Monty Python, Sinatra, and Rejection of the Self-Critical Analysis Privilege 1

In a colorful and refreshingly thorough opinion by Judge Iain D. Johnston, the USDC NDIL—Western Division—refused to adopt the self-critical analysis privilege under federal common law.  While a handful of federal courts recognize the privilege, most either reject the privilege or determine that, “without deciding whether the privilege exists,” it does not apply to the facts of that particular case.

Judge Johnston’s opinion addresses the privilege head-on, and I recommend his opinion as the starting place for any lawyer’s research on (1) the legal analysis for recognizing new federal common-law privileges and (2) the national status of the self-critical analysis privilege.  Lund v. City of Rockford, Case No. 3-17-cv-50035 (N.D. Ill. Nov. 29, 2017).  You may read the decision here.

Set Up

The Rockford (Ill.) Police Dep’t arrested William Lund, but state prosecutors later dismissed the charges.  Lund filed an Internal Discipline Complaint over the incident, and the RPD investigated the arrest and prepared an 88-page report.

During discovery in Lund’s subsequent § 1983 civil action against the City of Rockford, the City produced a redacted version of the report.  Lund moved to compel an unredacted copy, and the City asserted that the self-critical analysis privilege protected the full report from discovery.

What is the Self-Critical Analysis Privilege?

The self-critical analysis privilege (SCAP), sometimes called the self-evaluative or self-investigation privilege, generally protects confidential assessments, evaluations, investigations, or audits designed to improve a company’s processes.  The concept is that, More…

Yes, Virginia, There is an “Insurance Compliance Self-Evaluative Privilege”

In 1897, 8-year-old Virginia O’Hanlon sent a letter to the editor of the New York Sun newspaper asking if Santa Claus existed.  The paper’s editor, Francis Pharcellus Church, responded in an Virginniaeditorial declaring “Yes, Virginia, there is a Santa Claus.”  You may read about this story on the Newseum’s website, accessible here.

While no one has asked a newspaper (or me) whether there is an Insurance Compliance Self-Evaluative Privilege, I am certain the legal public has this question on its collective mind.  So, I will end everyone’s anxiety by stating, yes, Virginia, there is an Insurance Compliance Self-Evaluative Privilege, but only in certain states.

Model Act

In 1988, the National Conference of Insurance Legislators (NCOIL) adopted a model act titled Insurance Compliance Self-Evaluative Privilege Model Act, which you can access here. The purpose of this act is to encourage insurance companies conducting activities regulated by a state insurance agency to conduct voluntary internal audits of their compliance with state and federal regulations.

The Privilege

To further this purpose, the act creates an evidentiary privilege that protects from discovery an “insurance compliance self-evaluative audit document,” which the act broadly defines as documents prepared as a result of or in connection with an insurance compliance audit.  The privilege specifically covers an audit report prepared by an auditor, memoranda analyzing all or portions of the insurance-compliance audit, discussions of implementation issues, and implementation plans that address correcting past non-compliance or preventing future non-compliance.

The privilege also precludes the examination in any civil, criminal, or administrative proceeding an insurance company’s employee or consultant hired for the purpose of conducting an insurance-compliance audit.

Exceptions

The privilege does not protect documents, communications, data, reports, and other information that an insurance agency expressly requires the insurance company to collect, develop, or maintain. There are two exceptions to the privilege: when asserted for a fraudulent purpose or the self-audit contains evidence relevant to the commission of a criminal offense.

Selective Waiver

The model act includes a selective-waiver provision that permits the insurance company to voluntarily disclose self-audits without fear that the disclosure will constitute privilege waiver in subsequent state litigation.   And to the extent that a state insurance agency has authority to compel a self-audit, this disclosure likewise does not operate as a privilege waiver in subsequent litigation.

An unanswered yet significant issue, however, is whether federal courts would adhere to the state-law selective waiver provision or rule that disclosure to a state insurance agency amounts to privilege waiver.  Fed. R. Evid. 502(a) is of no help because it applies only to disclosures to federal agencies.

Where Does the Privilege Apply?

Several legislatures have adopted, in some form, the Insurance Compliance Self-Evaluative Privilege, including Arizona, District of Columbia, GeorgiaHawaii, Illinois, Kansas, Michigan, New Jersey, North Dakota, Oklahoma, and Oregon.  The Washington Legal Foundation issued an advocacy piece, which you may access here, that outlines benefits of the privilege in today’s regulatory environment.

Is this privilege on your state legislature’s radar?

Illinois Rejects Self-Critical Analysis Privilege—Will Other States Follow?

In a long-awaited ruling, the Illinois Supreme Court refused to recognize a common law self-critical analysis privilege and ordered production of a company’s quality-review report generated in response to an infant’s death.  Although arguably a narrow ruling, this decision will likely influence other state courts faced with a similar issue—do public-policy considerations warrant recognition of a common law self-critical analysis privilege.  Harris v. One Hope United, Inc., 2015 IL 117200 (Ill. Mar. 19, 2015).  You may read the decision here.

Illinois Supreme Court

Illinois Supreme Court

The Case

An infant died while in her mother’s care and in One Hope United’s family services program. The public guardian, acting as the infant’s estate administrator, filed a wrongful death suit against the mother and One Hope. Discovery revealed that One Hope investigated the death and prepared a post-death “Priority Review” report that evaluated its services.

One Hope refused to produce the Priority Review report on grounds that the self-critical analysis privilege protected its disclosure. The trial court refused to recognize the privilege, held One Hope in “friendly contempt,” and set the stage for appeal. In a decision profiled in this post, the appellate court also refused to adopt the privilege.

Pertinent Issues

As noted in my prior post, a threshold issue was whether the Illinois evidence rules permitted courts to adopt new common-law evidentiary privileges and modify existing privileges, or whether that role fell exclusively within the legislature’s domain.  And if the evidence rules permitted common-law privileges development, did public policy considerations compel adoption of a self-critical-analysis privilege.

The Ruling

The Supreme Court assumed, without directly addressing, that it could adopt new common-law privileges, but only in “rare instances.”  Those instances arise where the privilege proponent sufficiently proves each of four elements: (1) the communications originated in a confidence that they would not be disclosed; (2) confidentiality is essential to the maintenance of the parties’ relationship; (3) the relation at issue is one which “in the opinion of the community ought to be sedulously fostered”; and (4) the injury to the relation produced by disclosure outweighs the benefit of the truth-finding process and “the correct disposal of litigation.”

As to the 4th element, which focuses on public-policy considerations, the Supreme Court noted that adopting new privileges “involves a balancing of public policies which should be left to the legislature” and that the judiciary’s function was not “to promote policies aimed at broader social goals.”

So, the court looked for any legislative evidence to inform whether it should adopt a self-critical analysis privilege in this instance.  Reviewing the Child Death Review Team Act, which governs governmental panels reviewing minors’ deaths, and the Medical Studies Act, which creates a medial peer-review privilege, the court determined that these acts did not favor adoption of a self-critical analysis privilege.  The court reasoned that the Illinois legislature could have extended the peer-review privilege to entities such as One Hope, but did not; and the Child Death Review Team Act arguably encouraged rather than discouraged disclosure.

In sum, the court refused to recognize a common law self-critical analysis privilege because it is a “matter more appropriately a subject for legislative action.”  The court avoided “judicial infringement upon what is principally a policymaking decision for the legislature,” and reviewed whether public-policy expressions in existing legislation “warrant[ed] a ‘rare’ exercise of judicial authority” in recognizing new privileges.  Finding no legislative support, the court rejected the privilege.

PoP Analysis

The court focused on existing legislation relevant to One Hope’s activities and concluded that “the type of information sought in discovery here is not subject to a self-critical analysis privilege.” This limitation indicates that Illinois courts may re-consider a self-critical analysis privilege in other contexts; however, the Harris ruling tells us that adoption of new common law privileges is “rare” and existing legislation must clearly point toward the privilege’s adoption in a particular set of circumstances.

So, how will other states react to Harris when determining whether to adopt a self-critical analysis privilege? The self-critical analysis privilege, a product of the medical peer-review privilege first adopted in Bredice v. Doctors Hosp., Inc. 50 FRD 249 (D.D.C. 1970), encourages entities to undertake candid and unrestrained self-examinations for quality-improvement purposes by promising protection from discovery.  The theory is that entities will not be forthcoming and candid in their self-analyses without confidentiality assurances, and the lack of candidness will thwart improvement.

The Harris court effectively declined to assess whether Illinois common law should encourage self-examinations by adopting the privilege, instead scanning statutes to discern whether the legislature had already made this public-policy determination.  Courts in other states, however, may not feel constrained by existing legislation, particularly when legislatively approved state evidence rules, like FRE 501, permit common-law development of evidentiary privileges.

Illinois interprets this development opportunity narrowly, but other states may not.

My thanks to Jeff Bergman of the Chicago litigation firm of Mandell Menkes for informing me of the court’s release of this opinion.