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Waiver of Attorney-Client Privilege in Coverage Disputes

Christina Culver


  • The communications between insurers and their counsel are usually privileged.
  • Coverage attorneys must be mindful of circumstances leading to waiver of this protection in coverage disputes.
  • Merely copying counsel on or even addressing correspondence to counsel does not make communications privileged.
Waiver of Attorney-Client Privilege in Coverage Disputes
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The attorney-client privilege works to keep confidential communications between attorneys and their clients private. In coverage disputes, it is important to be aware of the situations in which the privilege does not apply to communications between insurers and their counsel. Notably, a document need not be authored by or addressed to an attorney to be properly withheld on attorney-client privilege grounds; however, merely copying counsel on or even addressing correspondence to counsel does not make communications privileged. Instead, the distinction is based on the purpose of the communication and the attorney’s role in relation to their client.

Applying Texas law, the court in OneBeacon Ins. Co. v. T. Wade Welch & Assocs., No. H-11-3061, 2013 WL 6002166, at *4 (N.D. Tex. Nov. 12, 2013) held that, to the extent an attorney acts as a claims adjuster, claims process supervisor, or claim investigation monitor, and not as a legal advisor, the attorney-client privilege does not apply. Thus, the key question regarding when communications are privileged becomes: when does the shift from merely investigating a claim to anticipating litigation occur? In many cases, litigation is anticipated from the date an insurer denies coverage. Courts generally consider the facts in their entirety, such as when coverage was denied and when the matter was referred to outside counsel.

Taking a different approach, the court in Boone v. Vanliner Ins. Co., 744 N.E.2d 154, 158 (Ohio 2001) deemed attorney-client communications “unworthy of protection” if they “show an insurer’s lack of good faith in denying coverage.” Therefore, after in camera review where a colorable case of bad faith is alleged, communications that would otherwise be considered privileged are instead discoverable. However, an insured is only entitled to discover materials containing attorney-client communications that were created prior to the denial of coverage as only those materials would contain information that was relevant to a bad faith claim.

The extent to which it is appropriate to waive the attorney-client privilege is often dependent on the attorney’s role and relationship with the client. Applying Georgia substantive law, the court in Camacho v. Nationwide Mut. Ins. Co., 287 F.R.D. 688, 690 (N.D. Ga. 2012) held that communications between an insurer and its joint outside defense counsel were not protected by attorney-client privilege. The plaintiffs brought suit against the defendant’s insurer alleging that it failed to settle claims against its insured in the underlying wrongful death suit. The insurer hired outside counsel to defend its insured. Following an excess verdict in favor of the plaintiffs, the insured assigned its bad faith claim to the plaintiff, waiving the attorney-client privilege with respect to the underlying action.

The court recognized an exception to the attorney-client privilege, which may be appropriate where an attorney jointly represents more than one client whose interests later become adverse, such as in a subsequent bad faith action. Recognizing that no Georgia court had yet held that attorney-client privilege is waived where the same attorney represents both the insurer and the insured under the joint-defense exception, the Camacho court cited decisions from Florida, North Carolina, and Iowa, which have held the attorney-client privilege is inapplicable in the context of a third-party bad faith claim by an insured against their insurer.

The court held that where the joint defense doctrine applies, the attorney-client privilege does not act to exclude communications between an insurer and its outside defense counsel regarding the defense of the underlying action unrelated to the issue of coverage. However, the court distinguished this from communications between the insurer and its in-house claims counsel, which the court held remained protected by the attorney-client privilege on the basis that there was no presumption that in-house counsel is employed to represent insured’s interests as opposed to the insurer’s. The Camacho court’s analysis implies that defense counsel hired by the insurer to represent its insured represents both the insured and its insurer.

The attorney-client privilege may be waived through voluntary or involuntary means, so it is crucial to know not only when the privilege applies and when it does not, but also what constitutes a waiver. The most common form of waiver is through disclosure to a third person lacking a common legal interest. Other forms of waiver include situations where the client’s purpose is the furtherance of a future intended crime or fraud or where the privilege is merely tossed over a mass of undifferentiated documents.

Although the attorney-client privilege is an important vehicle to ensure that confidential communications between attorneys and their clients are protected from disclosure, the privilege has its limitations. As a result, it is important for attorneys to keep in mind key facts critical in assessing whether waiver applies to erode the attorney-client privilege in cases involving coverage disputes.