## Facts

- Leo A. Diamond was seriously injured in a December 1979 bus accident and was hospitalized on life-support systems.
- Diamond later died after his family chose to remove life-support measures.
- A travel-insurance policy provided benefits if Diamond’s death resulted from injuries caused by the bus accident.
- Diamond’s estate and family submitted a claim for policy benefits to the insurer (the lead underwriter for Lloyd’s, London).
- Through counsel, the insurer declined payment and sent a letter to plaintiffs’ counsel implying that the family’s decision to remove life support—rather than the bus accident—was the cause of Diamond’s death, effectively suggesting the family had killed him.
- Plaintiffs sued in the Southern District of New York asserting (1) wrongful denial of coverage under the policy and (2) intentional infliction of emotional distress (IIED) based on the accusatory denial letter.
- In discovery directed to the IIED claim, plaintiffs requested the insurer’s claim file, including communications between the insurer and its attorneys relating to the content and drafting of the letter.
- The insurer refused to produce certain claim-file materials, asserting attorney–client privilege and work-product protection.
- The parties agreed that the court would review the disputed documents in camera to determine whether, and to what extent, they must be produced.
- The insurer also moved to dismiss the IIED claim; the court addressed the discovery dispute first to avoid deciding dismissal based on assumptions about the withheld materials.

## Issues

1. Whether attorney–client privilege barred discovery of insurer–counsel communications in the claim file concerning the accusatory denial letter that formed the basis of plaintiffs’ IIED claim.
2. Whether documents in the claim file constituted attorney work product and, if so, whether plaintiffs showed sufficient need under Rule 26(b)(3) to obtain them for purposes of proving IIED.
3. Whether the court should compel production (after in camera review) before ruling on the insurer’s motion to dismiss the IIED claim.

## Decision

- The court reviewed the withheld claim-file materials in camera.
- The court found that some withheld items were attorney–client communications and some qualified as attorney work product.
- The court nevertheless granted plaintiffs’ motion to compel production to the extent the materials were directly relevant to the IIED claim arising from the denial letter, concluding that plaintiffs had a strong need for the information and could not obtain the substantial equivalent by other means.
- The court addressed discovery before taking up the insurer’s motion to dismiss the IIED claim, reasoning that production was appropriate to permit a fair evaluation of the pleadings and the conduct alleged.

## Legal Principles

- Attorney–client privilege protects confidential communications between attorney and client made for the purpose of obtaining or providing legal advice, but a court may order disclosure where the communications are directly tied to alleged wrongful conduct and are necessary to litigate that claim.
- The work-product doctrine protects documents and tangible things prepared in anticipation of litigation, yet Rule 26(b)(3) allows discovery upon a showing of substantial need and inability to obtain the substantial equivalent without undue hardship; this need may be shown where a party’s intent or state of mind is a required element of the claim and the best evidence is found in internal claim-file materials.
- In camera inspection is an appropriate method to test privilege and work-product assertions and to confine compelled production to materials necessary to litigate the issues presented.
- When a discovery dispute concerns documents that may bear directly on the viability of a contested tort claim, a court may resolve discovery first rather than decide a motion to dismiss based on speculation about what the withheld documents contain.

## Conclusion

In *Diamond v. Stratton*, the court compelled production of selected claim-file materials after in camera review because plaintiffs’ IIED claim was based on the insurer’s accusatory denial letter, and related insurer–counsel communications and work product were directly relevant to proving the alleged intentional or reckless infliction of emotional distress and could not be fairly replaced by other discovery.


Diamond v. Stratton, 95 F.R.D. 503 (1982)