In March I blogged about a Washington case that held an insurer’s communications with their attorney used to determine a denial of a policyholder’s claim was not privileged. In National Union Fire Insurance Co. of Pittsburg v. TransCanada Energy USA, Inc.,1 a New York appellate court continues the trend. Although every state’s insurance laws differ, there are many similarities, and almost all states have ruled that an attorney’s communications with a client is privileged. However, when it comes to attorneys who are outside counsel for an insurer that render opinions during the insurer’s regular course of business of issuing a denial, courts are ruling that this attorney-client communication is one made as a business decision versus a legal purpose.
In National Union Fire, the appeals court found counsel’s investigation to provide an opinion regarding insurance coverage and the documents prepared are the same as those prepared by any other employee in the ordinary course of business and therefore not privileged. Interestingly, the Court was very specific that work product protection did not apply because the insurer cannot claim documents prepared before a denial is made are documents prepared in the anticipation of litigation.
In the past, insurers have been quick to claim communications with outside counsel used to investigate coverage resulting in denials are privileged in litigation. The current trend in court rulings across the country shows courts are finding that an insurer’s investigations that lead to denial of coverage are simply part of the insurer’s everyday business and the use of counsel in those decisions does not privilege such investigations from the insured in the event of litigation.