Privileges Protecting Communications Regarding Underlying Suit Not Waived by Placing Causation “At Issue”

The United States District Court for the Southern District of Florida, applying Florida and federal law, has held that a policyholder did not waive its attorney-client privilege or work product protection for communications regarding an underlying claim by bringing a negligence action against its insurance broker and agent.  Guarantee Ins. Co. v. Heffernan Ins. Brokers, Inc., 2014 WL 2653480 (S.D. Fla. June 13, 2014).  The court also held that disclosure of a pre-litigation opinion letter analyzing the merits of the potential claim did constitute a subject-matter waiver.

The policyholder, a workers compensation insurer, was sued by a claimant alleging intentional infliction of emotional distress arising from the insurer’s handling of a claim.  Before the claimant filed suit, the insurer’s counsel sent a letter to its primary insurer and its insurance broker, in which it analyzed the claim and essentially concluded that it was meritless. Following settlement of the underlying dispute, the insurer brought the present action for negligence and breach of fiduciary duty against the agent and the broker for failure to timely notify its excess carrier of the claim.  In part to advance their position that the alleged breach did not cause damage to the policyholder because the underlying suit was meritless, the agent and broker sought discovery of various materials related to the underlying claim.  In response, the insurer argued that attorney-client privilege and work product protection shielded the materials from disclosure.

In its order, the court rejected the argument that the insurer waived its privilege by filing the negligence action and thereby placing the merits of the underlying suit “at issue.”  Instead, the court concluded that the insurer did not put causation directly at issue because its claims did not require that the conduct of the broker and the agent be the sole cause of its damages.  For that reason, the court concluded that the “at issue” waiver, disfavored under Florida law, did not apply to the disputed materials.  Applying federal law to the work product issues, the court similarly concluded that, because the insurer held the protection and did not attempt to prove any of its claims by disclosing an attorney-client communication, the insurer did not waive work product protection.

The court also concluded, however, that the insurer waived all protections with respect to a letter analyzing the merits of the potential litigation by disclosing the letter to its broker and primary insurer.  The court rejected the insurer’s argument that privilege protected the letter from disclosure to third parties under the “common interest doctrine” because it found that, at the time the insurer sent the letter with notice of the claim to its primary insurer, the parties did not share sufficient common interest because without prior notice of the claim, the primary insurer “could not have already accepted the defense obligations.”  The court concluded that, by intentionally disclosing the letter without indicating intent to prevent disclosure to third parties, the insurer waived its attorney-client privilege for communications regarding that specific subject matter.  Balancing fairness to the parties, the court limited the scope of the waiver to the insurer’s communications that took place before the underlying suit was filed.  The court further concluded that the insurer only waived work product protection for the actual document that was produced.


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