Aa a general rule, clients waive the attorney–client privilege when they assert an advice-of-counsel defense and, consequently, must produce their 
lawyer’s advice-related communications. The waiver’s scope, however, is not as well-known. Does the waiver apply to communications with outside counsel and in-house lawyers?
The Utah federal court faced this specific question and narrowly construed the scope of waiver. The court held that a client’s advice-of-counsel defense waived the privilege over its communications with outside counsel, but that the waiver did not extend to its communications with in-house counsel. Hoopes v. Owners Ins. Co., 2018 WL 1183374 (D. Utah Mar. 6, 2018). You may read the decision here.
Bad-Faith Claim
A Geico insured struck an 11-year-old pedestrian on Main Street in Heber City, causing severe injuries to the minor. Geico paid its insurance limits, but the minor’s mother filed breach-of-contract and bad-faith claims against her uninsured-motorist carrier when it failed to promptly settle that matter.
The UIM carrier had retained outside counsel to investigate and opine on coverage and payment issues. The carrier asserted the advice-of-counsel defense and agreed that the defense waived the privilege over its communications with outside counsel. The carrier, however, refused to produce communications between its claims adjuster and in-house lawyer.
Sword and Shield
The mother moved to compel the claims-adjuster–in-house lawyer communications, essentially arguing that waiver is a broad concept and must include all advice-related communications, including those with in-house counsel.
She asserted the sword-and-shield argument, complaining that the carrier wished to use the reliance-on-outside-counsel defense as a sword while simultaneously using the privilege to shield discovery of privileged communications with in-house lawyers.
Decision
The court found this argument “meritless” for two reasons.
First, the court held that a party places privileged communications at issue where it attempts to prove an advice-of-counsel defense by “disclosing or describing an attorney client communication.” Here, the UIM carrier relied on its outside counsel’s advice, but did not rely on communications with its in-house counsel to prove the defense.
Second, the court held that the UIM carrier did not waive the privilege over in-house-counsel communications when it waived the privilege for outside-counsel communications. The court applied a narrow waiver doctrine by holding that waiver is “limited to the particular subject” and, importantly, “the conversation disclosed.”
Because the UIM carrier only relied upon and disclosed communications with outside counsel, that waiver did not extend to the claims adjuster’s communications with in-house counsel.