Privilege Protections for Insurance Coverage Counsel in Bad-Faith Litigation

In a thorough article published in DRI’s In-House Defense Quarterly, lawyers Dan Kohane and Sean Griffin, along with soon-to-be lawyer John Ewell, discuss recent court decisions eroding the Insurance Claim Deniedattorney–client privilege and work-product protections for claims files and other communications in bad-faith litigation.

From these decisions, the authors conclude that “[t]oday, insurance companies cannot assume that their communications with their attorneys will remain confidential.”  The authors do not simply identify the issue; rather, they advocate for a “better rule” modeled after the West Virginia Supreme Court’s decision in Montpelier U.S. Ins. Co. v. Bloom, 757 S.E.2d 788 (W. Va. 2014), a decision that PoP profiled in this post.

The article also contains a host of practice pointers for insurers and their counsel to “help them protect their coverage file from discovery.” I commend this well-researched article for your consideration.   And for additional information see the following posts: Court Rejects Privilege for Insurer’s Claims File and Attorney Communications and Court Rejects Privilege for Emails of Attorney Claims Specialist.

Dan D. Kohane, Sean Griffin, & John R. Ewell, Practical Solutions to Fend Off the Attack on the Confidentiality of Insurer-Coverage Counsel Communications, In-House Defense Quarterly, at p. 42 (Spring 2016).  My thanks to DRI for allowing republication of this article.

Court Extends Attorney-Client Privilege to “Insurance File” Sought in Bad Faith Litigation 1

The USDC for the Western District of Kentucky recently held that, in third-party bad-faith litigation, Kentucky’s attorney-client privilege protects an insurer’s file from discovery.  In Shaheen v. Progressive Insurance Co., 2012 WL 3644817 (W.D. Ky. Aug. 24, 2012), the adminstrator of the Nadia Shaheen Estate filed a bad-faith lawsuit against Progressive for its alleged delay in settling an underlying wrongful death case against Progressive’s insured.  The plaintiff sought production of Progressive’s “insurance file,” but Progressive refused, arguing that it contained communications between it and its insured.

Kentucky state law was silent on whether the attorney-client privilege covers insurance files from discovery in bad-faith litigation.  In predicting how Kentucky state courts would rule, the Kentucky federal court first noted that other courts had taken three different approaches.  First, some courts permit discovery of the entire insurance file in third-party bad-faith litigation.  Other courts permit insurance companies to preclude disclosure “by rigidly applying the attorney-client privilege.”  And a third line of courts take the middle-road approach by permitting insurance companies to claim privilege, but allowing a plaintiff to overcome the privilege through a sufficient showing of need.

Kentucky recognizes an insurer-insured privilege on grounds that the insured assumes that purpose of his communications is to transmit the information to an insurer-selected attorney.  And on this basis, the federal court predicted that Kentucky law would extend the attorney-client privilege to an insurance company’s file and prohibit compelled disclosure of the file’s contents.