This blog series has addressed several typical policy conditions, how such conditions can or cannot be exercised by an insurer during claim adjustment, and what conditions require an insured to do or not do. It is not uncommon for insurers to employ attorneys to exercise policy conditions (e.g., conduct EUOs, obtain recorded statements, obtain documents), and this post addresses the legal consequences on an insurer’s doing same. In short, if an attorney acts as a de facto claim adjuster on behalf of the insurer, a policyholder immersed in litigation is entitled to discover various (if not all) documents generated by or involving the attorney. Now I expound, starting with a factual illustration from the Pacific Northwest and ending with a string cite of Florida authority that Florida policyholder attorneys might find useful.
Under the following facts, the Supreme Court of Washington recently required Farmers Insurance Company to turn over documents it contended were attorney-client privileged:
Farmers hired [attorney] Hall to do more than give legal opinions [as to coverage liability]. The record suggests that Hall assisted in the [claim] investigation. Hall took sworn statements from [policyholder] Cedell and a witness and corresponded with Cedell. Hall assisted in adjusting the claim by negotiating with Cedell. Seven months after the fire, Hall wrote to Cedell offering a ‘one time offer’ of $30,000, which was open for only 10 days, and threatened denial of coverage if the offer was not accepted. It was Hall who was negotiating with Cedell on behalf of Farmers and it was Hall who did not return his calls when Cedell was attempting to respond to the offer. While Hall may have advised Farmers as to the law and strategy, he also performed the functions of investigating, evaluating, negotiating, and processing the claim. These functions and prompt and responsive communications with the insured are among the activities to which an insurer owes a quasi-fiduciary duty to Cedell.1
Under facts like these, Florida courts (state and federal) have routinely done as the Supreme Court of Washington did about a month and a half ago – order insurers to turn over supposedly attorney-client privileged or work product immune documents and information.2 You will note that the Supreme Court of Washington’s Cedell decision was rendered in bad faith litigation, whereas the footnoted Florida decisions were not.
To read previous posts in my series on insurance policy conditions, click here.
1 Cedell v. Farmers Ins. Co. of Washington, 295 P.3d 239, 247 (Wash. 2013).
2 See, e.g., Bankers Ins. Co. v. Florida Dept. of Ins. and Treasurer, 755 So. 2d 729 (Fla. 1st DCA 2000) (holding that there is no attorney-client privilege where an attorney is acting as a mere “conduit” of an insurance company and that there is no work product immunity where an attorney performs tasks for an insurer outside his / her professional capacity as an attorney); Milinazzo v. State Farm Ins. Co., 247 F.R.D. 691, 697 (S.D. Fla. 2007) (same) (citing Bankers); 1550 Brickell Assocs. v. Q.B.E. Ins. Co., 253 F.R.D. 697, 699-700 (S.D. Fla. 2008) (holding that no privilege applies where an insurer retains an attorney to assist in developing the investigation, securing examinations under oath, propounding prelitigation document requests and the like); Cutrale Citrus Juices USA, Inc. v. Zurich Am. Ins. Group, No. 03-cv-420-Oc-10GRJ, 2004 WL 5215191, *2-3 (M.D. Fla. Sept. 10, 2004) (“to the extent that an attorney acted as a claims adjuster, claims process supervisor, or claim investigations monitor, and not as a legal adviser for Defendants [insurance companies], attorney-client privilege would not apply and any documents responsive to Plaintiff’s request to produce would have to be disclosed”).