Fla. decision expands scope of attorney-client privilege for insurers

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A U.S. magistrate judge in Florida has issued a decision that significantly expands the scope of the attorney-client privilege for insurers involved in coverage lawsuits with insureds.

The case

An insurer contended that documents subject to the attorney-client privilege had been inadvertently disclosed to the insured’s counsel.

The magistrate judge considered whether the insurer had met its burden of establishing that the documents were attorney-client privileged documents.

Related: Is a carrier’s claim file covered by attorney-client privilege?

The insured contended that they were not subject to the attorney-client privilege because the insurer had not reasonably anticipated litigation at the time the documents had been created. The insured argued that an insurance company could not maintain attorney-client privilege over documents, if, at the time the attorney was retained or rendered a legal opinion or advice, the insurance company did not reasonably anticipate litigation.

The insured argued that an absolute prerequisite for an insurance company’s claim of attorney-client privilege was that the insurance company must have reasonably anticipated litigation.

Because a representative of the insurer testified that it did not reasonably anticipate litigation until the date the insured filed its lawsuit, the insurer’s claim of attorney-client privilege over the documents had to fail, the insured asserted.

The court’s decision

The court, rejecting the insured’s argument, found that all of the documents at issue were covered by the attorney-client privilege.

In its decision, the court acknowledged that there were “a handful of Florida appellate cases and Southern District of Florida cases that have seemingly suggested or ruled that the attorney-client privilege only attache[d] in the insurance company context when the legal advice was obtained or rendered in anticipation of litigation.”

The court, however, turned to the Florida statute on attorney-client privilege, and said that it did not require that a corporation — such as an insurance company — establish that it anticipated litigation at the time it retained counsel or received legal advice in order to invoke the attorney-client privilege.

The court then pointed out that Florida and federal case law had somewhat altered the attorney-client privilege analysis for corporations in that claims of attorney-client privilege by corporations were subject to “heightened scrutiny.” The court agreed with the body of case law requiring “heightened scrutiny” when a corporation claimed attorney-client privilege, but said that this heightened scrutiny did not mean that a corporation doing business as an insurance company had to anticipate litigation to be able to claim or assert the attorney-client privilege.

Related: Insurance litigation balloons in insurer-friendly federal courts, report finds

Rather, the court said, requiring an insurance company to anticipate litigation for it to assert attorney-client privilege “would not only constitute a misreading” of the applicable Florida statute and case law, but also would “partially, and improperly, eviscerate the attorney-client privilege for insurance companies” that retained legal counsel for legal advice when litigation was not yet anticipated.

Moreover, the court added, it was “clear” that, in the insurance context, no privilege attached when an attorney performed investigative work in the capacity of an insurance claims adjuster, rather than as a lawyer, “[but] simply because [the attorney’s] assigned duties were investigative in nature” did not preclude an assertion of the attorney-client privilege.

Therefore, the court continued, the relevant question was “not whether [the attorney] was retained to conduct an investigation, but rather, whether this investigation was related to the rendition of legal services.” If it was, the court declared, the privilege was “not waived.”

The court added that although it made sense that the attorney-client privilege only could be claimed by insurers — and corporations in general —– when their counsel actually was rendering legal services and not working in another separate capacity such as a claims adjuster, it was “wholly illogical” that the attorney-client privilege would not apply in the insurance company context unless the insurance company anticipated litigation at the time counsel was retained or the legal services were rendered.

The court ruled that:

[A] corporation doing business as an insurance company should not be estopped from claiming an attorney-client privilege merely because that insurance company did not reasonably anticipate litigation at the time counsel was retained or at the time the legal services were rendered. To rule otherwise would be an absurdity.

In the court’s opinion,  the “real test” for whether the attorney-client privilege attached in the context of corporate insurers was “whether the attorney functioned as a mere conduit, claims adjuster or claim investigator, or rather, whether the attorney functioned in the attorney’s professional capacity in dispensing legal advice.”

Therefore, the court concluded, the attorney-client privilege attached when the lawyer was rendering legal advice or legal services to a corporate insurer even if no litigation was reasonably anticipated by the insurer at the time counsel was retained or at the time the legal advice or legal service were rendered.

Related: Discoverability of attorney-generated documents in insurance company files

The case is Ranger Construction Industries v. Allied World National Assurance Co., No. 17-81226-CIV-Marra/Matthewman (S.D. Fla. Feb. 4, 2019).

Steven A. Meyerowitz, Esq., is the director of FC&S Legal, the editor-in-chief of the Insurance Coverage Law Report, and the founder and president of Meyerowitz Communications Inc. Email him at smeyerowitz@meyerowitzcommunications.com.