What Triggers an Insurer’s Duty to Preserve in a Coverage Action?

A recent decision stated several important principles applying to insurance companies in coverage actions:

• “A substantial part of an insurance company’s business is to investigate claims made by an insured against the company or by some other party against an insured; therefore, such investigations are presumed to be part of the normal business activity of the company and documents generated during that activity are deemed ordinary business records as distinguished from trial preparation materials.”
• “Of course, circumstances may arise where an insurance company’s investigation of a claim … shifts from an ordinary business activity to conduct in anticipation of litigation, but no bright line delineating the shift exists.”
• “Thus, an insurance company has the burden of demonstrating that the document that was prepared or obtained in order to defend the specific claim which already had arisen and a ‘substantial probability’ of litigation over the claim existed when the documents were prepared or obtained.”
• “Just as an insurance company’s investigation of a claim may shift from ordinary business activity to conduct in anticipation of litigation, so may an attorney’s role shift. Consequently, the work product doctrine does not protect communications from a lawyer to an insurance carrier when the lawyer acts in an investigative capacity rather than as a counselor of the law.”

Moorer v. Nationwide Prop. & Casualty Ins. Co., 2025 WL 3309387 (D. Col. Nov. 28, 2025)(all quotations cleaned up and citations omitted).

Plaintiff Moorer made a coverage claim against defendant Nationwide.  “Defendant investigated Plaintiff’s claim and denied the claim on October 23, 2024. On November 5, 2024, Plaintiff filed suit in Colorado District Court….”

The court wrote that “[t]his discovery dispute arises from Defendant Nationwide’s production of dozens of pages of the claim file with redactions. Defendant contends that the redactions concern protected work product because they consist of communications made after a substantial probability of litigation arose.”

The parties disputed when a substantial probability of litigation arose for work product purposes. The court held that “Defendant has not met its burden of establishing that the entire claim file’s contents were prepared in anticipation of litigation or for trial.”

The Moorer court wrote: “At the outset, the Court considers when litigation over Plaintiff’s claim became substantially probable.”

First:

The Court rejects Defendant’s argument that litigation became substantially probable as early as August 2022, when the claims adjusting phase began. While an insured’s submission of a claim “almost always” creates “the potential for litigation,” courts have consistently “rejected the argument that ‘any investigation undertaken by the insurer and all associated documents are made in anticipation of litigation[.]” … To hold otherwise “would ‘improperly ‘allow an insurance company to insulate all investigative materials generated in every case involving serious injuries long before any coverage decisions are made or threats of litigation arise.’”

Next:

Similarly, the Court rejects any argument by Defendant that litigation became substantially probable simply because Plaintiff retained counsel in September 2022, or sometime prior. “It is neither unusual nor indicative of an intent to pursue litigation that Plaintiff retained counsel to handle his insurance claims[.]”

The court also held that Plaintiff’s counsel’s letter  “expressing concern about delays in scheduling Defendant-requested medical examinations, given the approaching November 2024 statute of limitations deadline on Plaintiff’s underinsured motorist claim” was insufficient, writing: “Mere discussion of the statute of limitations does not make litigation substantially probable.”  On the facts presented, however, Plaintiff had proposed a tolling agreement so that Plaintiff was not “forced into litigation.”

The court held that litigation became substantially probable when the insurer denied the insured’s claim.  It held that: “Therefore, the Court concludes that claim file documents prepared before October 23, 2024, were not prepared in anticipation of litigation or for trial. … Accordingly, claim file documents that predate October 23, 2024, may not be withheld on work product grounds.”

The Moorer court then analyzed the redactions on a document-by-document basis, especially regarding claims adjusting communications.  Litigants involved in coverage litigation may find that analysis important; however, it is not summarized here.

This blog was initially posted on  Electronic Discovery Reference Model.