Paul Sanchez
In the context of insurance, attorney-client privilege is more complex than in other litigation scenarios as it involves sharing information with a third party, namely the insurance company. In most jurisdictions, communications between an insurance company and its policyholder are not inherently protected from disclosure to third parties. However, California law protects information disclosed between a policyholder and its insurance company, limiting what a policyholder must provide to its insurers in subsequent coverage disputes. While California's laws protect independent counsel's work product and attorney-client communications from disclosure to an insurer during a coverage dispute, the inclusion of insurance brokers in legal proceedings can waive attorney-client privileges under California's Evidence Code. This is because the disclosure must be reasonably necessary to further the purpose of the lawyer's engagement and remain confidential.
| Characteristics | Values |
|---|---|
| Communications between insured and insurer privileged in California | California law protects information disclosed between a policyholder and its insurance company, and limits what a policyholder has to provide to its insurers in subsequent coverage disputes. |
| Attorney-client privilege | The attorney-client privilege has been described as the “oldest rule of privilege known to the common law.” The privilege is designed to allow clients to be candid with their attorneys without fear that the information might be discovered by others. |
| Including insurance brokers in litigation strategy | Including insurance brokers in the litigation company’s legal proceedings can backfire in California, as including them may waive attorney-client privileges under California’s Evidence Code section 952. |
| Communications with insurance brokers | Privilege can extend to the insured’s broker if, based on the facts at issue, the broker can be considered to be acting as the insured’s agent and therefore within the attorney-client relationship. |
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What You'll Learn
- California laws protect attorney-client communications from disclosure to insurers during disputes
- California courts have identified two categories of third parties under attorney-client privilege
- Including insurance brokers in legal proceedings may waive attorney-client privilege
- California law protects information disclosed between policyholders and insurers
- Communications between insurers and policyholders are not inherently protected from third parties
California laws protect attorney-client communications from disclosure to insurers during disputes
In California, attorney-client privilege is a long-standing legal principle that ensures communications between attorneys and clients are confidential. This privilege is codified in California law through Evidence Code 954, which gives attorneys the right to refuse to divulge the contents of conversations with their clients and grants clients the right to require confidentiality from their attorneys.
However, this privilege is not absolute, and certain exceptions may apply. For example, under Evidence Code 952, California courts have identified two categories of third parties who fall under the attorney-client privilege. The first category includes experts such as physicians or appraisers who assist in advancing the litigant's interests. The second category comprises individuals whose interests align with the defendant and further the client's interests in the consultation.
In the context of insurance, the attorney-client relationship becomes more complex due to the involvement of a third party, namely the insurance company. Communications between an insurance company and its policyholder are generally not inherently protected from disclosure to third parties, including the insured's defence counsel. The determination of whether such communications are protected depends on which party controls the underlying litigation.
In California, while there is no published state court opinion on whether an insurance broker is an authorized representative of a client, a federal district court opinion in the Northern District of California concluded that an insurance broker could satisfy this definition. Nevertheless, including insurance brokers in legal proceedings can potentially waive attorney-client privileges under California's Evidence Code section 952. Attorneys and their clients must exercise caution and only disclose the information necessary for brokers to provide advice.
Additionally, in situations where an attorney needs to withdraw from representing an insured client, it must be done in a manner that protects confidential communications and does not prejudice the rights of the insured. This process should be conducted with special care to safeguard the reasons for withdrawal.
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California courts have identified two categories of third parties under attorney-client privilege
Communications between an insurance company and its policyholder are not inherently protected from disclosure to third parties. Neither federal common law nor the majority of states recognize any type of insurer-insured privilege. As a result, for such communications to be protected, another privilege must apply.
California Evidence Code section 952 outlines the attorney-client privilege and specifies that only those who further the client's interest or those with whom disclosure is required for the transmission of information or the accomplishment of the purpose for which the lawyer is consulted are included in the privileged communication. California courts have identified two categories of third parties who fall under the attorney-client privilege.
The first category pertains to experts who assist in advancing the litigant's interests but have no personal interest in the litigation. This category includes physicians, appraisers, or other experts consulted by the attorney to advise the client better. The Kovel rule for third-party consultants applies when a third-party advisor, such as an accountant, clarifies communications between the attorney and client where the advisor translates or interprets information given to the attorney by the client.
The second category includes individuals whose interests are aligned with the defendant and further the client's interest in the consultation. These parties have interests of their own to advance in the matter, but their interests are aligned with those of the client. This includes individuals who are essential in conveying information to the lawyer or are reasonably necessary to protect the client's interests. For example, in one case, the court found that an elderly mother facing litigation related to a traumatic event had a reasonable expectation of confidentiality when her daughter was present for lawyer-client conferences. The daughter chose the law firm for her mother, transported her to the meetings, and put her at ease so she could communicate with her lawyers. She also had relevant information and could aid her mother's memory.
It is important to note that including insurance brokers in legal proceedings can backfire in California, as it may waive attorney-client privileges. Attorneys and their clients should be cautious in only disclosing information necessary for the brokers to provide advice. The key is whether the communications were necessary for the brokers to assist the client in the litigation.
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Including insurance brokers in legal proceedings may waive attorney-client privilege
In California, there is no published state court opinion that addresses whether an insurance broker is an authorized representative of a client. However, a federal district court opinion found that an insurance broker can satisfy the definition of a "client" under California law. This means that including insurance brokers in legal proceedings may waive attorney-client privilege, as the communication is no longer strictly between the attorney and the client.
The attorney-client privilege is a vital aspect of the legal system, allowing clients to be candid with their attorneys without fear of information being discovered by others. This privilege is based on the public policy that an attorney can provide sound legal advice and zealous representation when fully informed by the client of the facts and circumstances surrounding the case. However, the involvement of a third party, such as an insurance company or broker, can complicate this dynamic and potentially waive the privilege.
In California, Evidence Code section 952 outlines the attorney-client privilege and specifies that only those who further the client's interest or those necessary for the transmission of information are included in privileged communication. The code identifies two categories of third parties who fall under the privilege: experts who assist in advancing the litigant's interests without any personal interest in the litigation, and individuals whose interests are aligned with the defendant and further the client's interest in consultation. While insurance brokers may fall into either of these categories, their inclusion is not guaranteed and must be evaluated on a case-by-case basis.
To protect the attorney-client privilege, attorneys and clients should exercise caution when disclosing information to insurance brokers. It is essential to consider whether the communications are necessary for the brokers to effectively assist the client in the litigation. Before including insurance brokers, clients need to understand the specific advice or contribution the broker will provide and what information is required to offer this assistance.
In some cases, insurance brokers may be necessary to help the defendant with their defense. For example, a client may require assistance understanding multiple insurance policies, the impact of settlements or judgments, and the consequences of litigation on future policies. While insurance brokers can provide valuable insights in these areas, attorneys and clients must carefully weigh the benefits against the potential waiver of attorney-client privilege.
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California law protects information disclosed between policyholders and insurers
California has a set of laws and regulations in place to protect the privacy of policyholders and their personal information. The California Insurance Code Sections 791-791.28, also known as the Insurance Information and Privacy Protection Act (IIPPA), outlines the rights of policyholders and the obligations of insurance institutions and agents.
The IIPPA provides protections for personally identifiable information that individuals provide to an agent, broker, or insurance company when applying for insurance or submitting a claim. This includes medical records and other individually identifiable health information, whether on paper, digital, or communicated orally. Insurance institutions and agents are required to provide a "Privacy Notice" to individuals, outlining their practices and policies regarding privacy, the type of information collected, how it will be shared, and the individual's rights to restrict sharing.
The Act also grants policyholders certain rights regarding their personal information. Policyholders have a right of access and correction to their personal information. If an individual makes a written request within 90 business days of receiving notice of an adverse underwriting decision, the insurance institution must provide the specific reasons for the decision and the personal information that supports those reasons within 21 business days.
However, it is important to note that communications between an insurance company and its policyholders are not inherently protected from disclosure to third parties. Whether such communications are protected turns on which party controls the underlying litigation. In most jurisdictions, evidentiary privileges are based on statutes, and courts cannot create new privileges or exceptions. Neither federal common law nor the majority of states recognize any special privilege for insurer-insured communications. Therefore, for such communications to be protected, another privilege, such as attorney-client privilege, must apply.
In California, the inclusion of insurance brokers in litigation strategy communications may waive the attorney-client privilege under California's Evidence Code section 952. This privilege only applies to those who further the client's interest or those necessary for transmitting information or accomplishing the purpose of the lawyer's consultation. Attorneys and clients should disclose only the information necessary for brokers to provide advice to protect the privilege.
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Communications between insurers and policyholders are not inherently protected from third parties
In most jurisdictions, communications between an insurance company and its policyholder are not inherently protected from disclosure to third parties. This is because evidentiary privileges are typically creatures of statute, and courts are generally unable to create new ones or make exceptions to those created by statute. Therefore, neither federal common law nor the majority of states recognize any type of insurer-insured privilege.
However, California law provides some protection for communications between an insured and their insurer, even in the face of a potential coverage dispute. In California, the presence of independent or Cumis counsel serves as a reminder that the interests of the insurer and insured are not always aligned. The state's laws protect information disclosed between the insured and insurer from automatic waiver as to other parties, and limit what a policyholder must provide to their insurers in subsequent coverage disputes. For example, in Bank of America, N.A. v. Superior Court, the underlying plaintiff tried to seek communications between an insured and its insurer, but was unable to do so because the insurer had reserved its rights and the insured did not hire Cumis counsel.
Nevertheless, not all communications and work products will be protected in California, especially when there is no duty to defend. For instance, in Continental Casualty Co. v. St. Paul Surplus Lines Insurance Co., the court found that while a conflict of interest was explicit between an insured and a defending insurer that reserved its rights, such a conflict was also manifested between an insured and a non-defending insurer that retained its own interests in the litigation outcome. Additionally, including insurance brokers in legal proceedings can waive attorney-client privileges under California's Evidence Code section 952. This is because the key consideration is whether the communications were necessary for the brokers to assist the client in the litigation.
In conclusion, while California offers some protections for communications between insurers and policyholders, these communications are not inherently privileged and can be disclosed to third parties in certain situations.
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Frequently asked questions
California law protects information disclosed between a policyholder and its insurance company and limits what a policyholder has to provide to its insurers in subsequent coverage disputes. However, communications between an insurance company and its policyholder are not inherently protected from disclosure to third parties.
In California, the attorney-client privilege is waived when communications are disclosed to a third party, such as an insurance broker, unless the communications are confidential and reasonably necessary to accomplish the purpose for which the lawyer was consulted.
The protection of communications between the insured and the insurer varies across states. For example, in New York, courts have applied a fact-specific inquiry to examine the broker's role relative to the insured and the insured's counsel. In Illinois, the Supreme Court held that the insured and insurer share in the attorney-client privilege and work product protections relating to the underlying litigation.
