Recently I blogged about how courts across the country are recognizing that a coverage opinion provided by an outside attorney to an insurer during the claims process is not privileged. A recent case in Mississippi shows that courts across the country are supporting those prior decisions. In Willis v. Allstate Insurance Company,1 the trial court concluded that the insurer cannot assert attorney-client privilege or the work-product doctrine when outside coverage counsel renders a coverage opinion. In fact, the entire file of that coverage attorney is discoverable.
In the case at hand, the insured’s home suffered a fire loss and the insured made a claim on her homeowner’s policy with Allstate. Allstate employed an outside counsel to provide a coverage opinion and ended up denying the claim. After the insured filed a bad faith lawsuit, Allstate’s deponents indicated that their coverage opinion was based upon that of outside counsel and although Allstate’s attorneys provided that coverage opinion letter in discovery, the insurer’s attorneys withheld the rest of the outside attorney’s file claiming privilege.
As the insured’s attorney sought to gain access to the insurer’s entire coverage opinion file, the court disagreed with Allstate’s assertions of both work product and attorney-client privileges and held that the insurer waived such privileges. The court was exceedingly clear that the entire file of the outside claim attorney was not privileged because the entire file would be important to understanding the coverage opinion.
Here, the court stated the insurer had the burden to show that the outside counsel’s file was prepared in the anticipation of litigation. The question of at what point the file of outside counsel shifted from the "routine investigation of a possible resistible claim" to that of being anticipation of litigation needed to be clear and the insurer could not show when the delineation occurred.
Insurers commonly use outside counsel to render coverage opinions and to perform coverage investigations after an insured suffers a loss. The day is swiftly coming to an end where courts allow insurers to keep outside counsel’s files privileged through attorney-client privilege and work product doctrine. Courts are ruling that insureds may see the entire investigation regarding why their claims are denied, and coverage opinions and their reasons for denial are becoming more transparent.