Recently, while going through the insurance company claim file on two cases, I saw references to a coverage opinion letter from a lawyer (or referencing emails shared between the adjuster and an attorney about coverage). These communications occurred in the claims handling process before the claim was denied and before the policyholder hired me as their lawyer. At about that point in the claim file there was much redacting where the lawyer defending the case had blacked out (or blanked out) anything having to do with communications between the coverage lawyer and the insurance company. I sent (pre motion to compel) letters to opposing counsel kindly asking them to reconsider their redaction of the documents, and withdraw their objection to my discovery request. The response I got was one of complete disdain that I had the audacity to make such a request. This is because many insurance defense lawyers think that anything done by a lawyer at any point during the claims handling process is absolutely and unquestionably protected by the attorney-client privilege.

I ended up settling both cases before we went to a compel hearing. However, I did some research because I know I will face this again. More insurance companies are involving lawyers earlier in the claims handling process. I have no problem with that, but I have a problem when the carrier attempts to hide or shield part of the claim file, solely because a lawyer was involved. The a federal district court in the Eastern District of Texas recently outlined what is required to maintain an assertion of attorney privileges.1 More importantly, the court explained when attorney work is not privileged in the claims handling process. Under Texas law the elements of attorney-client privilege are:

  1. a confidential communication;
  2. made for the purpose of facilitating the rendition of professional legal services;
  3. between or amongst the client, lawyer and their representative; and
  4. the privilege has not been waived.

The burden is on the party asserting the privilege to demonstrate how each document or communication satisfies each element. General allegations of privilege are insufficient. Fed. Rule. Civ. Proc. 26(b)(3) provides that only documents prepared “in anticipation of litigation” are exempt from discovery:

However, the work product doctrine is not an umbrella that shades all materials prepared by a lawyer, or agent of the client and the doctrine excludes materials assembled in the ordinary course of business. It also does not extend to underlying facts relevant to the litigation…If the document would have been created without regard to whether litigation was expected, it was made in the ordinary course of business and is not protected by the work product doctrine.

A coverage opinion is something insurance companies regularly assemble in the ordinary course of business. The coverage opinion is created no matter if or when any litigation might ensue. Importantly, by the time a case gets to litigation, the main issue is going to be coverage. Therefore, the coverage opinion is part of the underlying facts of the litigation, is not protected by privilege, and must be discovered. How is the policyholder supposed to prove breach of contract or bad faith if she is not given access to the decision-making process involved in denying the claim? The policyholder is entitled to the written explanation. It is obvious from Butler that any communications or work product by an insurance company lawyer during the claims handling process is discoverable and not protected by privilege. I look forward to compelling these materials in the future.

1 Butler v. American Heritage Life Ins. Co., 2016 WL 367314 (E.D. Tex. 01/29/2016).