Insurer Entitled to Discover Insured’s Communications with Broker, Defense Counsel Prior to Date of Final Coverage Denial and Communications with Defense Counsel Regarding Allocation Issues

A United States District Court in Florida has held that communications between an insured and its defense counsel that would normally fall within the attorney-client privilege were discoverable by the insurer in a coverage action because the insured placed certain communications “at issue” and because the parties shared a common legal interest prior to the insurer’s final denial of coverage. Sun Capital Partners, Inc. v. Twin City Fire Ins. Co., 2015 WL 1860826 (S.D. Fla. April 22, 2015). The court also held that the work product doctrine did not protect the insured’s communications with its broker prior to the date the insurer issued its final denial letter.

After the insured broadly asserted in coverage litigation that communications with its broker and defense counsel were protected from discovery by the attorney-client privilege and work product doctrine, the insurer filed a motion to compel production, which resulted in the court conducting an in camera review of the documents.

The court held that the insured waived its work product and attorney-client protections with respect to certain communications with its defense attorneys by putting those communications “at issue.” In alleging facts regarding the allocation dispute with its insurer, the insured referred to the relative exposures related to covered and non-covered loss, defensibility of certain claims and other allocation issues. The court found that because the insured would likely need to rely on communications with its defense counsel to prove these allegations, the insured had put them at issue. The court further held that applying attorney-client privilege to the communications would deny the insurer access to information vital to its defense. The insured therefore waived its attorney-client privilege as to these communications.

The court held that the work product doctrine, which the insured asserted to protect the broker communications, was not applicable to communications pre-dating the date on which the insured reasonably anticipated litigation. The insured argued that it reasonably anticipated litigation on September 2, 2010 when it received an e-mail regarding the insurer’s concerns about defense costs and allocation issues. The court disagreed, finding that the parties continued to actively work together toward a resolution of the coverage issues for several years after that date. Instead, the court found that the insured reasonably anticipated litigation on November 2, 2012, the date of the insurer’s final denial letter. The work product doctrine therefore protected the broker communications after the final denial letter was sent but not before that date. Moreover, the court held that the insured’s communications with its defense counsel prior to the date the parties reasonably anticipated litigation were discoverable because the insured and insurer had a “common legal interest” in minimizing the insured’s liability in the underlying litigation up until that point.