5 Fla. L. Weekly Supp. 407b
Insurance — Personal injury protection — Discovery — Attorney-client privilege — Work product — Trade secrets — Plaintiffs seeking discovery of portions of PIP file not yet produced by defendants and information about computer system known as Medical Bill Review System which is used to review claims submitted by policy holders and contains information and historical data regarding charges for treatment — Work product — Blanket statement that all portions of PIP file not previously produced are work product not sufficient — Court will conduct in camera inspection of file to determine if all or part of it is work product — With respect to training and course materials for MBRS, MBRS manual, MBRS Desk Reference Guide, and copies of MBRS screens, defendant failed to meet burden of establishing that materials were prepared in anticipation of litigation and thus encompassed by work product privilege — Attorney-client privilege — Defendant did not meet burden of showing entitlement to attorney-client privilege with respect to PIP file where defendant made only general objection without specifically identifying privileged portions of file and explaining why privilege applies — Trade secrets — MBRS software appears to fit definition of trade secret or confidential commercial information with exception that defendant made no allegation that company has taken steps to maintain its secrecy — Even if court determined that some or all of material constituted trade secrets, court may order disclosure if party seeking disclosure shows reasonable necessity for material — Relevancy — Defendant’s request that discovery be limited to information regarding specific reason upon which denial of benefit was based is reasonable — If defendant does not plan on relying on MBRS, its compilation of data or their claims process procedures as part of its proof that denial of plaintiffs’ PIP claims was reasonable, requested information would not lead to relevant evidence — If defendant plans on using data from computer system as proof, it must be presented independently from the system itself — If defendant plans on relying on computer system in any manner to prove that payment denial was reasonable, plaintiffs’ discovery requests would become very relevant — Defendants’ objections based on relevancy to disclosure of computer system and programs known as Medical Bill Review System are sustained without prejudice to plaintiffs’ rights to obtain information in the event defendant seeks to rely on it or utilize it in any way to sustain its position at trial
JEAN MAURICE JEAN BAPTISTE, Plaintiff, v. ALLSTATE INDEMNITY COMPANY, Defendant. County Court of the 15th Judicial Circuit in and for Palm Beach County. Case No. MC-95-6647-RJ. MAURICE DERIUS, Plaintiff, v. ALLSTATE INSURANCE COMPANY, Defendant. Case No. MC-96-5699-RJ. February 9, 1998. Peter M. Evans, Judge.
Order
This case comes before the court on the Defendant’s Motions for Protective Order, Defendant’s Response to Request to Produce and the Plaintiffs’ Motions to Compel Discovery. All parties have submitted memoranda of law. The issues in both cases are the same, the defendant is the same, plaintiffs counsel is the same and the parties have agreed to consolidate for purposes of hearing the issues presented herein.
Both plaintiffs were in accidents and sustained bodily injuries. The defendant insured each plaintiff under an auto policy that provides Personal Injury Protection (PIP) benefits. These policies were in full force and effect at the time of the subject accidents. These policies are subject to Chapter 627 of the Florida Statutes.
The defendant failed to pay the plaintiffs’ PIP claims in full. The defendant maintains that the benefits were denied because the disputed amounts are not reasonable, necessary, related and/or that they exceeded customary charges.
The plaintiffs seek to procure information from the defendant about a computer system known as the Medical Bill Review System (MBRS). This system is used to review claims submitted by policy holders. According to Randy Lewis, a Casualty Claim Process Specialist employed by the defendant, the MBRS provides Claims Representatives with information and historical data regarding charges for treatment. Affidavit of Randy Lewis in Support of Defendant’s Motion for Protective Order, DE #164. The plaintiffs have filed discovery requests and subpoenas duces tecum requesting a number of documents relating to the claim review system including manuals, guides and training materials. The defendant objects to these requests and has filed a Motion for Protective Order.
The plaintiffs claim that the benefits at issue are reasonable and necessary and therefore covered by the policy/contract. Sects. 627.736(1)(a) and (b) Fl. Stat. (1995). Payments owed by the defendant are overdue because the insurer does not have “reasonable proof” to establish that it is not responsible for payment as required by 627.736(4)(b). This is a violation of Chapter 627 of the Florida Statutes. Sect. 627.736(g).
The defendant objects to the discovery requests in regard to the MBRS on two levels. First, the defendant objects based on undue burden, work product and trade secret. Second, the defendant claims that the only relevant issue is whether the benefits paid were reasonable as required by F.S. 627.736(1)(a) and that the plaintiffs should be prohibited from conducting discovery into areas regarding business practices unrelated to the calculation of the figures found to be an unreasonable fee. The Court has also reviewed the objections to the other materials contained in the Defendant’s Response to Request to Produce (DE #168).
Unduly Burdensome.
The defendant has claimed that compliance with the discovery requests would be unduly burdensome. The court may consider the cost to produce when reviewing objections to discovery. However, it must be considered in conjunction with the probative value of the information being requested. In Travelers Indemnity Company v. Salido, 354 So.2d 963 (Fla. 3d DCA 1978), the court, in determining to quash a discovery request, relied upon the minimal relevance of the information requested and the significant cost to the defendant of production. Further, courts also consider the amount of the claim in dispute. Id.
The defendant claims that it would be unduly burdensome to produce the claim manuals, claim bulletins, and old forms because they have not been maintained for many years. Defendant’s Response to Request to Produce #5, 8, & 12 (DE #168). As to the probative value, if the materials and forms were not in use at the time of the plaintiffs’ claims it is not clear what probative value they would have. The factors tend to lean towards sustaining the objection on these grounds.
The defendant also claims that it would be unduly burdensome to produce those portions of the plaintiffs’ PIP files not already produced. Defendant’s Response to Request to Produce, #17 (DE #168). Although the probative value of the PIP file may be minimal, it is not clear why production would be unduly burdensome. Based on this ground the objection to production of the remainder of the PIP file should be overruled. There are other issues the court must consider in making its determination.
Work product
Work product is a document, memorandum, report, or statement made in anticipation of litigation and includes items submitted to an insurer in connection with an anticipated settlement or claim. 19 Fl.Jur.2d, §27. The burden is on the insurer to prove that documents are work product. Id., §24. Once that burden is met it shifts to the plaintiff to show he has a need for the materials in the preparation of his case and he is unable without undue hardship to obtain the substantial equivalent of the materials by other means. Id., §21; Fl.R.Civ.P. 1.280(b)(2). Only upon this showing may a party obtain discovery of work product.
The defendant objects on the basis of work product to the production of training and course materials for the MBRS, the MBRS manual, the MBRS Desk Reference Guide, copies of the MBRS screens, as well as those portions of the plaintiffs’ PIP files not already disclosed. Defendant’s Response to Request to Produce, #1-3, 7, and 17 (DE 168).
First, it is not apparent from the defendant’s motion and memorandum of law why the MBRS material is work product. That is, why would training material, in general, be prepared in anticipation of litigation. Thus the defendant has not met his burden and this objection based on work product as to the MBRS materials should be overruled.
Even if the defendant had made some showing that this material might possibly be work product that would not be the end of the inquiry. Under that scenario, an in camera inspection of the material would be appropriate to distinguish those portions protected by work product from those portions not so protected. See, Appel v. Quilantang, 629 So.2d 1004, 1005 (Fla. 4th DCA 1993) (use of in camera inspection to rule on discovery objections); Kavanaugh v. Stump, 592 So.2d 1231, 1232 (Fla. 5th DCA 1992).
As to the PIP file, case law does support the work product privilege as to those portions created or collected in anticipation of litigation. See, Seaboard Air Line R. Co. v. Timmons, 61 So.2d 426 (Fla. 1952) (discovery of the following was barred: insurer’s preliminary accident report, correspondence and memoranda on which the defendant’s claim agent based his settlement to the plaintiff that the insurer was not legally liable, and medical reports received by the defendant with respect to the claimed injuries); see also, Upjohn Co. v. United States, 101 S.Ct. 677 (1991) (a company’s own internal investigation may be privileged); Walt Disney World Co. v. Cotto, 462 So.2d 486 (Fl. 5th DCA 1984) (witness statements taken by employee’s of the claims division of the defendant’s legal department were work product).
However, the defendant is not specific as to why certain portions of the PIP file are work product. Fl.R.Civ.P. 1.280(b)(5) requires specificity in such a motion. The defendant makes a blanket statement that all portions of the file that have not been produced are work product, Defendant’s Response to Request to Produce (DE #168), and that Florida case law protects disclosure of an insurance company’s claim file. See, Defendant’s Response to Fourth Request to Produce. This is an accurate assessment of the law, however, after a close reading of the relevant cases it appears that the determination of work product is not based on the label of the file, but rather, the content. See, Manhattan National Life Insurance Company v. Kujawa, 522 So.2d 1078, 1079 (Fla. 4th DCA 1988) (distinguishes between legal files, documents relating to the Florida Department of Insurance, and information regarding the policy itself), aff’d, 541 So.2d 1168 (1989); Valido, 662 So.2d 1012, 1013 (surveillance photos, witness statements and repair estimates are protected by work product privilege).
The court needs to conduct an in camera inspection of the file to determine if all or part of it is work product. See e.g., Appel, 629 So.2d at 1005; Manhattan National Life Insurance, 522 So.2d at 1079.
Attorney-client privilege
The defendant also objects to the disclosure of those portions of the PIP file not yet disclosed based on attorney client privilege. However, the defendant does not make this statement with particularity, therefore, it is not apparent what those portions of the file are and why they would be protected by the exemption. See, Fl.R.Civ.P. 1.280(b)(5). The defendant has therefore not met his burden of proof. If the defendant identifies with particularity the documents and/or materials in some future objection, the court may make the appropriate rulings at that time. For example, legal department files would be subject to immunity. See, Manhattan National Life Insurance Company v. Kujawa, 522 So.2d 1078, 1079 (Fla. 4th DCA 1988). It should be noted that in camera review is not available for documents and materials, unless the court rules they are not protected by the attorney-client privilege. That is, in camera review is not available to the court to make that determination because the privilege extends to the court. Kujawa, 541 So.2d at 1169.
Trade Secret, Confidential Research or Commercial
Information That Would Yield a Competitive Edge.
In addition to all the objections addressed thus far, the defendant objects to the disclosure of all information regarding the MBRS based on trade secret, confidential research or commercial information that would yield a competitive edge. Defendant’s Response to Request to Produce, #1-3, 5, 7, and 11; Fl.R.Civ.P. 1.280(c)(7). According to the defendant, a significant amount of resources, time and money, have been invested in the development of the MBRS which appears to be a central part of their claims process. The software is licensed from another company. The hardware and many of the training manuals were internally developed. According to the sworn statement of a witness for the defendant, this information is generally not known by the defendant’s competitors and gives the defendant a commercial advantage. Affidavit of Randy Lewis in Support of Defendant’s Motion for a Protective Order (DE #164).
Privilege with respect to trade secrets is provided by statute:
A person has a privilege to refuse to disclose, …, a trade secret owned by the person if the allowance of the privilege will not conceal fraud or otherwise work injustice. When the court directs disclosure, it shall take the protective measures that the interest of the holder of the privilege, the interests of the parties, and the furtherance of justice require….
Sect. 90.606, Fl. Stat. (1995); see also, Fl.R.Civ.P. 1.280(c)(7).
The trial court must first determine whether the materials are trade secrets. General Hotel and Restaurant Supply Corporation v. Skipper, 514 So.2d 1158, 1159 (Fla. 2d DCA 1987). A trade secret is defined in §§ 688.002(4) and 812.081(c) of the Florida Statutes. Key to this definition is that the trade secret is a secret, and that the owner takes measures to prevent it from becoming available to persons other than those selected by the owner to have access thereto for limited purposes. §§ 812.081(c)(1), (4), 688.002(4)(b), Fl. Stat. (1995).
If the allegations in the defendant’s response, memorandum of law and affidavit are true the MBRS software appears to fit the definition of trade secret or confidential commercial information protected by Fl.R.Civ.P. 1.280(c)(7) with the exception that no allegation is made that the company has taken steps to maintain its secrecy. In fact, some of the material requested is marketing material which by its nature is not secret. The licensing agreement for the software that they purchased from another company probably requires nondisclosure of the code and certain documents, however, this is not clear from the defendant’s response, memorandum of law and affidavits.
Even if the court finds that some or all of the materials are trade secrets this is not the end of the analysis. If the party seeking disclosure shows a “reasonable necessity for the material,” the court may order disclosure. General Hotel, 514 So.2d at 1159. “Reasonable necessity” implies something more than just relevancy. See, Rare Coin-It, Inc. v. I.J.E., Inc., 625 So.2d 1278 (Fla. 3d DCA 1993). The court must balance the irreparable harm that may come from disclosure of a trade secret or confidential commercial information with the plaintiff’s ability to prepare his/her case. Accord, Allstate Insurance Company v. Langston, 655 So.2d 91, 94-95 (Fla. 1995).
For example, in Rare Coin-It, Inc. v. I.J.E., Inc., 625 So.2d 1278 (Fla. 3d DCA 1993) the court found that there was not reasonable necessity to produce source code that was conceded to be a trade secret. The plaintiff hired the defendant to take a game that was in IBM source code and produce it in Nintendo source code. The dispute was regarding ownership of the Nintendo source code. The plaintiff asserted that they absolutely needed the Nintendo source code to see if it was just a copy of the IBM source code. The court found that the case could be determined by the terms of the contract and that the plaintiff failed to meet the showing of reasonable necessity to compel production of a trade secret. Id.
If the court finds that disclosure is appropriate there are a number of restrictions that can be ordered to protect/limit the disclosure. For example, the documents/materials can be sealed and the plaintiff and plaintiff’s attorney ordered not to divulge any information outside of the lawsuit. See, Defendant’s Memorandum of Law, item #14 (DE #163). The order can be enforced via the court’s contempt power. See also, Fl.R.Civ.P. 1.280(c) (lists a number of restrictions that can be placed on discovery).
Relevancy
Discovery is permissible “if the information sought appears reasonably calculated to lead to the discovery of admissible evidence.” Fl.R.Civ.P. 1.280(b)(1) (1997). This is a very broad standard but it is not limitless. Travelers Indemnity Company v. Salido, 354 So.2d 963, 964 (Fla. 3d DCA 1978). The defendant requests that discovery be limited to information regarding the specific reason, or code, upon which the benefit was denied. This appears to be a reasonable request. The Court can find no reason why data supporting other reasons for benefit denial would lead to discoverable evidence in these two cases.
This however, does not dispose of the plaintiffs’ requests for general information regarding training manuals and the MBRS system that shed light on the manner in which claims are processed and the program is used. Although this information sheds light on more than the claims at issue it is not clear how you could separate it out, nor does the defendant offer a means to do this. Therefore, it appears that as to that information it is all or nothing.
The Court finds no decisional law in the PIP arena that deals specifically with this question. That is, if the defendant can provide some reasonable proof that a denial is permitted under the statute, is the plaintiff limited to challenging that proof and not challenging the actual way that claims are processed. Therefore, as to relevancy this is a case of first impression.
In the defendant’s favor when you look at the language of the statute it says:
, … any payment shall not be deemed overdue when the insurer has reasonable proof to establish that the insurer is not responsible for the payment, …
Sect. 627.736(4)(b), Fl. Stat.
It does not specify that the insurer must defend its claim processing practices but that it must provide “reasonable proof” that the benefit denied was not reasonable, necessary or related to the claim. It appears that if the defendant threw darts at a chart of numbers to come up with the payment, but later could provide proof that the figure was reasonable, the plaintiffs could not recover under F.S. 627.736.
Stated another way this is not a due process claim. In State Farm Fire and Casualty Company v. Valido, 662 So.2d 1012, 1013 (3d DCA 1995) the court held that the insurer’s claims files, manuals guidelines and documents concerning its claim handling procedure were irrelevant to the first party dispute over insurer’s refusal to pay claim under policy. The court finds this persuasive authority in this first party dispute.
Therefore, if the defendant does not plan on relying on the computer system, its compilation of data or their claims processing procedures as part of its proof that the denial was reasonable, this requested information would not lead to relevant information. In Travelers Indemnity Company v. Salido, 354 So.2d 963, 964 (Fla. 3d DCA 1978), the court, in determining to quash discovery, balanced the fact that it was a $50 payment at issue, the minimal relevance of the information requested, and the significant cost to the defendant to comply with the production request. That is, if the defendant plans on relying entirely on the testimony of medical experts or the defendant plans on using the data independent from the way in which it was processed, the objection to the general information about the MBRS should be sustained and the defendant’s motion granted.
If the defendant plans on using the data from the computer system as proof, it must be presented independently from the system itself. That is, the defendant could provide a data dump of charges from 100 doctors providing the same service, if it is independently verified. Further, they would have to go through any calculations manually, that is independently of the computer system, to show how the plaintiff’s claim is unreasonable. Basically, they need to put on their proof without any reference to the computer system, as if it did not exist.
However, if the defendant plans on relying on the computer system, in any manner to prove that the payment denial was reasonable this analysis would change. For example, if the defendant plans on stating that they have a fancy computer system, engineered by some of the best experts in the insurance business, that performs advanced statistical analyses on the fees charged by hundreds of doctors providing the same service to determine reasonable charges, and then uses output or results from the computer system as evidence, the plaintiffs’ discovery requests would become very relevant. That is, questions such as how do the programs work, what data is being manipulated, how reliable is that data, how is the information from the system being used, and are the results being used correctly by processors would bear on the reasonableness of the defendant’s proof. However, there has been no showing that the defendants will use such proof in any manner. Until such a showing is made there is no relevancy to this discovery inquirer. Based upon the foregoing it is thereupon;
Ordered and Adjudged as follows:
1. The Defendant shall produce all portions of the PIP file not yet disclosed to the court for an in camera inspection to determine the validity of any work product objections. All other objections are overruled as to the PIP file.
2. The defendant’s objections based on relevancy to disclosure of the computer system data and programs known as the Medical Bill Review System (MBRS) are sustained without prejudice to plaintiffs rights to obtain this information in the event that Defendant seeks to rely on it or utilize it in any way to sustain its position at trial.
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