Bad-faith litigation between an insurer and its insured often sparks privilege disputes, typically over disclosure of the insurer’s claims file. Now a less-litigated insurer–insured privilege dispute has reached the Florida District Court of Appeals: whether an insurer’s affirmative defense—that the insured was unwilling to settle the underlying claim—waives the insured’s attorney-client privilege in the bad-faith suit. The appellate court said no, relying on traditional at-issue waiver principles. Kesler v. Progressive Select Ins. Co., No. 2D2025-1038, 2026 Fla. App. LEXIS 2465 (Dist. Ct. App. Apr. 1, 2026). You may read the opinion here.
Let’s examine the court’s ruling.
Stolen Car, Bad-Faith Claim, and an Affirmative Defense
Bridgette Kesler suffered severe injuries when an underinsured driver—operating a stolen car—struck her vehicle. She later demanded the $200K policy limits from her UIM insurer. When the insurer responded with a $43K counteroffer, she filed a UIM action. Kesler then underwent accident-induced surgery, which increased her medical bills and prompted the insurer to tender its limits.
Kesler later amended her UIM lawsuit to assert a bad-faith claim, alleging that the insurer acted improperly by not settling the UIM claim more promptly. To succeed on this claim, Kesler had to prove that the insurer failed to settle the claim when “it could and should have done so.” Focusing on the “could have” element of proof, the insurer asserted the defense that Kesler was unwilling to settle.
Attorney Deposition and Privilege Assertion
To show Kesler’s alleged unwillingness to settle, the insurer deposed her attorney, who sent the initial demand letter. The company’s lawyer asked—and the attorney answered—questions about the basis for the opening $200K settlement demand. The lawyer then asked several questions about Kesler’s willingness to settle for less than policy limits, prompting attorney-client privilege objections.
The insurer moved to compel, arguing that Kesler’s willingness to settle is relevant and, even if privileged, Kesler waived that protection by filing the bad-faith lawsuit.
At-Issue Waiver
The appellate court recognized that “a litigant may waive a privilege by putting ‘at issue’ a claim or defense that required privileged material as evidence.” Simply filing a lawsuit does not, by itself, put privileged material “at issue” resulting in waiver. Instead, the court determined, “a party can waive the attorney-client privilege by injecting into the litigation an issue that can only be proved by the privileged material.”
But here, the court found that Kesler’s proof of her bad-faith claim did not necessarily require disclosure of privileged communications or “even identification of the topics” Kesler and her lawyer discussed. And the insurer could not use its affirmative defense to waive the privilege for her—
The insurer cannot waiver her privilege for her by raising her alleged unwillingness to settle as a defense. … The fact that the insurer may need the evidence to prove its defense does not give it the power to waiver Kesler’s privilege on her behalf.
About that Relevance Argument ….
After dispensing with the at-issue waiver argument, the court addressed whether the relevance of the withheld information could overcome the privilege. Perhaps somewhere, sometime, that argument has prevailed, but not here. The court easily ruled that “the attorney-client privilege is not overcome simply by the nature of the discovery sought or even the material’s relevance in a particular case.”
