Courts Explore Privilege Protection for Communications Between an Insurance Company and its Insured

June 16, 2010

Courts have struggled with analyzing the applicability of attorney-client privilege protection for communications between an insurance company and the lawyer it retains to represent its insured. In states where the law does not deem that lawyer to represent both entities, it is difficult to justify such privilege protection – because the entities have a contractual rather than legal relationship, and the insurance company shares only a financial (rather than a legal) interest in the insured’s success.

Despite the theoretical hurdles in applying the privilege to such communications, courts strain to protect them. In In re Tetra Technologies, Inc. Securities Litigation, Civ. A. No. 4:08-cv-0965, 2010 U.S. Dist. LEXIS 33012, at *13 (S.D. Tex. Apr. 5, 2010), the court pointed to other decisions in the circuit holding that “the attorney-client privilege extends to communications between an insurer and its insured” – as long as “such communications are shared with counsel for the purposes of defending the legal interest of the insured.” Seven days later, another federal court explained that when “an insurer acts . . . with a purpose of facilitating the insured’s legal defense, communications between insurer and insured have been held to be protected by the attorney-client privilege.” Lamar Adver. of S. D., Inc. v. Kay, No. CIV. 07-5091, 2010 U.S. Dist. LEXIS 36012, at *36 (D.S.D. Apr. 12, 2010).

Corporations dealing with their insurance carriers should not assume that every court takes this broad approach, but should rely on such helpful case law supporting this principle. Fortunately, the separate work product doctrine almost surely protects these communications.