September 06, 2011 Articles

Coverage Preservation vs. Privilege Protection: Two Horns of a Dilemma?

The tension between litigation defense and insurance pursuit can create a frustrating dilemma.

By John Buchanan and Wendy Feng – September 6, 2011

Companies defending litigation often must simultaneously pursue a claim for insurance to cover that defense from insurers that may resist covering it. For in-house litigation counsel and their outside defense firms, the tension between litigation defense and insurance pursuit can create a frustrating dilemma. On the one hand, the insured company needs to provide its insurers with sufficient information about the underlying case to persuade its insurer that the case is covered, to avoid insurer claims of noncooperation, and to try to get its defense and settlement funded. On the other hand, if the company complies with insurers' demands for work product or attorney-client privileged information, underlying claimants may assert that the disclosure to an insurer with interests potentially adverse to the company's has waived any privilege or work product protection attaching to the material disclosed.

Otherwise stated, the company and its counsel are caught between the risk of impairing coverage (for cooperating too little with the insurer) and the risk of waiving privilege (for cooperating too much). We discuss below some of the case law addressing this dilemma and some practical suggestions for counsel facing it.

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