June 17, 2020 Feature

Common Interest Exception? Third Party Denied Privileged Communications

Court refuses to extend privilege to insurance brokers

By Stephen Carr

Insurance brokers hoping to use the common interest exception to discover an insured’s privileged communications may need to look for new strategies. The common interest doctrine—an exception to attorney-client privilege often important in insurance cases—is a narrow one based on the unique public policy concerns that arise in an insurance relationship, not one that is generally available to third parties who share a “de facto” interest.

A third party cannot compel production of privileged communications.

A third party cannot compel production of privileged communications.

Credit: Walrusmail | Getty Images Plus | Photo Illustration by Elmarie Jara

Insurance Oversight Leads to Big Liability

The controversy in Robert R. McCormick Foundation v. Arthur J. Gallagher Risk Management Services, Inc., began when two charitable foundations, the Robert R. McCormick Foundation and the Cantigny Foundation, hired Arthur J. Gallagher Risk Management Services to act as their insurance broker. The foundations are large charitable organizations that rely on their securities holdings to fund much of their charitable giving. As a result, they sought comprehensive insurance coverage against the risk of being sued for violating securities laws, including coverage for their directors and officers.

According to the foundations, Gallagher offered them two options: continue with their current insurance coverage or switch to a cheaper plan that would save the foundations $3,400 a month while offering the same “apples to apples” coverage. The foundations chose to switch carriers.

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