There is No Privilege in an Attorney’s Claim Investigation
When consulted on an insurance claim, most attorneys believe their correspondences are fully privileged. Discovery logs repetitively assert the “attorney-client communications” and “work product” privileges for any message sent to or from an attorney. But this practice shows a fundamental misunderstanding of how the privilege works.
This article addresses the growing consensus in jurisdictions across the country that while legal analysis is privileged, insurance claim investigations conducted by or with attorneys is not. When attorneys serve a dual-purpose role (i.e., both investigating a claim and providing a legal opinion on it), this overlap in purpose requires the court to analyze which attorney statements are privileged and which are discoverable.
Claim Investigations and Facts Are Not Privileged
Courts are rightly suspicious of attempts to cloak a factual investigation under the privilege by “looping in” an attorney to the claim investigation. In the context of coverage litigation, expressly rejected this practice. In an unusual fact pattern, a claim specialist heavily involved in State Farm’s legal defense submitted a declaration on behalf of the insured after ending her employment. The declaration detailed her role in the claim investigation, State Farm’s litigation strategy, and instructions received during deposition preparation.
The court held that all the facts learned during her investigation (including her discussion of the inspection of an important claim assessment machine) were discoverable, despite the presence of an attorney during the investigation. Only statements made to the attorneys were privileged. The court found general discussions of litigation strategy with the attorneys privileged, but the insurer had the burden to show that the privilege applied to each statement.
Routine Business Operations Are Not Privileged
Together with pure factual investigations, standard business operations are not subject to the privilege. In decisions across the country, insurance claims investigations are found to be routine business operations and discoverable.
For example, in, the insurer asserted the privilege over two reports prepared by independent claim investigators concerning of the cause of a fire. An earlier investigation suggested that the fire damage may not be covered, suggesting that there would be coverage litigation. But the Southern District of New York rejected the argument that these investigatory reports were privileged, finding that Since the investigation into the cause of the fire was “plainly intended to determine whether to deny the policyholder’s claim,” it was not subject to privilege. Noting that no attorney had requested the preparation of the report, the full claim investigation was discoverable.
Claim Investigations Performed By Attorneys Receive No Special Privileges
A few years later, the District Court of Minnesota agreed, finding that attorney-led claim investigations did not qualify as privileged.The Fourth Circuit later adopted this distinction, confirming that
, the Colorado Supreme Court rejected the insurer’s assertion of privilege over a Agreeing that an insurance claim investigation is part of the normal business activity of the insurer, the court compelled production of reports and witness statements collected absent any specific litigation. Because the records at issue mainly contained the results of the factual investigation about the issuance of the policy, they were discoverable.
Recent Decisions Suggest a Consensus that Attorney Claim Investigations are Discoverable
and There, the insurer asked the court to recognize privilege in communications between the insurer and in-house attorney claims adjusters. The court refused to find that documents prepared during the attorneys’ claim investigation were privileged, finding that only legal advice and opinions in the records could be redacted from the production.
The insurer hired outside counsel to conduct an Examination Under Oath (“EUO”) in connection with a homeowner’s theft claim. The policyholder challenged the insurer’s claim log redactions that removed notes about the attorney’s investigation and EUO. The court compelled production of any information about scheduling and taking the EUOs, finding that these examinations were an ordinary insurance business function. The court noted that post-litigation log entries and attorney impressions retained their privilege.
a New York court similarly rejected the insurer’s assertion of privilege over a coverage opinion memorandum. The court considered coverage analysis to be an “ordinary business activity” of claim handling. Only true legal advice and analysis could be redacted from the memorandum as privileged. The Southern District of New York applied this principle in to compel the insurer’s communications with its outside counsel. Although accepting coverage, the insurer’s attorneys participated in the adjustment of the claim, and the insurer contended their work was privileged. The court disagreed, ruling that [
A London-based specialty lines insurer hired U.S. counsel to oversee the claim investigation, collect records from the policyholder, issue a coverage opinion, draft and send the denial letter, and defend the ensuing litigation. This dual purpose representation required the court to conduct an extensive review of the records in camera. Following the reasoning of OneBeacon and other decisions, the court compelled production of all records from the claim investigation, allowing redactions of statements of legal analysis, strategy, and settlement as privileged.
These cases, and others like them, show a growing judicial consensus that pre-decision claim investigations are discoverable, no matter who conducts them. Where attorneys lead the investigation, only true legal analysis is privileged, and the insurer will bear the burden of proving privilege for each statement.
Since this type of discovery dispute quickly turns into a fact-intensive hearing, it is wise to see if this issue will arise when first evaluating your case. If attorneys were involved at any stage of the claim investigation, consider conferring with opposing counsel early. Narrowing the scope of the dispute will reduce the need to conduct “discovery on discovery,” quell avoidable discovery disputes, and crystalize the factual issues needing decision by the discovery magistrate.