Justices aren't on Nationwide's side this time

CHARLESTON, W.Va. - Nationwide Mutual Insurance Company fumbled three times at the state Supreme Court of Appeals in a futile bid to rewrite an order of Kanawha Circuit Judge Tod Kaufman.

Nationwide pleaded for confidentiality of claim files that Kaufman wouldn't have made public anyway.

Nationwide tried to halt discovery under a 1994 decision when a 1998 decision applied.

Nationwide challenged a decision Kaufman hadn't even reached.

For these reasons, a unanimous Court affirmed Kaufman on Jan. 25. Nationwide now must show claim files to Kaufman, in his chambers.

The Justices chose not to disturb Kaufman's deliberations over whether to hold separate trials for plaintiff Donald Smith against Nationwide and policyholder Stephen Clegg.

Nationwide attorney Michelle Fox argued in briefs and before the Court as if Kaufman denied her motion for separate trials, but Kaufman has not ruled either way.

"It would be premature on our part to prohibit the circuit court from doing that which it has yet to rule upon," Justice Robin Davis wrote for the Court.

The Record, in coverage of oral arguments, incorrectly reported earlier that Kaufman planned a single trial for Nationwide and Clegg.

The case began on the center line of Greenwood Road in South Charleston, where Smith's motorcycle and Clegg's sport utility vehicle collided.

Smith filed claims with Nationwide for property damage and injuries.

Nationwide settled the property damage claim in 2006. Smith turned the motorcycle over to Nationwide, and his helmet too.

Later that year, Smith sued Clegg.

Smith moved last year to compel production of all communications between Nationwide and Clegg about possible causes of the crash.

Clegg objected, citing attorney client privilege and work product privilege.

Kaufman ordered Clegg to produce all documents for which he did not assert privilege and a log of those for which he did assert privilege.

A privilege log identifies every document under an assertion of privilege by name, date, custodian, and source, with the basis for the claim of privilege.

Last July, Smith amended his complaint to include Nationwide as a defendant.

Clegg moved to vacate the order compelling production of documents.

Nationwide moved to stay discovery and lay a protective order over documents.

Nationwide also moved for bifurcation of claims so Clegg and Nationwide could defend themselves in separate trials.

At a hearing in August, Kaufman ordered Clegg to produce documents and a privilege log. He denied Nationwide's motion for a stay and a protective order.

He said he would rule later on bifurcation.

Kaufman signed an order in September. By then Nationwide and Clegg had already petitioned the Supreme Court of Appeals for a writ of prohibition against Kaufman.

At oral arguments Jan. 8, Fox said that after Nationwide paid Smith's property damage claim, Clegg was adamant that he didn't cause the accident.

Fox said Smith wanted the property payment to bind Nationwide to an injury payment.

She said courts have held that a challenge to an insurer's conduct must be bifurcated.

Smith's attorney, Jack Tinney of Charleston, said Nationwide induced his client to turn over the motorcycle.

"We received false answers," Tinney said. "We received very suspicious claims of privilege."

He asked the Court to remand and get on with trial.

Fox said, "I agree he should present the case, Smith versus Clegg. Let a jury decide who caused it and who is hurt."

The Court quickly reached a unanimous decision.

In it, Davis chided Fox for "scant discussion" of her privilege claims.

Clegg's assertion of privilege may be true, Davis, wrote.

"However, at this stage of the litigation the truth or falsity of the assertion is known only to Mr. Clegg," she wrote.

She called a privilege log a critical aspect of discovery.

She quoted an earlier decision that in preparing a log an attorney must think about the merits of each assertion of privilege and decide whether it is truly appropriate.

"In the instant case," she wrote, "the circuit court's order does not require Mr. Clegg to provide the Smiths with privileged information."

Kaufman clearly stated that he would review the files in chambers, Davis wrote.

"We need not prolong our discussion," she wrote. "The circuit court followed the proper procedure and did not abuse its discretion ..."

She rejected Nationwide's argument that a 1994 decision in a State Farm case required a stay of discovery and a protective order.

She wrote that Kaufman properly considered factors the Court listed in a 1998 decision, Light v. Allstate, to guide judges in deciding whether to stay discovery against insurers in cases with both insurer and policyholder as defendants.