In first-party insurance scenarios, an insured seeks coverage directly from its insurance company for its losses (in contrast to third-party insurance, in which an insured seeks its insurance company’s help defending and paying for claims against the insured). Both types of insurance scenarios frequently involve work product protection issues.
In Club Gene & Georgetti, LP v. XL Insurance America, Inc., No. 20 C 652, 2021 U.S. Dist. LEXIS 64759 (N.D. Ill. Apr. 2, 2021), the court assessed when an insurance company facing a first-party claim from an insured reasonably anticipated litigation with that insured (and therefore could claim work product protection). Not surprisingly, this question frequently arises after an event like the one the court addressed in this case – in which "[t]he plaintiff’s steakhouse was damaged in a fire . . . of unknown origin"]. Id. at *3, *6, The court applied the majority rule in first-party insurance cases: "drawing a line at the point where a subrogation decision is made." Id. at *13. In other words, an insurance company investigating a suspicious fire or similar event cannot claim work product protection until it decides to deny its insured’s first-party claim. Interestingly, just one day earlier the Southern District of New York (Judge Furman) dealt with a first-party insured’s work product claim – noting that "the rule that . . . a party anticipates litigation only once an insurance claim has been denied – applies to insurers . . . not to insureds." Tower 570 Co. v. Affiliated FM Ins. Co., No. 20-CV-0799 (JMF), 2021 U.S. Dist. LEXIS 63955, at *10 (S.D.N.Y. Apr. 1, 2021).
Third-party insurance scenarios are more complicated. Courts take widely varying views of when an insurance company may claim work product protection when investigating a third party's claims (and possible litigation) against its insured – rather than its insured's direct claims against the insurance company.