) because the reports, although prepared by attorneys, are prepared as part of the regular business' of the insurance company" (Bertalo's Restaurant Inc. v Exchange Insurance Co., supra; see, Karta Industries Inc. v Insurance Co. of State of Pennsylvania, 258 AD2d 375 [1st Dept. 1999]).

Applying these principles to the case at bar, those communications which occurred prior to the date that Lloyd's rejected the claim (December 19, 2000) are not immune from discovery (Bertalo's Restaurant Inc. v Exchange Insurance Co., supra; see, Landmark Insurance Co. v Beau Rivage Restaurant, supra at p. 101). Here, all of the documents listed in the privilege log were prepared before December 19, 2000, when

defendants, through Mendes & Mount, LLP, and in the regular course of insurance business, denied PMCC's claim under the policy. Consequently, the documents are discoverable.

Accordingly, Lloyd's is directed to produce the documents at issue within 30 days after a copy of this order is served upon their attorneys.

J.S.C.