Part II: Recent Decisions Affecting Insurers’ Attorney-Client Privilege Protection

Submitted by the Insurance PAC

By: Moheeb Murray, Partner, Bush Seyferth & Paige PLLC, Troy, Michigan

Part 1 of this article noted decisions from three jurisdictions (Ohio, Washington, and New York) that limited the application of the attorney-client privilege for insurance companies, particularly when attorneys take on roles in claims investigations. As those cases and others show, it is critical for insurers and their counsel to do all they can to preserve the privilege at every turn. Part 2 of this article provides some practical tips for how to maximize the likelihood their written communications will be deemed protected under the attorney-client privilege.

A good starting point when creating written communication is to remind oneself of the required elements for establishing the attorney-client privilege. Jurisdictions articulate the attorney-client privileged differently, but in general, a communication is subject to the attorney-client privilege if it is (1) a communication; (2) made between privileged persons; (3) in confidence; and (4) for the purpose of obtaining or providing legal assistance for the client. See Restatement (Third) of the Law Governing Lawyers § 68. These requirements apply whether the communication is between an individual and her attorney, a business entity and its outside attorney, or a business entity and its in-house counsel.

Clients often look to inside and outside counsel to provide both legal and business advice. When a lawyer is not offering legal advice, but is instead serving as negotiator or business advisor, the discussion is not privileged. When a lawyer is transacting business that might have been transacted by a non-lawyer, it is also unlikely that the privilege applies. In a blended scenario (attorney’s advice is both legal- and business-related), courts look to the “dominant purpose” of the attorney’s work and the communication. See, e.g., Clark v. Superior Court, 196 Cal. App. 4th 37, 51 (2011).

As Part 1 noted, in the insurance context, some courts are beginning to past assumptions about the dominant purpose of counsel’s work and communications in a claim investigations. It is important, therefore, at the beginning of a matter involving legal analysis requiring fact investigation to delineate the scope and purpose of the representation in writing. The client and counsel should make clear that the insurer is retaining the attorney to provide specific confidential legal advice on a particular subject. Documenting the purpose can help establish that the attorney’s investigation was not purely fact investigation, but instead was part of the attorney’s work product and analysis to form legal opinions and render legal advice. If the fact investigation is entirely distinct from the legal analysis, another alternative is to use separate counsel for those two aspects of the project.

Perhaps the easiest, but oft-overlooked, step to aid preservation of the privilege is making sure that privileged communications are clearly marked as such, even beyond the ubiquitous boilerplate in signature blocks that accompany every email communication—privileged or not. For instance, the subject line of a privileged email should state that the communication is privileged. Or at a minimum, the body of the document should have a clear heading identifying the documents as privileged. For multi-page documents, such as memos or presentations, every page should be marked as privileged. Although merely labeling a document as privileged does not establish the privilege, a court may consider such purposeful labeling (as opposed to boilerplate) as evidence of intent to protect the document. However, if the predominant purpose of the document is business-oriented, rather than legal advice, the label likely will not protect the communication.

The privilege can also be waived if privileged documents are forwarded to individuals who need not know the information for the purpose of receiving legal advice. A privileged communication must be to for from the attorney for the purpose of providing or receiving legal advice and made in confidence. Simply “cc’ing” or “bcc’ing” an attorney does not create a privileged communication. So, particularly in large organizations, make sure that email distribution lists are properly updated to include only those who are giving or receiving legal advice. Employees who are no longer working on the matter should be removed. If there is a concern about a document being forwarded to someone that may result in the privilege may be questioned, consider including a notation in the subject heading or on the face of the document stating “Attorney-client communication – Do not forward,” or similarly clear language.

Because labels alone may be insufficient to establish the privilege, the substantive portions of communications should be written so they unmistakably indicate the intent to elicit or convey legal advice. For example, instead of responding to a question on a legal issue with “In response to your inquiry . . . ,” one could state, “In response to your request for my legal analysis . . .” or “from a legal standpoint, the pros and cons are . . . .” Further, when communicating on legal issues, facts should be separated from legal analysis. If a court must examine a document to determine privilege, such separation makes it easier for the court to order only nonprivileged portions produced, rather than having to comb through the entire document, in which case the court might be more inclined to order the whole document produced rather than take the time and effort to scrutinize a document to order line-by-line redactions.

Counsel should also remember that e-mail is being replaced by even more informal means of electronic communication such as instant messaging, text messaging, and various forms of corporate intranet communications. The informality of these media makes communication easier, but also magnifies the ills of e-mail for establishing the elements of a privileged communication. Best practice is to redirect any requests for or provision of legal advice through these formats into the more formal structure of e-mail or written communications where the intent to create the privilege can be more clearly stated.

The best defense for attacks on the attorney-client privilege when counsel is providing claims analysis involving fact investigation is to be proactive. Establish in writing at the outset of an assignment that the client is seeking legal advice. Make sure communications are going only to those who need to know the legal advice. And throughout the assignment, ensure that communications have appropriate labels and clear indications that they are requesting or conveying legal advice. Following these steps will likely greatly assist the court in concluding that the privilege applies, should opposing counsel raise such a challenge.

Moheeb Murray leads the insurance coverage practice team at Bush Seyferth & Paige PLLC in Troy, Michigan. He represents leading national insurers in life, disability, ERISA, and other insurance matters at all stages of litigation. Moheeb is a past co-chair of the IPAC for NAMWOLF. Moheeb graduated cum laude from the University of Michigan Law School and with high distinction from the University of Michigan’s Stephen M. Ross School of Business.