Privilege and Work Product in Insurance Coverage Disputes

Adam Gajadharsingh | Barnes & Thornburg

Disputes over the attorney-client privilege, work product doctrine, and other privileges and protections can affect outcomes in insurance coverage disputes. Anticipating these disputes can help prevent disclosure of an insured’s protected information and also afford an opportunity to apply pressure against an insurer withholding relevant information without a valid basis.  

Who Does Defense Counsel Represent When the Insurer is Paying?

Communications among an insurer, its policyholder, and defense counsel can present tricky questions regarding whether and to what extent those communications may be privileged. Whether an insurer will have access to privileged communications between defense counsel and the insured in the event of a coverage dispute largely turns on whether a potential adverse relationship exists between the insurer and its policyholder and the nature of the policy at issue in the case. 

Policies give the insurer varying degrees of control over the insured’s defense. A duty to defend policy gives the insurer the right and duty to defend the insured, which generally means the insurer has the right to control the defense of the case, including whether and under what circumstances to settle. In contrast, under a “pay on behalf of” policy, the insurer generally has a right and duty to advance or reimburse defense costs, while the policyholder maintains control of the defense and the settlement process. 

States adhere to competing concepts governing whether the insurer is a client of the defense counsel it retains on behalf of its insured. Some states, like California, use the “tripartite” model, in which the insurer and the insured are the defense counsel’s joint clients, imposing on counsel ethical duties to both. [l] Other states hold that the insured is the only client of defense counsel. [2]

Generally, in the above scenarios, the insurer and insured will both be parties to communications with the defense counsel. While there is no insurer-insured privilege per se, many courts – particularly in tripartite states – hold that a defending insurer is within the circle of privilege with defense counsel and the insured. Other states hold that, even where the insurer is not within the circle of privilege, the insurer and insured may share a common interest in minimizing the insured’s liability such that communications among the carrier, defense counsel and the policyholder remain privileged even in states where defense counsel represented only the insured. Insurers frequently enter into common interest agreements with their insureds to underscore their intent to keep communications between them privileged and confidential. The downside to such open exchanges is that they afford an insurer plenty of opportunities to develop existing coverage defenses or conjure up new ones.

Certain coverage disputes, however, serve to cut off this valuable source of information from the insurer. In many states, an insured is entitled to independent counsel at the insurer’s expense where there is a conflict of interest between the insurer and insured – that is, where the insurer asserts a coverage defense that turns on the adjudication of a disputed issue in the underlying lawsuit. [3] In such circumstances, the insurer ends up paying for counsel that it does not control and with whom it does not share confidential communications. Similarly, where the insurance company denies coverage outright – including denial of any duty to defend – courts generally will not permit the insurer to have access to an insured’s privileged communications with defense counsel. [4]

Privilege in Bad Faith Claims

While privileged communications between the insurer and insured may protect the insured’s interests in maintaining the confidentiality of the details of its defense as against third parties, that shield may become a sword in the event of coverage litigation between them. Some courts have held that, where the insurer and the insured have a common interest in communicating with the defense counsel, they have no expectation of privilege between themselves in a subsequent coverage dispute. [5] Many other courts, however, have rejected this reasoning, and permit the insured to maintain confidentiality in its communications with its defense counsel when coverage is disputed notwithstanding their common interest and the insured’s duty of cooperation. [6]

Even in matters where there is no common interest between the insurer and the insured, a policyholder often can penetrate an insurer’s claim of attorney-client privilege and work product applicable to its investigation and analysis of a claim in bad faith litigation against the insurer challenging whether its investigation and analysis were reasonable. This is because investigating claims is a business function performed by an adjuster, not the function of a lawyer giving legal advice. Case law distinguishing in-house counsel’s privileged legal advice from unprivileged business advice applies here.In a bad faith action, a key issue often is whether the insurer’s investigation was reasonable.  When an insurance company tries to shield its investigation from scrutiny by having it done by an attorney, this is the equivalent of claiming privilege for a lawyer’s business advice. This would not be allowed because the carrier’s business is investigating claims. Communications by attorneys acting as insurance claims investigators, rather than as attorneys, are not protected by the attorney client privilege. [7] Therefore, no protection should attach to the insurer’s investigation of a claim, no matter who performs it.

Privilege is waived in the bad faith context when the insurer claims, as a defense, that it relied upon the advice of counsel. [8] The “reliance on counsel” defense overlaps with another basis for waiver of the privilege – the “at-issue” doctrine. The “at-issue” doctrine comes into play when a party takes the position that it relied on the advice of counsel in asserting a claim or defense. This reliance now makes that legal advice relevant to the underlying suit, which may constitute an implied waiver of the privilege. This can occur in bad faith cases, where an insurer asserts (usually as a defense to punitive damages) that its decision not to provide coverage for a claim was appropriate because it was based on the advice of counsel. [9] Some courts have taken a more stringent approach, holding that mere relevance of the attorney’s advice to the client’s claim or defense is not enough: The party challenging privilege must demonstrate that the client affirmatively and directly placed the advice of its attorney at issue by citing it as the specific basis for the claim or defense. [10] The inquiry is very fact-specific and the tests used to resolve these issues can differ substantially among jurisdictions.

The Use of Third Parties

Another common relationship affecting privilege and work product protection is that among insurers, policyholders, and third parties like consultants and brokers. A policyholder may be able to use privilege and the work product doctrine to protect confidential attorney-client communications provided to brokers in order to prepare for litigation with its carrier. In contrast, many courts will not extend privileges to protect an insurance carrier’s documents if they were created in the ordinary course of claim handling. [11]

From the perspective of an insured working with its broker on a disputed claim, the broker’s help in preparing for anticipated litigation may be essential. If a broker is acting as a “representative” of the insured, pursuant to Federal Rule of Civil Procedure 26(b)(3) and equivalent state rules, its communications with the policyholder may be protected by the work product doctrine. Even if a broker is not a “representative,” revealing work product material to it is not necessarily a waiver of work product protection. Unlike the privilege attaching to attorney-client communications, which is waived when sharing with a third party, work product protection is defeated only if the third party’s interests are adverse to those of the insured. Additionally, if the insured’s broker is needed as an ongoing consultant to assist the attorney in providing legal advice, the Kovel privilege – based on a Second Circuit opinion extending the attorney-client privilege to a client’s communication with an accountant in the lawyer’s employ, incident to the legal advice sought by the client – may apply. [12] The common interest doctrine can also be a powerful shield to protect communications involving a broker, because it acts as an exception to the waiver of the attorney-client privilege where the relevant factual showing is made (such as necessity, in some states).

Insurers sometimes attempt to shield information related to the work of their adjusters without a proper basis. For example, an insurer may hire consultants to assist with the claims investigation process, rely upon their reports in denying a claim, and then take the position that these reports are non-discoverable work product in coverage litigation. Work product protection, however, typically is available only at the point where the insurer reasonably anticipates litigation. A best practice for a policyholder is to assess carefully when, during the insurer’s claim evaluation process (which is not protected by work product), it actually began to anticipate litigation, to prevent the carrier from shielding otherwise discoverable documents

Privilege Logs

A valid claim for privilege can all be for naught if it is not asserted correctly. Preparing a defensible privilege log is an essential element in this process. The requirements for privilege logs vary across jurisdictions, so it is good practice to check local rules and standing orders. [13] If all potential protections are not expressly asserted on the log or the log is otherwise inadequate, this risks waiving the protections altogether. [14] To assess whether an email, for example, is privileged, one must know who sent and received it (including everyone copied and blind copied). Failure to provide information like this may raise a challenge.

A best practice is for insureds to evaluate all of these issues when pursuing coverage for contested claims. Insurance companies often take the most aggressive position possible regarding privilege and work product, trying to use them as a sword (by delving into protected exchanges), and as a shield (by trying to prevent discovery of documents created in the ordinary course of the insurer’s business). The insured often has substantial grounds to push back on these positions. Doing so can be a potent weapon for increasing pressure on a recalcitrant carrier to pay a covered claim.This article was originally published in the 2020 edition of Corporate Policyholder Magazine.

[1] Cont’l Cas. Co. v. St. Paul Surplus Lines Ins. Co., 265 F.R.D. 510, 519-20 (E.D. Cal. 2010).

[2] Essex Ins. Co. v. Tyler, 309 F. Supp. 2d 1270, 1272 (D. Colo. 2004).

[3] Golden Eagle Ins. Co. v. Foremost Ins. Co., 20 Cal. App. 4th 1372, 1396, 25 Cal. Rptr. 2d 242, 258 (1993).

[4] Owens-Corning Fiberglas Corp. v. Allstate Ins. Co., 74 Ohio Misc. 2d 174, 181, 660 N.E.2d 765, 769 (Com. Pl. 1993).

[5] Waste Management, Inc. v. International Surplus Lines Ins. Co., 579 N.E.2d 322, 328-29 (Ill. 1999).

[6] E. Air Lines v. United States Aviation Underwriters, 716 So.2d 340, 342-43 (Fla. Dist. Ct. App. 1998); PETCO Animal Supplies Stores, Inc. v. Ins. Co. of N.
Am., No. CIV. 10-682 SRN/JSM, 2011 WL 2490298, at *21 (D. Minn. June 10, 2011).

[7] Michigan First Credit Union v. Cumis Ins. Soc., Inc., No. 05-74423, 2006 WL 1851018, at *2 (E.D. Mich. July 5, 2006).

[8] State Farm Mut. Auto Ins. Co. v. Lee, 13 P.3d 1169, 1175 (Ariz. 2000).

[9] Hunton v. Am. Zurich Ins. Co., No. CV-16-00539-PHX-DLR, 2017 WL 3712445, at *2 (D. Ariz. Aug. 29, 2017). 

[10] Rhone-Poulenc Rorer, Inc. v. Home Indemnity Co., 32 F.3d 851, 863 (3d Cir. 1994).

[11] Carver v. Allstate Ins. Co., 94 F.R.D. 131, 134 (S.D. Ga. 1982).

[12] See U.S. v. Kovel, 296 F.2d 918 (2d Cir. 1961).

[13] See Fed. R. Civ. P. 26(b)(5)(A)(i) and (ii) for a good baseline of what is required.

[14] Aurora Loan Services, Inc. v. Posner, Posner & Assocs., P.C., 499 F. Supp.2d 475, 479 (S.D.N.Y. 2007); see also, Jansson v. Stamford Health, Inc., 312 F.
Supp.3d 289 (D. Conn. 2018).

South Carolina Supreme Court’s Quiet Erosion of Insurers’ Attorney-Client Privilege Rights

Roben West | Property Casualty Focus

One decision that flew under the radar in 2019 continues the recent trend of courts to dispense, under among other things the previously discussed “at-issue” waiver doctrine, with insurers’ fundamental rights to confidentiality with respect to legal advice. In the June 2019 decision In re Mt. Hawley Insurance Co., No. 2018-001170 (S.C. June 12, 2019), South Carolina directed, in response to a certified question from the Fourth Circuit Court of Appeals, the circumstances under which it decided that an insurer no longer has a right to confidential attorney-client communications in bad faith cases.

The insurance dispute stemmed from various alleged construction defects plaguing a residential development. The insurer issued an excess commercial liability policy to the construction company that was responsible for constructing the residential development. Upon the discovery of alleged construction defects, the development’s homeowners association sued the construction company. Eventually, the construction company settled with the homeowners association and assigned its interest in the excess policy to the homeowners association.

In response to the insurer’s coverage denial, both the insured and the construction company filed a bad faith action in state court, which was removed to federal court shortly thereafter. During discovery, the insurer relied on the attorney-client privilege to withhold several documents from the plaintiffs. Arguing that the insurer’s denial of bad faith implicated the “at-issue” exception and established the insurer’s waiver of the attorney-client privilege, the plaintiffs filed several motions to compel, resulting in in-camera inspection of the documents. The insurer sought a writ of mandamus to avoid the production, and the Fourth Circuit certified the following question to the South Carolina Supreme Court:

Does South Carolina law support application of the “at issue” exception to attorney-client privilege such that a party may waive the privilege by denying liability in its answer?

The court began its analysis by surveying South Carolina bad faith law and the various approaches surrounding the implied attorney-client privilege waiver in the bad faith context. The court adopted a “middle-ground” case-by-case approach, finding the rule less harsh than establishing a per se waiver every time an insurer defends a bad faith action by denying bad faith or asserting good faith but more stringent than an absolute application of the privilege.

The court acknowledged that as it relates to implied waiver and the at-issue exception to the attorney-client privilege, insurers are often stuck between “Scylla and Charybdis” because it is difficult to respond or otherwise defend a bad faith action without asserting that it investigated the claim in good faith and evaluated the applicable law. The court clarified that it is when the insurer affirmatively alleges that its actions were based on its reasonable good faith belief and its subjective belief — which was informed by advice of counsel — that the court found that the privilege must give way.

The court did not comment on the potential policy implications of a rule that encourages insurers and their counsel to reduce the scope of what they are willing to commit to paper.

What are the Boundaries of the Attorney/Client Privilege – Can a Public Adjuster Be a Part of Privileged Communications?

Tamara Chen-See | Property Insurance Coverage Law Blog | November 5, 2019

When an insured disputes coverage or the amount of loss under an insurance policy, it frequently finds it necessary to hire a claims professional – a licensed public adjuster or other claim consultant, or an attorney for assistance.

Insurance companies have claim professionals on staff and are equipped as a business practice to resolve disputed issues of coverage or damages, but most insureds are not. For some of the complex or substantial commercial and condominium claims we represent, a lawsuit can be necessary to resolve the dispute and the insured’s claim professional continues to assist with understanding the facts of the claim investigation – what property was damaged, the condition of the property before and after the event triggering coverage, and the measures taken to mitigate the damages, for example. Issues concerning discovery of those communications during the lawsuit can arise. The attorney/client privilege, and the related doctrine of attorney work-product immunity from disclosure, limit discovery of communications with an attorney.

In some states where we practice, such as Colorado, the attorney-client privilege has been codified in a statute, and is generally described in the following terms:

An attorney shall not be examined without the consent of his client as to any communication made by the client to him or his advice given thereon in the course of professional employment; nor shall an attorney’s secretary, paralegal, legal assistant, stenographer, or clerk be examined without the consent of his employer concerning any fact, the knowledge of which he has acquired in such capacity.1

When claims cannot be settled without a lawsuit, attorneys frequently need to obtain factual information to advise the client, and there are many sources of that information – the documents in the underlying claim process reflecting the investigation, the insurance carriers claims notes or log (in a bad faith case, where such internal documents are discoverable), depositions and other information preserved for the legal process.

Attorneys are routinely called on to provide advice to their clients, in confidence, and such communications are protected from intrusion by others outside that privilege. However, if persons that are not related to or employed by the insured client are included in an otherwise confidential communication with the attorney, the privilege may be waived, and the communication becomes discoverable evidence in a lawsuit.2 But often the attorney needs to advise the insured client about facts that are not readily evident from those other materials and may need to include the public adjuster or other claim professional in a communication with the client enabling the attorney to give advice. Since the claim professional may be deemed to be a “third-party” to this communication, can the communication still be protected from discovery as a confidential attorney-client “privileged” communication, immune from discovery?

Many states provide protection for such communications in recognition of the practical necessity of including knowledgeable “third-parties” in the conference. Where an insured has hired an independent contractor or an agent or other representative to investigate or control some activity important to the insured, an “organizational privilege” may arise. This formulation of the privilege is commonly attributed to the United States Supreme Court in Upjohn Co. v. United States,3 where the Court analyzed the scope of the attorney-client privilege in the corporate context. The Court rejected what had previously been known as the “control group” test where only senior management responsible for making a decision on the issue the privileged communications involved, and instead concluded:

(1) that the information, not available from higher management, was needed to supply a basis for legal advice; (2) that the communications concerned matters within the scope of the employees’ corporate duties; (3) that the employees were aware that they were being questioned so that the corporation could obtain legal advice; and (4) that the communications were considered “highly confidential” when made and were kept confidential by the company.

The highest court in the country has recognized that entities like corporations necessarily must act through their employees and representatives. And many times, those are the people who were actually involved in the underlying events on which advice is needed, rather than management of the company. It is a short leap to extend these principles to organizations that hire outsiders to perform some function, like a public adjuster or other claim professional might for an organization during a claim investigation. The Chief Justice of the Colorado Supreme Court provided an analysis to apply this “organizational privilege” to the independent contractors or other representatives of an agency in Alliance Construction Solutions, Inc. v. Department of Corrections.4

In Alliance Construction, the Colorado Supreme Court considered:

[W]hether the purposes supporting the attorney-client privilege-including the attorney’s need to gather relevant information in order to provide sound legal advice are supported by applying the privilege to protect communications between governmental counsel and persons who, though not formally employed by the governmental entity, have the kind of significant relationship with the entity that makes it appropriate to consider them functional employees for the purposes of the privilege.”5

The court held:

We find the Bieter court’s analysis persuasive and conclude that there are circumstances when the attorney-client privilege protects communications between a governmental entity’s independent contractor and the entity’s counsel. Moreover, this conclusion comports with our reasoning in Gordon v. Boyles, 9 P.3d 1106 (Colo. 2000) and Nat’l Farmers Union Prop. & Cas. Co. v. Dist. Court, 718 P.2d 1044 (Colo. 1986). Because we have concluded that the attorney-client privilege protects communications made to the attorney in order for him to provide sound legal advice, Gordon, 9 P.3d at 1123; Nat’l Farmers, 718 P.2d at 1049, we agree with the Bieter court that a formal distinction between an employee and an independent contractor conflicts with the purposes supporting the privilege. An independent contractor with a meaningful relationship to the governmental entity may possess important information needed by the attorney to provide effective representation.6

The Colorado Supreme Court held:

[F]or the attorney-client privilege to apply in the context at issue, the information-giver must be an employee, agent, or independent contractor with a significant relationship not only to the governmental entity but also to the transaction that is the subject of the governmental entity’s need for legal services. Thus, the type of relationship between the client and the information-giver must be closely analyzed to determine the application of the privilege.

These standards can apply to a claims professional such as a public adjuster if the necessary relationship – a written agreement between the adjuster and the insured – exists and close relationship with the transaction at issue – investigation of the claim circumstances – all exist.

Care is required to maintain the privilege, so the participants in a communication must follow the rules established to maintain confidentiality of the communications and avoid any waiver. However, given the critical role that outside claims professionals often have in the claim investigation and close evaluation of the damage circumstances, common sense should allow an attorney to join that third-party in confidential conferences with the client to assure that both the client and attorney have the critical facts needed for the attorney to provide legal advice. The courts seem to agree.
1 Colo. Rev. Stat. §13-90-107(1)(b) (2001).
2 This issue is discussed in this blog in the context of attorney representation of a corporation, partnership, limited liability corporation or other organizational entity, including not-for-profit community associations. The principles discussed should be similarly applicable to circumstances in which an individual retains a claims professional and that “third-party” is asked by legal counsel to assist in providing facts on which to advise the client.
3 Upjohn Co. v. United States, 449 U.S. 383, 101 S.Ct. 677, 66 L.Ed.2d 584 (1981).
4 Alliance Construction Solutions, Inc. v. Department of Corrections, 54 P.3d 861, 867-70 (Colo. 2002).
5 Id. at 867.
6 Id. at 867, relying on In re Bieter Co., 16 F.3d 929 (8th Cir. 1994).

The Supreme Court of Texas Clarifies That a Party Can Testify as an Expert Witness without Waiving the Attorney-Client Privilege

Donnie Apodaca | Avoiding Insurance Bad Faith | March 12, 2019

Litigation usually involves complex issues related to technology, products, or business processes. In many cases, clients are the best subject-matter experts of their craft. Nevertheless, attorneys are sometimes hesitant to designate a client or a client’s employee as an expert witness for fear of waiving attorney-client privilege. In a recent decision, the Supreme Court of Texas addressed this very issue and held that the attorney-client privilege remains unscathed when a party (or its corporate representative) is designated as a testifying expert witness. See In re City of Dickinson, — S.W.3d —, No. 7-0020, 2019 WL 638555 (Tex. Feb. 15, 2019).


City of Dickinson concerned whether a property insurer underpaid insurance benefits related to a Hurricane Ike claim made by the City of Dickinson. In responding to the City’s motion for summary judgment, the property insurer filed the affidavit of its corporate representative who was also a senior claims examiner. Unsurprisingly, the affidavit offered factual and expert testimony in opposition to the dispositive motion. The City later learned the corporate representative exchanged emails and drafts of the affidavit with defense counsel.The City then moved to compel the production of the emails and all other information “provided to, reviewed by, or prepared by or for” the corporate representative in anticipation of his expert testimony. Naturally, the property insurer claimed the documents were protected by the attorney-client privilege. The trial court, however, disagreed and granted the motion to compel. The intermediate appellate court reversed, finding the information sought was privileged.

The Supreme Court of Texas’s Decision

On appeal, the Court addressed whether Texas Rules of Civil Procedure 192.3 and 194.2 barred the property insurer from asserting attorney-client privilege. Rule 192.3 concerns the scope of discovery and provides that, with respect to a testifying expert, “[a] party may discover . . . all documents, tangible things, reports, models, or data compilations that have been provided to, reviewed by, or prepared by or for the expert in anticipation of a testifying expert’s testimony[.]” In construing Rule 192.3, the Court noted that the use of the word “may” merely meant that an opposing party could discover the information—not that it had an absolute right to discover it when a privilege applied. The Court also noted that another subpart of Rule 192.3 expressly precluded the discovery of privileged information.

Rule 194.2 concerns the content of a discovery tool called “requests for disclosure” and provides that, with respect to testifying expert, “[a] party may request disclosure of . . . all documents, tangible things, reports, models, or data compilations that have been provided to, reviewed by, or prepared by or for the expert in anticipation of the expert’s testimony[.]” As with Rule 192.3, the Court explained that the word “may” simply meant that a party could request the discovery. Another subpart of the rule expressly allowed the trial court to limit requests for disclosure, and the official comment to the rule made clear that “requests for disclosure under Rule 194 are subject to the attorney–client privilege just like the provisions of Rule 192.”

The Court also rejected the City’s argument that the Texas Rules of Civil Procedure should be interpreted the same as the pre-2010 Federal Rules of Civil Procedures because they were modeled after them. The Court summarily rejected the argument because the comments to the rules where substantively different.

The Court also distinguished its decision in In re Christus Spohn Hosp. Kleberg, 222 S.W.3d 434 (Tex. 2007). In that case, the Court held that a party was required to produce an investigator’s report provided to party’s expert. The Court explained that Christus Spohn only addressed the work-product privilege—not undisputed attorney-client communications. The Court explained that its holding was consistent with prior decisions, which “underscore the status of the attorney-client privilege as ‘quintessentially imperative’ to our legal system” and that “[w]ithout the privilege, attorneys would not be able to give their clients candid advice as is an attorney’s professional duty.”


City of Dickinson provides clarity in a previously unsettled area of Texas law. Further, it reinforces the importance of the attorney-client privilege and clarifies that a client does not have to choose between testifying as an expert at trial and invoking attorney-client privilege. Going forward, we expect the primary party-expert dispute to center on whether materials provided to the party-expert constitute discoverable work product under Christus Spohn or protected attorney-client privilege under City of Dickinson. Indeed, as the Court noted in its opinion, the two privileges are often conflated.

Attorneys: A Common Interest Agreement May Not Be Worth the Paper It’s Written On

Joseph L. Francoeur and Michael S. Tripicco | Wilson Elser | March 22, 2017

It is a very common practice for counsel to co-defendants or co-plaintiffs to enter into agreements that shield their communications. The agreements are expressions of intent that the communications will be protected by the “common interest doctrine” that extends the attorney-client privilege to discussions with parties that share a common interest. Under the doctrine, the attorney-client privilege is not waived when such communications are made between parties sharing a common legal interest.

In Ambac Assur. Corp. v Countrywide Home Loans, Inc., 27 NY3d 616 (2016), the New York Court of Appeals expressly limited the application of the common interest doctrine to “co-defendants, co-plaintiffs or persons who reasonably anticipate that they will become co-litigants.…” In doing so, the Court of Appeals clarified that the policy underpinning the doctrine was to enable two or more parties to coordinate a common claim or defense without fear that such efforts might later become the subject of disclosure.

Despite the frequent use of common interest agreements, there are limitations that may vitiate the privilege entirely and leave communications unprotected and discoverable to the other side. In applying the holding in Ambac, a New York County Supreme Court judge recently ruled that the common interest doctrine did not apply to communications between counsel where one party assigned claims to the other.

In 59 S. 4th LLC v A-Top Ins. Brokerage, Inc., 2017 N.Y. Slip. Op. 30050[U] (Sup. Ct., N.Y. County, Jan. 10, 2017), an owner of a residential development project initiated a lawsuit against an insurance broker, alleging that the broker had misrepresented the scope of work the general contractor could undertake with its current insurance. In addition, the owner obtained an unconditional assignment of any potential claims the general contractor may have possessed against the broker regarding the procurement of insurance. Subsequent to the assignment and during the litigation, the plaintiff owner and (non-party) general contractor entered into a “common interest agreement” before entering into a series of discussions. That agreement contemplated that certain communications between the owner and the general contractor would be privileged and confidential. When counsel for the broker sought production of those communications, the owner refused to produce them citing the common interest doctrine. The broker then moved to compel.

In granting the broker’s motion, the Court reaffirmed the limited applicability of the common interest doctrine as set forth by the Court of Appeals in Ambac. The Court reasoned that, because the assignment completely divested the general contractor of any interest it may have had in the outcome of the litigation, the general contractor could not – by definition – become a co-plaintiff in the action. As a result, the entirety of verbal and written communications between the owner and general contractor were deemed not privileged and subject to disclosure to the other side.

Following the holdings in Ambac and 59 S. 4th LLC, any lawyer considering entering into a common interest agreement should be mindful that these agreements are not automatically upheld. Instead, careful practitioners must confirm whether their situation meets the requirements set forth in Ambac above, or they, too, may see their private communications deemed unprotected.