Last week I blogged about how the recent Willis v. Swain case ruling out of Hawaii, may impact and shape future cases as we move forward full-steam into 2014. Looking back at the past year, it’s also important to mention a ruling from a Washington state court that will be helpful to insureds in efforts to procure bad faith damages. It is well known in the litigation realm that plaintiffs and their attorneys are continually frustrated when trying to obtain discovery of the claim file – only to find numerous redactions in the file during the adjusting period accompanied by a privilege log stating that these communications are attorney-client privilege.
In Cedell v. Farmers Insurance Company of Washington,1 the Washington Supreme Court ruled that in first-party situations, “there is a presumption that there is no applicable attorney-client privilege.” This means when bad faith is alleged as a cause of action, it is presumed that, in the claims file, attorney-client privilege does not apply to claims or coverage counsel, especially if that counsel was acting for the insurer in a “quasi-fiduciary” role. Specifically, it can be inferred if the insurer’s counsel is handling the claim during the investigation, or evaluating the claim on behalf of the insurer, there is no privilege.
The Court was extremely mindful that there are instances when an insurer’s attorney-client privilege must be maintained. The Court ruled that the presumption of no attorney-client privilege can be overcome if the insurer is able to demonstrate coverage counsel was providing legal counsel regarding the insurer’s potential liability. So as not to disclose attorney-client privileged materials, the Court was willing to have an in camera review of the documents in question. This means if a privilege is asserted in the claim documents during discovery, it is up to the trial court to review documents and determine whether the privilege asserted is viable.
Plaintiffs seeking bad faith damages should review an insurer’s discovery responses and, using Cedell, push to uncover the redactions many insurers insert into the claims file during discovery production. Uncovering coverage counsel’s communications while a claims file is being adjusted is a beneficial way to show the intentions of the insurer in how a claim is handled, and will be ground breaking in how cases evolve in 2014.
1 Cedell v. Farmers Ins. Co. of Washington, 176 Wn.2d 686, 295 P. 3d 239 (Feb 21, 2013).