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Certain Underwriters at Lloyd's v. Morrow

United States District Court, W.D. Kentucky, Bowling Green Division

November 1, 2018

CERTAIN UNDERWRITERS AT LLOYD'S, LONDON
v.
EUGENE C. MORROW, Individually, and as Personal Representative for the Estate OF MARGARET E. MORROW, Deceased; HORIZON TRANSPORT, INC.; KLAUS BERMEL-SCHANZ; SCOTTSDALE INSURANCE COMPANY; and ALFA MUTUAL INSURANCE COMPANY DEFENDANTS

          MEMORANDUM OPINION AND ORDER

          H. BRENT BRENNENSTUHL, UNITED STATES MAGISTRATE JUDGE

         Plaintiff, Certain Underwriters at Lloyd's, London (“Underwriters”) have filed a motion to compel (DN 118). Specifically, Underwriters seek an order compelling the production of a statement or statements that Defendant Klaus Bermel-Schanz gave to Defendant Alfa Mutual Insurance Company around October 15, 2015, concerning a motor vehicle accident that occurred two days earlier in Franklin, Kentucky (DN 118-4). Bermel-Schanze and Alfa have jointly filed a memorandum in opposition (DN 119). Underwriters have filed a reply memorandum in support of their position (DN 126). This matter is ripe for determination. For the reasons that follow the Court grants Underwriters' motion.

         Nature of the Case

         This declaratory judgment action and the companion tort action arose from an automobile accident at a Flying J truck stop in Franklin, Kentucky. On the morning of October 13, Bermel- Schanz was driving a Dodge Ram truck that was leased to Defendant Horizon Transport, Inc.[1](DN 118-3 PageID # 784). While maneuvering the truck into position to refuel Bermel-Schanz struck and killed Margaret E. Morrow. Immediately thereafter, the accident was reported to the authorities and Bermel-Schanz contacted Horizon Transport for which he was an independent contractor. He eventually refueled his truck and returned home to Warner Robbins, Georgia.

         At all relevant times, Bermel-Schanz was insured for personal automobile liability coverage by Alfa, an Alabama Corporation. He also possessed a non-trucking liability or “personal use” policy from Underwriters for the Horizon leased Dodge Ram.

         Bermel-Schanz notified Alfa of the accident on the day it occurred. Approximately two days after the accident, Bermel-Schanz gave what may have been a recorded statement over the telephone to an Alfa representative. Bermel-Schanz was in Georgia when he made the statement. It is unclear from the information provided by the parties whether the Alfa representative was in Georgia or Alabama. Apparently, Bermel-Schanz waited approximately four months to notify Underwriters of the accident (DN 118-3 PageID # 786).

         Underwriters brought this declaratory judgment action to determine the rights and responsibilities of the parties as it concerns Bermel-Schanz's insurance coverage for the accident (DN 1). Underwriters challenge responsibility for coverage because they believe Bermel-Schanz was not operating the Dodge Ram for personal use at the time of the accident. Defendants assert that Bermel-Schanz was operating the vehicle for personal use because he was on his way to meet a potential personal business contact at the time of the accident (DN 119 PageID # 802). During the discovery process a dispute arose concerning the privileged status of the statement or statements given by Bermel-Schanz to a representative of Alfa two days after the accident. Informal attempts to break the impasse proved unsuccessful. The undersigned conducted a telephonic conference on July 6, 2018 and ordered the parties to brief the issue. The matter stands submitted to the undersigned for ruling.

         Arguments of the Parties

         Underwriters argue the statement or statements given by Bermel-Schanz to a representative of Alfa are discoverable under Discovery Fed.R.Civ.P. 26(b)(1) (DN 118-3 PageID # 783, 788). The crux of their argument is that Kentucky courts apply the Restatement (Second) of Conflicts of Law § 139 (1971) to determine which forum's privilege law applies to communications in a case. Underwriters contend this leads to an application of Georgia, or alternatively Alabama, privilege law to Bermel-Schanz's statement in this case. They assert neither forum has extended the attorney-client privilege to conversations between insured and insurer, thus the statement should be produced. (DN 118).

         Defendants disagree (DN 119). They argue the Court should apply Asbury v. Beerbower, 589 S.W.2d 216 (Ky. 1979) because the accident occurred in Kentucky and Kentucky law supplies the rule of decision in this diversity jurisdiction case (DN 119 PageID # 804-06 citing Fed.R.Evid. 501). Defendants assert that under Asbury the statements Bermel-Schanz made to the representative of Alfa would be subject to the attorney-client privilege (Id. citing Asbury, 589 S.W.2d at 217). Defendant's also observe the statements “could also be characterized in the future as attorney work-product.” (DN 119 PageID # 806).

         In reply, Underwriters contest Defendants' straightforward application of Asbury and reaffirm their argument that Kentucky choice of law principles lead to an application of Georgia or Alabama privilege law (DN 126). They also claim the statement or statements are not work- product, but if they are Underwriters can demonstrate a substantial need for the statements in preparation of their case (DN 126 PageID # 2325).

         Conclusions of Law

         Bermel-Schanz and Alfa objected jointly to Underwriters' request to produce all documents relating to communications between Bermel-Schanz and Alfa regarding the automobile accident on October 13, 2015 (DN 119). They reason because the accident occurred in Kentucky and Kentucky law supplies the rule of decision in this diversity jurisdiction case the statements are subject to the attorney-client privilege under Kentucky common law (DN 119 PageID # 804-06 citing Fed.R.Evid. 501 and Asbury, 589 S.W.2d at 217). They add that Kentucky law should be applied if there are significant contacts with Kentucky, even if those contacts are not the most significant. See Adam v. J.B. Hunt Transportation, 130 F.3d 219 (6th Cir. 1997). But the issue is not as straightforward as Bermel-Schanz and Alfa claim.

         Federal Rule of Evidence 501 clearly instructs that state law governs questions of privilege in civil cases for which state law supplies the rule of decision. Bermel-Schanz and Alfa's reliance on Adam is misplaced because, unlike in that case, here it is undisputed that Kentucky tort law provides the rule of decision. The issue before the Court is whether Kentucky law of privilege applies to the subject communications which ...


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