An Insurance Coverage Lawyer is Not an Adjuster

I was an insurance adjuster from 1967 until 1972 when I was admitted to the California Bar and became a practicing lawyer. Since my career as a lawyer was almost exclusively limited to representing insurers policyholder lawyers have claimed – to obtain privileged communications with my clients and my work product by claiming that I was acting as a super adjuster. Since I have been both an adjuster and a coverage lawyer I understand the difference and as a lawyer never acted as an adjuster.

In Ranger Construction Industries, Inc. v. Allied World National Assurance Company, Civil No. 17-81226-CIV-Marra/Matthewman, United States District Court Southern District Of Florida (February 5, 2019) the District Court considered a motion to disqualify plaintiff’s counsel because it reviewed privileged communications inadvertently produced in discovery.

The Court addressed a total of 10 attorney-client privileged documents produced by Defendant to Plaintiff in regard to the Motion for Disqualification.

FACTS

The facts underlying this disqualification motion establish that, unfortunately, lawyers on both sides of the litigation acted poorly.

At the heart of this dispute is a disappointing but obvious inability of opposing counsel in this case to talk and correspond with each other in good faith, to rely on each other’s representations, and to deal honestly and squarely with one another. From its inception, this case has been replete with numerous and extensive discovery disputes, myriad motions, lengthy hearings, and finger-pointing by opposing counsel against each other for various alleged bad acts. The Court does not know if this conduct and mistrust is based upon past dealings between counsel or due to other factors, but the attorneys should be aware that their conduct is not helping their respective clients’ positions in this litigation. In fact, it is downright unproductive and silly.

Defendant’s counsel inadvertently produced 10 attorney-client privileged documents out of a total of approximately 14,500 discovery documents produced. Plaintiff’s counsel advised Defendant’s counsel in writing that approximately 100 documents—which appeared to be attorney-client privileged documents between Fowler White and Defendant—had been produced by Defendant within that large production, but that Plaintiff would “assume” that those 100 or so documents were correctly produced and were, in fact, not privileged.

There was a level of gamesmanship exhibited by counsel on both sides, combined with the rush of the holidays—and the flu and illness of counsel on both sides—which affected the responses of both sides’ counsel and exacerbated and prolonged this dispute.

What the parties’ counsel seem to miss in all of this is that if opposing counsel would have just picked up the phone or met in person, honestly spoken to one another, jointly and immediately identified and specified the approximate 100 documents at issue, and acted in good faith with one another like professional attorneys are supposed to do, they could have quickly resolved this matter among themselves with a simple claw-back of the privileged documents by Defendant. That did not happen.

Issue One: Whether Defendant Met Its Burden of Establishing that the 10 Documents at Issue Were Attorney-Client Privileged Documents

The Court concluded that the 10 documents at issue are, in fact, covered by the attorney-client privilege. A corporate insurance company can claim the attorney-client privilege if counsel was retained or tasked with providing an opinion in his or her professional capacity as an attorney or if counsel’s investigation was undertaken in anticipation of litigation.

The statute does 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. Where a lawyer is engaged to advise a person as to business matters as opposed to legal matters, or when he is employed to act simply as an agent to perform some non-legal activity for a client there is no privilege.

The Court held that requiring an insurance company to anticipate litigation in order for it to assert an attorney-client privilege would not only constitute a misreading of the applicable statute and case law, it would also partially, and improperly, eviscerate the attorney-client privilege for insurance companies who retain legal counsel for legal advice when litigation is not yet anticipated.

Moreover, it is clear that, in the insurance context, no privilege attaches when an attorney performs investigative work in the capacity of an insurance claims adjuster, rather than as a lawyer. Simply because the attorney’s assigned duties were investigative in nature does not, however, preclude an assertion of the attorney-client privilege. The relevant question is 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 privilege is not waived.

Attorneys often perform legal services and render legal advice for corporate insurers before the corporate insurer reasonably anticipates litigation. To say that such legal advice and legal opinions are not covered by the attorney-client privilege would be nonsensical and would unfairly remove attorney-client protection for corporate insurers in such circumstances.

The attorney-client privilege should attach when the lawyer is rendering legal advice or legal services to a corporate insurer even if no litigation is reasonably anticipated by the insurer at the time counsel is retained or at the time the legal advice or legal service are rendered. Fowler White was not in-house counsel, but rather was outside coverage counsel for Defendant. Fowler White was not acting as a conduit, claims investigator, or claims handler. Fowler White was providing legal advice and legal services to Defendant in its capacity as outside coverage counsel, and it matters not whether Defendant anticipated litigation at the time Fowler White was retained or at the time Fowler White rendered its legal advice or legal services.

The Court found the content of the documents sufficiently establishes that Fowler White was rendering legal services and was acting in the capacity of legal counsel and not as a claim investigator, claims adjustor, monitor, or mere conduit.

Under the facts of this case, Defendant’s counsel’s disclosure of the 10 attorney-client privileged documents was clearly inadvertent. The holder of the privilege, Defendant and its counsel, took reasonable steps to prevent disclosure. Additionally, Defendant’s counsel took reasonable steps to rectify the error. The documents were inadvertently produced, and no waiver of the attorney-client privilege occurred.

Disqualification is Not Proper or Appropriate

Disqualification is an extreme sanction which is not justified in this case. Disqualification of Plaintiff’s counsel would severely prejudice Plaintiff and is wholly unnecessary under the facts of this case. Both sides share the blame for what occurred in this case and this militates against disqualification.

Plaintiff is not permitted to utilize any of the 10 attorney-client privileged documents at issue, or any of the specific information directly and exclusively obtained from the 10 documents, in this case or in any other case involving Defendant. Plaintiff’s counsel and Plaintiff shall ensure that they have destroyed all copies of the 10 documents and shall reaffirm and certify to the Court and opposing counsel that they have done so within seven (7) days of the date of this Order.

ZALMA OPINION

One of the reasons, after I turned 75-years-old that I had my license to practice law deemed inactive and stopped practicing law, was the number of cases like this one where some policyholder’s lawyers acted as if they were at war and had been instructed to “take no prisoners” and the lawyers, as in this case, acted poorly.  When the conduct of the lawyers fails to help their respective clients’ positions in the litigation that causes a trial judge to describe their actions as “downright unproductive and silly.” The privilege applies to the work of a lawyer acting as a lawyer, even if the lawyer conducts an investigation as part of his or her right and duty to provide legal advice to the insurer.

Over the last 51 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

THE HOMEOWNERS INSURANCE POLICY

HOW TO BUY AN APPROPRIATE HOMEOWNERS POLICY AND SUCCESSFULLY MAKE A CLAIM TO THE INSURER

Read about this and other insurance books by Barry Zalma at http://zalma.com/blog/insurance-claims-library/

Insurance is a contract between a person seeking insurance and an insurer. It is obtained by making contact with the insurer as a prospective insured seeking insurance. The homeowners policy is a specialized policy of insurance that protects the homeowner from certain risks of loss to the real and personal property at the home, the exposure the insured faces for injury to a household employee, and the exposure the insured faces to liability for bodily injury or property damage caused to third parties. The book explains how to buy a homeowners policy and how to collect on any claim made to the homeowners insurer.

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