Anastasi v. Fidelity National Title Insurance Company.

   *** FOR PUBLICATION IN WEST’S HAWAI#I REPORTS AND PACIFIC REPORTER ***




                                                              Electronically Filed
                                                              Supreme Court
                                                              SCWC-30557
                                                              04-FEB-2016
                                                              09:16 AM




           IN THE SUPREME COURT OF THE STATE OF HAWAI#I

                                ---o0o---


                        LLOYD R. ANASTASI,
          Petitioner and Respondent/Plaintiff-Appellant,

                                    vs.

            FIDELITY NATIONAL TITLE INSURANCE COMPANY,
          Respondent and Petitioner/Defendant-Appellee.


                               SCWC-30557

         CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
               (ICA NO. 30557; CIV. NO. 08-1-0718)

                            FEBRUARY 4, 2016

 RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON, JJ.

                OPINION OF THE COURT BY NAKAYAMA, J.

          Both Plaintiff-Appellant Lloyd R. Anastasi (Anastasi)

and Defendant-Appellee Fidelity National Title Insurance Company

(Fidelity) have applied for a writ of certiorari from the

Intermediate Court of Appeals’s (ICA) February 6, 2015 Judgment

on Appeal filed pursuant to its December 30, 2014 Opinion.             The

ICA vacated the judgment of the Circuit Court of the First

Circuit (circuit court), which was entered in favor of Fidelity
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on Anastasi’s bad faith claim.

           Anastasi filed a bad faith and breach of contract claim

against Fidelity after Fidelity allegedly delayed in making

payments to Anastasi under a title insurance policy.            Anastasi

had loaned $2.4 million to a third party in exchange for a

mortgage on a property that was supposedly owned by that third

party.   Fidelity insured that the third party had good title, but

it was soon discovered that the warranty deed purporting to give

title to the third party was forged.        When Anastasi was sued by

the true owners of the property, Fidelity immediately accepted

tender of the claim under a reservation of rights and retained an

attorney to represent Anastasi.

           Anastasi argued that Fidelity committed bad faith

because Fidelity knew early on in the underlying litigation that

the deed was forged but continued to litigate the lawsuit.

Anastasi asserts that the lawsuit was used by Fidelity to delay

paying him under the policy.      The circuit court granted summary

judgment in favor of Fidelity on this issue.

           On appeal, Anastasi argued that there were genuine

issues of material fact as to whether Fidelity committed bad

faith.   Anastasi also challenged a circuit court order that

allowed Fidelity to withhold certain documents that Anastasi

requested during discovery under attorney-client privilege and

work product doctrine.     The ICA remanded the discovery order to


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the circuit court and vacated part of the circuit court’s order

granting summary judgment.

           For the reasons stated below, we affirm in part and

vacate in part the February 6, 2015 judgment of the ICA filed

pursuant to its December 30, 2014 opinion and remand to the

circuit court for further proceedings consistent with this

opinion.

                             I.   BACKGROUND

           Anastasi made a loan to Alajos Nagy (Nagy) in the

amount of $2.4 million that was secured by a mortgage on a

property located in Mokulç#ia, O#ahu.       In 2005, Anastasi had over

twenty years of experience in real estate transactions and made

loans to individuals as a business.        Anastasi’s loans were equity

loans based on the value of properties.         Anastasi stated in his

deposition that a business acquaintance of his, Paul Lee (Lee),

first brought the Nagy loan to his attention.          Anastasi did not

know what Lee did on a day-to-day basis for work except that Lee

referred prospective borrowers to Anastasi.          Michael Talisman

(Talisman) also brought the Nagy loan to Anastasi’s attention.

Anastasi stated that Lee did not tell him where he procured his

customers, and Anastasi could not recall any details about how

Nagy, Lee, and Talisman were connected.

           In March 2005, Anastasi was in communication with Lee

and Talisman regarding a potential mortgage to Nagy that would be


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secured by the property.      Anastasi testified that during that

month, he performed a due diligence investigation into the

property.    Among documents that Anastasi reviewed as part of his

investigation was a document from the tax assessor’s office that

indicated that the property was owned by Paul Stickney

(Stickney).   At that time, the property was owned by a trust, and

Stickney was the trustee and Gregory Rand (Rand) was the

beneficiary of the trust.      Anastasi stated that it was his

understanding that Lee and Talisman and Rand and Stickney were

making arrangements between them and that Nagy would acquire

title to the property unencumbered and be the one signing the

loan documents.    Anastasi was assured that he would also be

issued title insurance at that time.        Anastasi also reviewed an

appraisal of the property done by Mark Justmann (Justmann) dated

March 15, 2005.    Justmann valued the property at almost $7

million, but Anastasi believed the actual value of the property

was closer to $5 million.

            A $2.4 million mortgage was executed by Nagy on

April 25, 2005.    On June 1, 2005, a warranty deed was apparently

signed by Stickney and purported to deed the property from

Stickney to Nagy in exchange for $10 in consideration.            The

warranty deed and the mortgage were recorded in the Bureau of

Conveyances on June 17, 2005.       Also on June 17, 2005, Fidelity

issued Anastasi a title insurance policy (Policy) on the property


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in the amount of $2.4 million.

          The Policy contained a section that stated the

following:
          4. DEFENSE AND PROSECUTION OF ACTIONS; DUTY OF INSURED
          CLAIMANT TO COOPERATE

                (a) Upon written request by the insured and subject to
          the options contained in Section 6 of these Conditions and
          Stipulations, the Company, at its own cost and without
          unreasonable delay, shall provide for the defense of an
          insured in litigation in which any third party asserts a
          claim adverse to the title or interest as insured, but only
          as to those stated causes of action alleging a defect, lien
          or encumbrance or other matter insured against by this
          policy. The Company shall have the right to select counsel
          of its choice (subject to the right of the insured to object
          for reasonable cause) to represent the insured as to those
          stated causes of action and shall not be liable for and will
          not pay the fees of any other counsel. The Company will not
          pay any fees, costs or expenses incurred by the insured in
          the defense of those causes of action which allege matters
          not insured against by this policy.
                (b) The Company shall have the right, at its own cost,
          to institute and prosecute any action or proceeding or to do
          any other act which in its opinion may be necessary or
          desirable to establish the title to the estate or interest
          or the lien of the insured mortgage, as insured, or to
          prevent or reduce loss or damage to the insured. The
          Company may take any appropriate action under the terms of
          this policy, whether or not it shall be liable hereunder,
          and shall not thereby concede liability or waive any
          provision of this policy. If the Company shall exercise its
          rights under this paragraph, it shall do so diligently.
                (c) Whenever the Company shall have brought an action
          or interposed a defense as required or permitted by the
          provisions of this policy, the Company may pursue any
          litigation to final determination by a court of competent
          jurisdiction and expressly reserves the right, in its sole
          discretion, to appeal from any adverse judgment or order.
                (d) In all cases where this policy permits or requires
          the Company to prosecute or provide for the defense of any
          action or proceeding, the insured shall secure to the
          Company the right to so prosecute or provide defense in the
          action or proceeding, and all appeals therein, and permit
          the Company to use, at its option, the name of the insured
          for this purpose. Whenever requested by the Company, the
          insured, at the Company’s expense, shall give the Company
          all reasonable aid (i) in any action or proceeding, securing
          evidence, obtaining witnesses, prosecuting or defending the
          action or proceeding, or effecting settlement, and (ii) in
          any other lawful act which in the opinion of the Company may
          be necessary or desirable to establish the title to the
          estate or interest or the lien of the insured mortgage, as
          insured. If the Company is prejudice by the failure of the

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            insured to furnish the required cooperation, the Company’s
            obligations to the insured under the policy shall terminate,
            including any liability or obligation to defend, prosecute,
            or continue any litigation, with regard to the matter or
            matters requiring such cooperation.

A.    Stickney Lawsuit

            On November 23, 2005, Stickney and Rand filed their

First Amended Complaint to Quiet Title against Nagy and Anastasi,

alleging that Stickney’s signature had been forged on the June 1,

2005 warranty deed.       Anastasi was served with the complaint on

January 5, 2006, and he tendered the claim to Fidelity.

Fidelity received notice of the claim on January 6, 2006.

            Elizabeth McGinnity (McGinnity), Senior Vice-President

and Major Claims Counsel for Fidelity, reviewed Anastasi’s claim

and determined that Fidelity should provide a defense to Anastasi

under a reservation of rights.         In a letter to Anastasi dated

January 23, 2006, McGinnity informed Anastasi that Fidelity

accepted his tender of defense and reserved all of its rights,

including its right to continue its investigation of the matter

and later deny coverage.        McGinnity also informed Anastasi that

Fidelity had retained Jade Lynne Ching (Ching) of Alston Hunt

Floyd & Ing to represent him in the Stickney lawsuit.

            Ching sent an introductory letter dated January 27,

2006 to Anastasi.      Ching wrote that she would be acting as

counsel for Anastasi, and not Fidelity, even though her fees

would be paid by Fidelity.        The letter also stated that because



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Ching was serving as Anastasi’s attorney, confidential

information provided to Ching by Anastasi would not be disclosed

to Fidelity without Anastasi’s consent.         Ching wrote that it was

her practice to provide Fidelity with copies of correspondence,

pleadings, discovery responses, deposition transcripts, and

periodic status reports, including an assessment of the

likelihood of success of the defense of a claim.           Ching further

wrote that
          [i]t is anticipated that Fidelity will provide
          recommendations and instructions to the law firm regarding
          the steps and procedures to be taken in defending or
          settling the Claim. I shall endeavor to keep you informed
          of such instructions and obtain your consent where
          appropriate to the procedures to be taken in defending or
          settling the title dispute. In the event of any dispute
          between you and Fidelity concerning the proper procedures to
          be followed in defending or settling the title dispute, it
          is necessary for you or your individual attorney to
          negotiate the matter directly with Fidelity. This law firm
          reserves the right to withdraw from your representation in
          the event such dispute cannot be resolved by agreement
          between you and Fidelity and the law firm receives
          conflicting instructions from you and Fidelity concerning
          the procedures to be followed in defending or settling the
          Claim.

          On February 13, 2006, McGinnity and Ching received a

letter from an attorney, Clifford Frieden (Frieden), who was

retained by Fidelity to provide coverage advice and investigate

the allegations made in the Stickney lawsuit.          Frieden’s letter

stated that he compared Stickney’s signature to the signature of

the person who executed the warranty deed, and the two signatures

were very different.     The driver’s license number and the

expiration date of the license recorded by the notary were also

different from Stickney’s actual driver’s license number and

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expiration date.    Suspecting the potential involvement of

Talisman, Justmann, and Nagy in the falsely executed warranty

deed, Ching filed a cross-claim against Nagy and a third-party

complaint against Talisman and Justmann.

          On October 6, 2006, the Stickney plaintiffs filed a

motion for summary judgment.      Through Ching, Anastasi opposed the

motion, but on April 11, 2007, the circuit court granted the

plaintiffs’ motion for summary judgment.

          On April 20, 2007, Ching filed a motion for

reconsideration on the grant of summary judgment on Anastasi’s

behalf.   The circuit court denied the motion on October 23, 2007.

On November 19, 2007, Ching sent an email to McGinnity informing

her that the deadline to file an appeal was two days away and

that
          [t]o protect Anastasi’s appeal rights, we suggest a notice
          of appeal be filed; we can dismiss the appeal at any time.
          Also, since the court denied Stickney’s fee request, there
          is some utility in procuring an agreement from Stickney that
          we will not pursue the appeal so long as he does not appeal
          the court’s denial of his request for fees.

Attached to the email was a memorandum from Ching to McGinnity

that was labeled as confidential, work product, and attorney-

client communication (Ching-McGinnity Memorandum).           In the

memorandum, Ching gave the following conclusion: “Though we would

likely succeed on appeal, it would be a pyrrhic victory since we

would not be able to establish the validity of the Warranty Deed.

For this reason, we do not recommend an appeal of the order


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granting summary judgment.”         McGinnity sent the following

response to Ching: “Yes.         File the notice.     Thanks.”     A notice of

appeal was filed by Ching on November 21, 2007.

             The Stickney plaintiffs also filed a cross-appeal

challenging the circuit court’s denial of their attorneys’ fees.

On February 27, 2008, the attorney for the Stickney plaintiffs

sent an email to Ching stating that the plaintiffs would accept

Ching’s offer to settle for $10,000 and that both parties would

dismiss their appeals.        The parties eventually filed a

stipulation for dismissal of all claims on August 14, 2008.

             On February 28, 2008, Fidelity retained Harlin Young to

appraise the property as of the date of the loss in order to

determine the amount of loss in accordance with the Policy’s

terms.     The appraisal was issued on April 30, 2008, and the value

of the property was determined to be $2,750,000.

B.     Instant Action

             On April 8, 2008, Anastasi filed the complaint in the

instant case against Fidelity, alleging breach of contract and

bad faith.      On August 4, 2008, Fidelity paid Anastasi $2.4

million under the Policy.

             On December 9, 2008, Anastasi filed a motion to compel

discovery of certain documents and responses to interrogatories

that Anastasi had requested and Fidelity had withheld or objected

to.    Attached to the motion was a privilege log that Fidelity


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submitted on October 10, 2008.       The privilege log listed numerous

documents that were not produced due to either attorney-client

privilege or work product privilege.        The log provided

information on the number of pages in each document; the type of

document withheld; who the recipient of the document was, if

applicable; who the author of the document was; the date of the

document; the subject of the document; and the claimed privilege

for each document.     McGinnity was listed as either the recipient

or the author on many of the documents listed in the privilege

log.   Anastasi argued that McGinnity functioned as a claims

adjuster in this case, and although her confidential

communications with Frieden may be privileged, her internal work

was not privileged.

           In McGinnity’s declaration, she stated that she was an

attorney and
           [p]ursuant to my role as Major Claims Counsel, I
           investigated, analyzed and rendered legal advice in
           connection with the allegations made against the interests
           of our insured (“the Claim”) in the Stickney lawsuit by
           making an initial determination on whether the Claim was at
           least potentially covered by the Policy, as well as
           determining what other actions to take in response to the
           Claim. The fact that an attorney was assigned to perform
           these tasks was not an accident. Title insurance
           indemnifies against loss caused by a multitude of potential
           problems that affect the title or interest of an insured in
           real property. Because of this fact and the unique and
           complex problems endemic to title insurance claims, many
           aspects relating to coverage under a title insurance policy
           requires both the performance of a careful legal analysis of
           the title insurance policy and the application of real
           estate and insurance coverage law to the unique facts of
           every case. As a result, it has become the standard in the
           title insurance industry to hire claims attorneys as part of
           a title company’s legal department.



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          The circuit court1 held a hearing on Anastasi’s motion

to compel discovery on February 3, 2009, and issued an order on

March 17, 2009.    The circuit court held that “the Declaration of

Elizabeth McGinnity establishes that she is an attorney employed

by Defendant and therefore, the attorney-client privilege and

work product privilege may be applicable to documents generated

and/or received by her.”      The court ordered Fidelity to review

the withheld documents to determine if any additional documents

could be produced.    The circuit court also ordered Fidelity to

produce any of the privileged documents it elected to continue to

withhold for an in camera review.

          Fidelity submitted some documents to the circuit court

for in camera review.     There were ten documents submitted in

total, all authored or received by McGinnity (McGinnity

documents).   On November 5, 2009, the circuit court2 issued an

order stating that it had “reviewed in-camera the documents

claimed by [Fidelity] as privileged and ha[d] determined that

[Fidelity’s] assertion of attorney-client privilege and/or the

work product doctrine is proper and that all of the documents are

covered by the attorney-client privilege and/or the work product

doctrine.”



     1
          The Honorable Glenn J. Kim presided.
     2
          The Honorable Rom A. Trader signed the order.

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            On March 19, 2010, Fidelity filed a motion for summary

judgment on Anastasi’s bad faith claim.          In support of the

summary judgment motion, Fidelity included Ching’s deposition

where she testified to the following under oath:
            Q:          [W]ould it be a fair statement to say that it is
                        your view that you were defending Mr. Anastasi,
                        and you were determining the legal strategy that
                        should be used to defend him?

            [Ching]:    That’s correct.

            Q:          And by implication Fidelity was not directing
                        you in how to defend Mr. Anastasi. Would that
                        be correct?

            [Ching]:    That’s correct.

In opposition to the motion, Anastasi asserted that Fidelity

unreasonably delayed paying him under the Policy by directing

Ching to continue litigation and pursue an appeal even after

Fidelity learned the warranty deed was forged.

            The circuit court granted Fidelity’s motion for summary

judgment on May 24, 2010.       The circuit court made the following

findings:
            1. The undisputed facts establish that during the course of
            the underlying case, Paul Stickney et al. v. Nagy et al.,
            Civil No. 05-1-2065-11 in the Circuit Court of the First
            Circuit, State of Hawai#i (“Stickney Litigation”), Fidelity
            immediately accepted Plaintiff Anastasi’s tender of the
            defense of the claims asserted against him by Paul Stickney
            and Gregory Rand (“Stickney Plaintiffs”) and fully and
            timely investigated Plaintiff Anastasi’s claim.

            2. In accordance with the Hawai#i Supreme Court’s holding
            in Best Place, Inc. v. Penn American Ins. Co., 82 Hawai#i
            120, 920 P.2d 334 (1996), Fidelity acted reasonably in its
            interpretation of the terms and provisions of the title
            insurance policy (the “Policy”) issued to Plaintiff Anastasi
            when it chose to defend the claims asserted against him in
            the Stickney Litigation; particularly since Fidelity had


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          been told by attorney Jade Ching that she believed the claim
          against Plaintiff Anastasi was defensible because, among
          other things, the alleged forgery of the Warranty Deed at
          issue in the Stickney Litigation might have been secured
          with the complicity of the Stickney Plaintiffs as well as
          other parties in the Stickney Litigation. Given these
          undisputed facts, the Court finds that Fidelity was entitled
          to exercise its legal and contractual rights under the
          Policy to defend Plaintiff Anastasi against the claims
          alleged against him in the Stickney Litigation and to pursue
          that defense to a final determination.

          3. While it is undisputed that the Stickney Plaintiffs’
          motion for summary judgment was ruled adversely to Plaintiff
          Anastasi and that a decision was made to file both a motion
          for reconsideration of that ruling and an appeal when the
          motion for reconsideration was denied, these facts do not
          support a finding that Fidelity acted in bad faith in its
          handling of Plaintiff Anastasi’s claim.

          4. Plaintiff Anastasi has failed to adduce any evidence to
          raise a genuine issue of material fact as to whether
          Fidelity controlled and/or directed Plaintiff Anastasi’s
          attorneys at Alston Hunt Floyd & Ing in their defense of
          Plaintiff Anastasi in the Stickney Litigation. The
          undisputed facts establish that Fidelity defended the
          Stickney Litigation under a reservation of rights and that
          in accordance with its obligations under Finley vs. Home
          Insurance, 90 Hawai#i 25, 957 P.2d 1145 (1998), gave
          Plaintiff Anastasi’s attorneys full rein to conduct the
          defense of their client as they deemed appropriate.

          5. Plaintiff Anastasi has not adduced any evidence to
          support the conclusion that Fidelity directed Plaintiff
          Anastasi’s attorneys to delay a resolution of the Stickney
          Litigation for the purpose of allowing Fidelity to forestall
          the payment of benefits to Plaintiff Anastasi under the
          policy. Any delay in the resolution of the Stickney
          Litigation was the natural byproduct of the defense strategy
          employed by the Alston Hunt Floyd & Ing attorneys which, as
          a matter of law, must be imputed to him.

          6. Fidelity’s decision to pay for the work performed by two
          appraisers, James Hallstrom and Stellmacher & Sadoyama, and
          its decision to order an appraisal from Harlin Young to
          determine the amount of the loss under the Policy were
          consistent with and in accordance with a reasonable
          interpretation of Fidelity’s rights under the Policy.

Pursuant to Hawai#i Rules of Civil Procedure Rule 54(b), the

circuit court entered judgment dismissing the bad faith claim on

May 24, 2010.   Anastasi filed a timely notice of appeal on

June 8, 2010.

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B.    ICA Proceedings

            In his opening brief, Anastasi argued 1) that the

circuit court erred in finding that Fidelity’s actions were

reasonable as a matter of law, 2) that the circuit court erred in

ruling that the actions of Ching must be imputed to Anastasi as a

matter of law, 3) that the circuit court erred in holding that

the McGinnity documents were covered by attorney-client privilege

or the work product doctrine, 4) that the circuit court erred in

restricting discovery to other claims made in Hawai#i, and 5)

that the court erred in awarding costs to Fidelity.3

            Anastasi argued that an issue of fact existed as to

whether Fidelity breached the duty of good faith it owed to him

because “Fidelity engaged in more than two years of fruitless

litigation in a feigned attempt to cure a deed that it knew was

forged.”    Anastasi argued that there was evidence that showed

that Fidelity believed from May 2006 that the deed was forged and

that Fidelity used the litigation and appraisal clauses in the

Policy to delay payment to Anastasi until August 4, 2008.

Anastasi argued that there was also a question of fact as to

whether Fidelity engaged in undue delay in express breach of the

Policy, which required that Fidelity exercise its rights

“diligently.”


      3
            Because only the first and third issues remain before us on
appeal, only those issues will be discussed herein.

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          Anastasi also argued that the circuit court erred in

finding that the McGinnity documents were privileged.            Anastasi

asserted among other things that because McGinnity served in the

capacity of a claims adjuster and investigated Anastasi’s claim

in the ordinary course of business, attorney-client privilege and

work product doctrine should not apply.

          In its answering brief, Fidelity argued that it could

not be held liable for bad faith because its actions were based

on a reasonable interpretation of the insurance contract, which

expressly allows defense of the claim, retention of an appraiser,

and deferral of payment until after the conclusion of litigation.

Furthermore, Fidelity asserted that even if these actions could

support a bad faith claim, Anastasi failed to adduce evidence

suggesting a genuine issue of material fact because

notwithstanding the forgery, Ching believed she could

successfully defend the claim against Anastasi.          Fidelity also

argued that it needed Young’s appraisal because previous

appraisals had failed to determine the value of the property as

of the relevant date of loss, January 6, 2006 (when Anastasi

tendered the claim to Fidelity).

          As for the discovery issue, Fidelity argued that the

circuit court did not abuse its discretion in holding that the

documents were privileged because Anastasi did not provide any

evidence to support his contention that McGinnity acted solely as

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an adjuster.

            On December 30, 2014, the ICA issued an opinion.

Relevant to this appeal, the ICA held 1) that because McGinnity

acted in a dual capacity as in-house counsel and claims adjuster,

the circuit court abused its discretion in ruling that all of the

McGinnity documents were covered by attorney-client privilege

and/or work product doctrine, 2) that the circuit court erred in

determining that Fidelity acted reasonably as a matter of law,

and summary judgment should be vacated, and 3) that the circuit

court did not err in determining that Fidelity did not control or

direct Ching’s representation of Anastasi.           Anastasi v. Fidelity

Nat. Title Ins. Co., 134 Hawai#i 400, 405, 341 P.3d 1200, 1205

(App. 2014).

            Both Anastasi and Fidelity filed timely applications

for writ of certiorari, and this court accepted both applications

on May 22, 2015.
                         II.   STANDARDS OF REVIEW

A.    Discovery Rulings

            The Hawai#i Rules of Civil Procedure (HRCP)reflect a basic
            philosophy that a party to a civil action should be entitled
            to the disclosure of all relevant information in the
            possession of another person prior to trial, unless the
            information is privileged. However, the extent to which
            discovery is permitted under Rule 26 is subject to
            considerable latitude and the discretion of the trial court.
            Thus, the exercise of such discretion will not be disturbed
            in the absence of a clear abuse of discretion that results
            in substantial prejudice to a party. Accordingly, the
            applicable standard of review on a trial court's ruling on a
            motion to compel discovery, brought pursuant to HRCP Rule
            26, is abuse of discretion.



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Hac v. Univ. of Hawai#i, 102 Hawai#i 92, 100-01, 73 P.3d 46, 54-55

(2003) (internal quotation marks, citations, brackets, and

ellipsis omitted).

B.    Summary Judgment

            The standard of review for the grant or denial of a motion
            for summary judgment is well-settled. “Unlike other
            appellate matters, in reviewing summary judgment decisions
            an appellate court steps into the shoes of the trial court
            and applies the same legal standard as the trial court
            applied.” Beamer v. Nishiki, 66 Haw. 572, 577, 670 P.2d
            1264, 1270 (1983). “[The appellate] court reviews a circuit
            court’s grant or denial of summary judgment de novo.”
            Bremer v. Weeks, 104 Hawai#i 43, 51, 85 P.3d 150, 158 (2004)
            (quoting Hawai#i Cmty. Fed. Credit Union v. Keka, 94 Hawai#i
            213, 221, 11 P.3d 1, 9 (2000)).

                  [S]ummary judgment is appropriate if the
                  pleadings, depositions, answers to
                  interrogatories, and admissions on file,
                  together, with the affidavits, if any,
                  show that there is no genuine issue as to
                  any material fact and that the moving
                  party is entitled to judgment as a matter
                  of law. A fact is material if proof of
                  that fact would have the effect of
                  establishing or refuting one of the
                  essential elements of a cause of action or
                  defense asserted by the parties. The
                  evidence must be viewed in the light most
                  favorable to the non-moving party. In
                  other words, we must view all of the
                  evidence and the inferences drawn
                  therefrom, in the light most favorable to
                  the party opposing the motion.

            Omerod v. Heirs of Kaheananui, 116 Hawai#i 239, 254-55, 172 P.3d
            983, 998-99 (2007) (citations omitted) (emphasis added).

Blaisdell v. Dep’t of Public Safety, 119 Hawai#i 275, 282, 196

P.3d 277, 284 (2008).

                              III.   DISCUSSION

A.    The Discovery Dispute: Work Product Doctrine

            The main issue at the center of the discovery dispute


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is whether attorney-client privilege and work product doctrine

protect communications produced by an in-house attorney like

McGinnity who performed duties both as an attorney and a claims

adjuster for Fidelity.     Neither party has challenged the ICA’s

opinion as to attorney-client privilege, but Fidelity challenges

the ICA’s reference to a presumption from Harper v. Auto-Owners

Insurance Co., 138 F.R.D. 655, 663 (S.D. Ind. 1991), regarding

the applicability of the work product doctrine.          We find

Fidelity’s arguments to be persuasive, and the ICA erred to the

extent that it endorsed or adopted the Harper presumption as part

of our case law.

          As noted by the ICA, even though HRCP Rule 26(b)(4)

generally prohibits the discovery of documents prepared in

anticipation of litigation or for trial, “[t]he difficulty of

this issue is determining at what point work produced by an

insurer’s in-house counsel acting in a dual role becomes ‘work

prepared in anticipation of litigation.’”         Anastasi, 124 Hawai#i

at 425, 341 P.3d at 1225.      The ICA held:
                Instead, “[i]t is well established that documents
          prepared in the ordinary course of business are not
          protected by the work-product doctrine because they would
          have been created regardless of the litigation.” Health v.
          F/V ZOLOTOI, 221 F.R.D. 545, 549-50 (W.D. Wash. 2004);
          Thomas Organ Co. v. Jadranska Slobodna Plovidba, 54 F.R.D.
          367, 371 (N.D. Ill. 1972) (“[W]e conclude that any document
          which was prepared in the ordinary course of business and
          not in anticipation of trial or litigation is routinely
          discoverable without any showing of need under Rule 26(b)(1)
          and is not protected by Rule 26(b)(3) notwithstanding that
          it contains mental impressions, conclusions, opinions and
          legal theories.”). “It is presumed that a document or thing


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          prepared before a final decision was reached on an insured’s
          claim, and which constitutes part of the factual inquiry
          into or evaluation of that claim, was prepared in the
          ordinary and routine course of the insurer’s business of
          claim determination and is not work product.” Harper v.
          Auto-Owners Ins. Co., 138 F.R.D. 655, 663 (S.D. Ind. 1991).
          “[M]aterials prepared as part of claims investigation are
          generally not considered work product due to the industry’s
          need to investigate claims. . . . Documents created during
          those processes are part of the ordinary course of business
          of insurance companies.” Moe v. Sys. Transp., Inc., 270
          F.R.D. 613, 624-25 (D. Mont. 2010) (block quote format and
          citation omitted); see Thomas Organ, 54 F.R.D. at 374 (“If
          every time a party prepared a document in the ordinary
          course of business to guide claim handling, this document
          was deemed to be prepared in anticipation of litigation, it
          is difficult to see what would be discoverable.”).

                      In circumstances where a document serves a
                dual purpose, that is, where it was not prepared
                exclusively for litigation, then the “because
                of” test is used. Dual purpose documents are
                deemed prepared because of litigation if “in
                light of the nature of the document and the
                factual situation in the particular case, the
                document can be fairly said to have been
                prepared or obtained because of the prospect of
                litigation.” In applying the “because of”
                standard, courts must consider the totality of
                the circumstances and determine whether the
                “‘document was created because of anticipated
                litigation, and would not have been created in
                substantially similar form but for the prospect
                of litigation.’”

          United States v. Richey, 632 F.3d 559, 567-68 (9th Cir.
          2011) (citations omitted).

Id. (emphasis added).

          Turning to the facts of this case, the ICA held that

based on its review of the McGinnity documents, “it is not

evident that Fidelity has carried its burden of establishing that

the work-product doctrine applies to preclude discovery[.]”              Id.

Although McGinnity testified that at the time the claim was

tendered to Fidelity she anticipated that a coverage dispute

might ensue between Fidelity and Anastasi, the ICA held that


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there was no evidence on the record that documents were created

because of anticipated litigation and would not have been created

in substantially similar form but for the prospect of litigation.

Id. at 425-26, 341 P.3d at 1225-26.        After briefly addressing

each document, the ICA noted that there was “nothing in the

record to suggest that the circuit court considered whether the

withheld documents were produced ‘because of’ anticipated

litigation and would not have been created in a substantially

similar form but for the prospect of litigation.”           Id. at 426,

341 P.3d at 1226.

           Fidelity did not challenge the ICA’s adoption or

application of the “because of” test.        Fidelity challenged only

the ICA’s reference to Harper emphasized above and argued that

“[b]y imposing a presumption that materials prepared by an

insurer before a final decision on an insured’s claim are not

work product, the ICA narrowed work product protections for

insurers for reasons not consistent with this Court’s case law.”

           The Hawai#i work product doctrine is set forth in HRCP

Rule 26:

           (b) Discovery Scope and Limits. Unless otherwise limited by
           order of the court in accordance with these rules, the scope
           of discovery is as follows:

                 . . . .

                 (4) Trial Preparation: Materials. A party may
                 obtain discovery of documents, electronically
                 stored information, and tangible things
                 otherwise discoverable under subdivision (b)(1)
                 of this rule and prepared in anticipation of

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                litigation or for trial by or for another party
                or by or for that other party’s representative
                (including the other party’s attorney,
                consultant, surety, indemnitor, insurer, or
                agent) only upon a showing that the party
                seeking discovery has substantial need of the
                materials in the preparation of the party’s case
                and that the party is unable without undue
                hardship to obtain the substantial equivalent of
                the materials by other means. In ordering
                discovery of such materials when the required
                showing has been made, the court shall protect
                against disclosure of the mental impressions,
                conclusions, opinions, or legal theories of an
                attorney or other representative of a party
                concerning the litigation.

HRCP Rule 26(b)(4) (effective 2004-2014) (emphasis added).             Thus,

the relevant inquiry for determining whether a document can be

protected by work product doctrine is whether the document was

prepared in anticipation of litigation or trial.

          Most courts have recognized that an insurance carrier’s

investigation of a claim is generally performed in the ordinary

course of business and not protected by work product doctrine.

Christopher C. Frost et al., Shhh!        Why the Attorney-Client

Privilege and Work Product Doctrine May Not Protect

Communications with Coverage Counsel 19 n.74 (2014).            Therefore,

when an attorney is performing both the role of claims adjuster

and counsel, courts must determine whether work product created

by such an attorney was made in anticipation of litigation.             The

main test adopted and employed by the ICA to answer this question

was the “because of” test from United States v. Richey, 632 F.3d

559, 567-68 (9th Cir. 2011).

          Under the “because of” test, courts are instructed to

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consider whether given the totality of the circumstances it can

be fairly said that a document was prepared or obtained because

of the prospect of litigation.       This test aligns with the scope

of the privilege as circumscribed in HRCP Rule 26 because the

statutory privilege protects only materials prepared in

anticipation of litigation or for trial.

            However, the Harper presumption does not fit squarely

with the privilege as laid out in HRCP Rule 26, because it

focuses not on whether material was prepared in anticipation of

litigation or for trial, but on whether material was prepared

before or after a formal determination has been made on a claim.

Nowhere in the rule is there reference to when a document is

prepared.   Instead, the rule clearly focuses on the purpose of

the prepared material and not on when it is prepared.            See Ass’n

of Apartment Owners of Waikoloa Beach Villas v. Sunstone

Waikoloa, LLC, 130 Hawai#i 152, 161, 307 P.3d 132, 141 (2013)

(“It is apparent that the opinion letter is ‘prepared in

anticipation of litigation’ because under the terms of the

declaration the opinion letter is a prerequisite for litigation.

Thus, the opinion letter is covered by the work-product

privilege.”); Save Sunset Beach Coal. v. City & Cnty. of

Honolulu, 102 Hawai#i 465, 484, 78 P.3d 1, 20 (2003) (“Although

Obayashi repeatedly states that the memorandum contains ‘legal

analysis, legal impressions and legal conclusions’ there is no

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indication that it was prepared in anticipation of litigation.

We must conclude then that the work-product privilege is

inapplicable.”).

            Moreover, HRCP Rule 26(b)(4) does not create a

presumption.     A presumption is defined as a “rebuttable

assumption of fact . . . that the law requires to be made . . .

.”    Hawai#i Rules of Evidence (HRE) Rule 301(1) (emphasis

added).    However, there is no statute or case in Hawai#i that

requires that the trier of fact assume in insurance claims cases

that materials prepared before a final determination on the

insured’s claim are not work product and that materials prepared

after a final determination are work product.            The ICA erred to

the extent that it endorsed or adopted the Harper presumption

that was not required by our law.

            But because the circuit court must still address

whether the documents meet the “because of” test, we affirm the

ICA’s judgment insofar as it remanded the issue to the circuit

court for further proceedings.

B.    Summary Judgment on Bad Faith Claim

            1.    Enhanced Standard of Good Faith

            In Finley v. Home Insurance Co., this court adopted an

enhanced standard of good faith for insurers who defend insureds

under a reservation of rights.         90 Hawai#i 25, 36, 975 P.2d 1145,

1156 (1998).     This standard states that

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          an insurance company must fulfill an enhanced obligation to
          its insured as part of its duty of good faith. Failure to
          satisfy this enhanced obligation may result in liability of
          the company, or retained defense counsel, or both.

          This enhanced obligation is fulfilled by meeting specific
          criteria. First, the company must thoroughly investigate
          the cause of the insured’s accident and the nature and
          severity of the plaintiff’s injuries. Second, it must
          retain competent defense counsel for the insured. Both
          retained defense counsel and the insurer must understand
          that only the insured is the client . . . . Finally, an
          insurance company must refrain from engaging in any action
          which would demonstrate a greater concern for the insurer’s
          monetary interest than for the insured’s financial risk.

Id. at 36-37, 975 P.2d at 1156-57 (quoting Tank v. State Farm

Fire & Cas. Co., 715 P.2d 1133, 1137 (1986)) (internal quotation

marks omitted).

          The ICA held that the grant of summary judgment in

favor of Fidelity on Anastasi’s bad faith claim should be vacated

because the circuit court erred in holding that Fidelity acted

reasonably as a matter of law.       Anastasi, 134 Hawai#i at 429, 341

P.3d at 1229.     The ICA held that viewing the evidence in the

light most favorable to Anastasi (the non-moving party), there

was evidence that Fidelity knew within four months of receiving

the claim that the warranty deed was forged and Fidelity did not

address how proving fraud or forgery in the Stickney lawsuit

would have affected coverage under the Policy, it could not be

said that, as a matter of law, Fidelity’s actions following its

knowledge that the deed was forged were reasonable.           Id.

Although the Policy may have allowed Fidelity to withhold payment

until after the resolution of the Stickney lawsuit, the ICA wrote


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that the relevant question “under Best Place is whether, given

the information Fidelity had, the timing when it had the

information, and when it reasonably resolved the issues presented

by Anastasi’s claim, was there an unreasonable delay in paying

Anastasi.”     Id.   The ICA also held that there was a genuine issue

of material fact as to whether Fidelity demonstrated a greater

concern for its monetary interest than for the insured’s

financial risk in violation of the enhanced standard of good

faith.   Id.

           Fidelity challenged the ICA’s judgment, arguing 1) that

Fidelity should be allowed to rely on provisions of the Policy

that allow it to pursue litigation to final judgment before

having to determine and pay losses, and 2) that the enhanced

standard of good faith should not apply to title insurers because

“Fidelity and Anastasi’s interests were unified in the underlying

action,” and Anastasi was not at risk of greater personal

liability.

           Fidelity’s arguments are not persuasive.          First,

Fidelity provides no support for its argument that it should not

be found to have acted unreasonably or in bad faith because it

was exercising its rights under the Policy.          Bad faith implies

unfair dealing, and insurance companies should not be allowed to

hide behind policy clauses in order to delay payments.            If

insurance companies were held to be acting reasonably as a matter

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of law any time they filed or defended lawsuits under a

contractual right to pursue litigation, frivolous lawsuits could

be used to unfairly delay payments to insureds for years.

Insurance companies must act reasonably even when exercising

contractual rights.     See Best Place, Inc. v. Penn Am. Ins. Co.,

82 Hawai#i 120, 122, 920 P.2d 334, 346 (1996) (“Without the

threat of a tort action, insurance companies have little

incentive to promptly pay proceeds rightfully due to their

insureds, as they stand to lose very little by delaying

payment.”).   On remand, Fidelity will have the opportunity to

present evidence as to why its actions were reasonable or in good

faith, but based on the record before us, we decline to hold that

Fidelity acted in good faith as a matter of law when it exercised

its contractual rights.

          Secondly, this court declines to exclude title

insurance companies from the enhanced standard of good faith when

claims are defended under a reservation of rights.           Fidelity’s

and Anastasi’s interests may have been aligned in the Stickney

lawsuit, but their interests were not identical.           As this court

has noted,
          When an insurer provides an unconditional defense for its
          insured, the insured and the carrier share the same goal -–
          minimizing or eliminating liability in the third party
          action –- and no conflict of interest inhibits the ability
          of one lawyer to represent both the insurer and its insured.
          But where the carrier questions the availability of coverage
          and provides a defense in the third party action subject to
          a reservation of rights, a conflict exists –- because the


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          insured’s goal is coverage, which flies in the face of the
          insurer’s desire to avoid its duty to indemnify.

Finley, 90 Hawai#i at 30, 975 P.2d at 1150 (quotation marks and

citation omitted).    When any insurer, including a title insurer,

defends an insured under a reservation of rights, the insurer

maintains the right to evaluate and disclaim coverage.

Therefore, there is inherently a potential for conflict between

the insurer and the insured in such a situation, and there is

nothing distinctive about title insurance that would eliminate

such potential.    In fact, the record in this case shows that

Fidelity suspected that Talisman, Justmann, and Nagy may have

been involved in falsely executing the warranty deed.            Thus,

Fidelity may have had an interest in delaying or prolonging

resolution of the Stickney lawsuit in order to investigate their

potentially nefarious involvement in the matter, which would have

diverged from Anastasi’s interest in prompt payment under the

Policy.

          We do not express any opinion as to whether Fidelity’s

actions constituted bad faith.       However, we find that there is a

genuine issue of material fact as to whether Fidelity met the

enhanced standard of good faith.         Thus, we affirm the ICA’s

judgment on this issue.

          2.      Whether Fidelity Induced Ching to Violate HRPC

          After holding that summary judgment on Anastasi’s bad


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faith claim was not appropriate, the ICA affirmed the circuit

court’s finding that “Anastasi failed to show any genuine issue

of material fact that Ching breached her ethical duties to him or

that Fidelity induced any such breaches.”         Anastasi, 134 Hawai#i

at 431, 341 P.3d at 1231.      The ICA held that the four pieces of

evidence relied on by Anastasi to argue that Fidelity improperly

controlled Ching’s actions in the Stickney lawsuit did not

suggest that Ching was actually constrained in exercising her

professional judgment.     Id. at 430-31, 341 P.3d at 1230-31.          The

four pieces of evidence were a statement from Fidelity’s claims

handbook, the introductory letter Ching sent to Anastasi, the

Ching-McGinnity Memorandum, and the emails between Ching and

McGinnity wherein McGinnity directed Ching to file the notice of

appeal.

          Anastasi argues that the ICA gravely erred by failing

to hold Fidelity to an enhanced standard of good faith in

analyzing Fidelity’s interactions with Ching and by viewing the

evidence regarding Ching’s inducement by Fidelity unfavorably to

Anastasi, the non-moving party.       This court has held that “where

an insurer is required to provide a defense for its insured, it

would be a breach of the duty of good faith to induce retained

counsel to provide a defense which did not meet the professional

standard set forth by the [Hawai#i Rules of Professional

Conduct].”   Finley, 90 Hawai#i at 36, 975 P.2d at 1156.          And HRPC

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requires that attorneys who accept payment for a defense of the

insured
            (1) consult with the client as to the “means by which the
            objectives [of the representation] are to be pursued”; (2)
            not allow the insurer to interfere with the attorney’s
            “independence of professional judgment or with the client-
            lawyer relationship”; and (3) not allow the insurer “to
            direct or regulate the lawyer’s professional judgment in
            rendering such legal services.”

Id. at 33, 975 P.2d at 1153 (quoting HRPC Rules 1.2; 1.8(f);

5.4(c)).

            Viewing the evidence in the light most favorable to

Anastasi, the evidence is sufficient to raise a genuine question

as to whether Ching allowed Fidelity to direct or regulate her

professional judgment.      Fidelity’s Claims Handbook expressly

states, “If the outcome of a suit is unfavorable to the insured,

the insurer may determine, in its sole discretion, whether or not

to appeal. . . . The insurer will generally insist upon the right

to select counsel of its own choosing because it is in control of

the litigation.”     Ching also stated in her letter to Anastasi

that it was “anticipated that Fidelity will provide

recommendations and instructions to the law firm regarding the

steps and procedures to be taken in defending or settling the

Claim.”    The Ching-McGinnity Memorandum and the emails between

Ching and McGinnity could also support a conclusion that Ching

was deferring to McGinnity on the issue of whether to file an

appeal.


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            The ICA referred to Ching’s deposition where she stated

that she did not allow Fidelity to direct her in how to defend

Anastasi.    Anastasi, 134 Hawai#i at 430, 341 P.3d at 1230.          And

while it may ultimately be determined that Ching did not breach

her duties, the evidence put forth by Anastasi is sufficient to

raise a question of fact.      Therefore, the ICA erred in holding

that Anastasi failed to show any genuine issue of material fact

that Fidelity induced Ching to breach her ethical duties to

Anastasi.    The ICA’s judgment in this regard is vacated and

remanded to the circuit court for further proceedings.

                            IV.   CONCLUSION

            For the reasons stated above, we affirm in part and

vacate in part the ICA’s February 6, 2015 judgment on appeal, and

accordingly vacate the circuit court’s judgment and remand to the

circuit court for further proceedings consistent with this

opinion.

Philip J. Leas, John P.                  /s/ Mark E. Recktenwald
Duchemin and Trisha H.S.T.
Akagi for petitioner and                 /s/ Paula A. Nakayama
respondent Lloyd R. Anastasi
                                         /s/ Sabrina S. McKenna
Edmund K. Saffery, Thomas
Benedict and Dawn T. Sugihara            /s/ Richard W. Pollack
for respondent and petitioner
Fidelity National Title                  /s/ Michael D. Wilson
Insurance Company

Wayne Nasser and
Benjamin M. Creps for
amicus curiae Hawaii Land
Title Association

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