Insurance Claims And Issues: Attorney-Client Privilege #nj #car #insurance

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April 08, 2015

ADVICE OF INSURANCE CARRIER’S COUNSEL PUT AT ISSUE BY CARRIER.

Under Oklahoma law that mirrors the law of many other jurisdictions in this regard, it was held that an insurance company waived attorney-client privilege and work product immunity in a case in which the carrier sued an adjuster for indemnity and negligence. The carrier contended that it would not have had to defend or settle an underlying lawsuit filed by the carrier s policyholder against the carrier, but for the alleged errors and omissions of the adjuster handling the policyholder s claim for the carrier.

The Court’s opinion makes it clear that the carrier raised the privilege and immunity against discovery of certain advice given to the carrier by attorneys it consulted on whether the lawsuit filed by the carrier’s policyholder should be settled because of the carrier’s potential exposure to a bad faith claim and the value of the carrier’s exposure to a bad faith claim. Seneca Ins. Co. v. Western Claims, Inc., 774 F.3d 1272, 1274-75 (10th Cir. 2014).

So, the case that confronted the Court was a lawsuit filed by the carrier to recover indemnity and to recover damages for alleged negligence, in which the plaintiff carrier asserted privileges from discovery over the advice on which the carrier allegedly relied in paying the money which it now sought to recover from the adjuster it hired to handle the underlying hail damage claim made by its policyholder. Because of the adjuster s handling of the policyholder s hail damage claim, the carrier alleged, the policyholder was dissatisfied and sued the carrier for mishandling the claim.

The Tenth Circuit panel held that Oklahoma law would apply a waiver of the attorney-client privilege in this case because the carrier “affirmatively put at issue its attorney’s advice by invoking ‘advice of counsel’ to support its claims in this litigation.” The plaintiff carrier had to prove the reasonableness of its underlying settlement in order to recover indemnity, and the carrier asserted that it relied on advice of counsel that the settlement was reasonable. Seneca Ins. Co. v. Western Claims, Inc., 774 F.3d 1272, 1276-77 (10th Cir. 2014). [Emphasis added.] Of course, in order to recover the amount of its underlying settlement as damages under a negligence theory, the plaintiff would still have to prove that its settlement was reasonable. Under both claims alleged by the carrier, implied indemnity and negligence, the reasonableness of the underlying settlement was an issue in the carrier’s suit against the adjuster.

It is interesting that the carrier contended it did not waive attorney-client privilege because, the carrier contended, the adjuster could pursue discovery regarding the reasonableness of the carrier’s settlement from sources other than the communications of the attorneys for the carrier. However, the carrier’s officers testified that they made their decision to settle the underlying case on the advice of counsel. Seneca Ins. Co. v. Western Claims, Inc., 774 F.3d 1272, 1277 (10th Cir. 2014).

For the same reasons, the Tenth Circuit panel held that Oklahoma law would apply a waiver of the work product qualified immunity “by putting the correspondence at issue.” Seneca Ins. Co. v. Western Claims, Inc., 774 F.3d 1272, 1278 (10th Cir. 2014).

The twin waivers were held to apply in this case not so much on account of the nature of the carrier’s suit for implied indemnity and negligence. More to the point, the carrier’s own officers testified that there were no other sources from which to obtain evidence on the reasonableness of the carrier’s settlement, an issue in the carrier’s lawsuit whichever theory of liability was at issue, implied indemnity or negligence.

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