In New York Schools Insurance Reciprocal v. Milburn Sales Co., Inc., 963 N.Y.S. 2d 152, 105 A.D.3d 716 (2nd Dep't 2013), the New York Appellate Division, Second Department, narrowed the protection afforded by the work-product doctrine to investigations performed by independently retained experts. The Second Department reversed the trial court’s decision and held that work performed and documents prepared by an insurer's retained fire investigator prior to determination of the cause of a fire, was not immune from discovery as "work-product." The Court required production of the documents of the fire investigator to the adversary in litigation.
The facts of the loss are as follows: On February 18, 2010, a fire broke out at South Bay Elementary School in West Babylon, New York. The fire resulted in extensive damage to the school building. On the day of the fire, Milburn Sales Co. Inc. (“Milburn”) was performing work in the school gymnasium. Milburn's work included painting and sanding. Ultimately, following investigation, it was determined by the local fire authorities and documented in the Fire Marshal's report that the fire was the result of improper disposal of materials known to spontaneously combust. The improperly discarded materials were used by Milburn in the course of its work in the gymnasium on the day of the fire.
The school's insurer, New York Schools Insurance Reciprocal ("NYSIR"), retained the services of an independent fire investigation company, Russo Consultants (“Russo”), to investigate the cause of the fire. In the week following the fire, a series of three scene inspections were performed by both Russo and the local fire authorities. The on-scene investigations were performed the night of the fire, the day after the fire, and the fourth day following the fire. Russo had three investigators present during each inspection. Six days following the fire, NYSIR, through counsel, sent a notice letter to Milburn and its insurer. The letter stated that the "exact cause" of the fire was under investigation, but that "preliminary investigation" revealed the fire was caused by improper disposal of painting supplies by employees of Milburn.
During the litigation of this matter, Milburn’s counsel issued Subpoenas to Russo ordering production of documentation prepared by the Russo employees during the week following the fire and requesting the three Russo employees provide deposition testimony. NYSIR moved to quash the subpoenas pursuant to CPLR 2304 to prevent the production of documents prepared by Russo and to prevent the deposition of the Russo employees. In its motion to quash, NYSIR argued that the work performed by the Russo employees was "prepared in anticipation of litigation" and thus, immune from discovery pursuant to the work-product rule. Milburn cross-moved to compel Russo to comply with the Subpoenas seeking production of documents and deposition testimony. The trial court granted NYSIR’s motion to quash and denied Milburn’s cross-motion with leave to renew in the event that further discovery in the action demonstrated that Milburn is entitled to such relief. The court found the materials sought to be work-product, and thus, immune from disclosure.
CPLR 3101 (a) is the rule that there should be full disclosure of all matters material and necessary in the prosecution or defense of an action. However, under CPLR 3101 (d) (2), materials prepared in anticipation of litigation or for trial may be obtained only upon a showing that the party seeking discovery has substantial need for the material and is unable to obtain the information without “undue hardship.” The burden of proving that a statement is privileged as material prepared solely in anticipation of litigation or trial is on the party opposing discovery. More particularly, the party asserting the privilege that the material sought through discovery was prepared in anticipation of litigation bears the burden of demonstrating that the material is immune from discovery and should be withheld.
Milburn appealed the trial court decision. The Appellate Division, Second Department agreed with Milburn and reversed the trial court's decision as to the documents and ordered their production. In deciding that the materials sought by Milburn were discoverable, the Court relied on two rationales. First, the Court found the timing of the Russo employees' investigation to be particularly pertinent to the question of whether their work was done "solely in anticipation of litigation." The Court noted that Russo's employees investigated the premises immediately after the fire, and they were present on the fire scene before any determination was made as to the cause of the fire. The Court held that "subrogation litigation could not have been anticipated until the cause of the fire had been ascertained." Id. at 155 (emphasis added). The Court further held that because subrogation litigation could not have been anticipated at that time, NYSIR could not meet the burden of demonstrating that the Russo employees' work and documentation was "prepared exclusively in anticipation of litigation." Id. at 154. The Court noted that NYSIR's notice letter six days after the fire acknowledged that the cause of the fire had yet to be determined.
The Court's second rationale for compelling production of the documentation focused upon the standard a litigant must meet to demonstrate that materials are not subject to discovery due to the work-product immunity. The Court noted that an attorney's Affirmation containing conclusory statements that the materials sought were prepared in anticipation of litigation, without more, is insufficient to establish that the materials were prepared exclusively for litigation. A party must articulate an "actual basis" or "specific reasoning" for the position that the materials were prepared in anticipation of litigation.
In subrogation, early and immediate investigation is essential and therefore, protection of the work of independently retained experts is also a necessity in a subrogation matter. In light of the Court’s ruling, subrogation professionals must be familiar with the ways to protect the expert's documents and guide the investigation, so as to avoid unnecessary disclosure to an adversary. Early retention of counsel, even prior to the cause and origin investigation, may avoid such disclosure.