Introduction

"Discovery in coverage and bad-faith litigation: are courts permitting more invasive discovery?" examined how the protections afforded to insurers by attorney-client privilege and the work product doctrine have been challenged and stretched through recent cases across the United States, particularly where bad faith of an insurer is alleged.(1) It confirmed that whether an insurer has impliedly waived attorney-client privilege continues to be a case-by-case analysis and revealed that asserting the 'advice of counsel' defence weakens an insurer's ability to claim the privilege where bad faith is alleged.

This update provides some practical pointers for insurers and attorneys to assist in laying the groundwork for privilege and asserting attorney-client privilege.

Laying the groundwork for privilege

  • When emailing in-house counsel, make the specific request for legal advice clear. Merely writing "a request for comments" or for "feedback" does not equate to seeking legal advice. Simply copying an in-house counsel to an email does not automatically confer privilege – especially where an email is sent to various corporate, non-legal employees.
  • In-house counsel should reply to the initial email and reference legal advice in the response. A court may note that a lack of a response to an email by in-house counsel weakens arguments for privilege; and even if a response is given, if the response can be construed as simply corporate/business advice, and not legal advice, privilege will not be conferred.
  • In-house counsel who also hold operational/corporate titles must make it clear that the purpose of a communication alleged to be privileged is to render legal advice, and not business advice.
  • In-house (or outside) counsel should not take on any claims-handling type of activities if counsel is engaged specifically for legal advice.
  • Coverage counsel should consider, to the extent possible, creating separate documents for factual investigation and legal analysis of the facts. Otherwise, consider clearly delineating sections within a document titled "Facts and legal analysis", in order to set the argument for privilege down the road. Some courts emphasise that, even if in-house or outside counsel are involved in generating documents or communications pertaining to a claim file, if the nature of that document includes "facts and non-legal opinions and thoughts about the facts", then those documents are considered within an insurer's ordinary course of business and are not afforded attorney-client privilege or work product protection. In order to show that such communications with counsel are primarily legal, and not in a business capacity, one court has suggested that an insurer could offer "detailed explanations of the nature of the legal advice sought from counsel on a document-by-document basis". The court appeared displeased that an insurer did not attempt to separate factual investigations from legal coverage analysis of a claim, despite the insurer's position that separating the two was not practicable.(2)
  • Coverage counsel should limit any business or claims-handling roles, and show the legal work and analysis provided.
  • Coverage counsel should not contact the insured or other third parties with the coverage advice provided to the insurer.
  • The following kinds of documents related to a claim can be sought:
    • claim file;
    • claim diaries relating to a particular claim;
    • correspondence between in-house counsel for the insurer and insurance adjuster;
    • coverage file;
    • claims portfolio;
    • claims memo/emails;
    • corporate referral reports;
    • correspondence/memoranda/letters/emails;
    • all documents which can be accessed online by an insurer for a claim; and
    • electronically stored information – including prior drafts, in native format, with metadata intact.
  • If claims files are kept separately from coverage files, consider providing the court with an overview of how files are kept and separated.
  • Consider taking a compromise approach from the beginning. Courts may be more receptive to claims of privilege if an insurer has historically shown a reasoned and balanced approach in contesting production of certain documents based on privilege. Instead of a near-blanket assertion of attorney-client privilege as to all claims handling materials, for example, consider taking a targeted, selective assertion of the privilege. Courts may view an insurer's initial dealings with the requesting party and efforts that an insurer has made to make certain compromises with production, as well as the insurer's interactions with the court.
  • Consider redacting attorney impressions and legal opinions, and otherwise producing certain communications/documents.
  • If using affidavits to bolster claims of privilege, consider multiple affidavits to strengthen a privilege claim. Consider also the submission of an affidavit of in-house counsel as well as outside counsel.

Asserting attorney-client privilege

  • Contesting the discovery of privileged documents – emails within an insurance company that involved non-attorney employees, particularly without coverage counsel as a recipient, are less likely to prevail on a claim of privilege.
  • Can attorney-client privilege also be claimed as an additional means to protect documents?
  • Anticipation of litigation protection–generally, if work product protection is the only basis for withholding documents before this date, those documents may be ordered to be produced. Any documents after this date will be afforded work product protection.
  • Document the file as to when an insurer began anticipating litigation – courts will look for notes, such as adjuster notes in a claim file, and other indications that litigation was anticipated.
  • Courts may look for whether litigation was a primary motivating factor.
  • Consider making an offer to provide withheld documents to the court for in camera review

Drafting privilege logs

  • Consider the benefit of taking the time and resources to produce detailed privilege logs in order to bolster the showing of an insurer's good-faith efforts with the court (and opposing party), and to pre-empt any future arguments that further evidentiary bases are needed – evidentiary bases which could take substantially more time, expense and resources.
  • Create a 'who's who'/'players list' – show for each individual listed on the privilege log who that individual is and what his or her role is. List email addresses in the players' list that appears on the privilege log. Be sure to distinguish attorneys on the players list from non-attorneys.
  • Pay special attention to third parties – in particular for third parties, ensure that all third parties are listed on the players' list and if any third parties are providing legal advice, explain that role. Explain on the players' list who retained any third parties and how they may have been involved in the provision of legal advice. Explain how communicating with those third parties did not waive a claimed privilege.
  • Be detailed in privilege log entries – the goal of a privilege log is to "describe the nature of the documents, communications, or tangible things not produced or disclosed – and [to] do so in a manner that, without revealing information [that is] itself privileged or protected, will enable other parties to assess the claim".(3)
  • Show the reasons why a document or communication is privileged. The courts may order that the privilege log explain the reasons for withholding communication with specific detail.
  • Mark the date and place of the communication.
  • Mark the document's general subject matter.
  • Show who authored documents and identify attorneys. Make sure to clearly note the parties to a communication as well as the attorney involved.
  • Show the recipients of a communication/document. Where attorney-client privilege is claimed, identify the attorney whose advice was reflected in the document.
  • Show why each attachment to an email is privileged – attachments to emails that are alleged to be privileged are not automatically granted the same privilege. A privilege log should list the separate reasons that attachments are privileged, for each attachment.
  • Note who is involved in creating the privilege log.
  • Organise the privilege log – for example, in chronological order. This makes it easier for the court to review; a lack of organisation will not be well received by the court. Consider an index for documents that relate the documents to the privilege log. Consider physical organisation – for example, producing documents in camera in the same order as listed on the privilege log.
  • Double check whether any documents have not been logged in the privilege log.
  • If warranted, be prepared to make certain compromises or concessions instead of a blanket refusal to make any corrections. Beware of the sanctions of a poorly drafted privilege log.

Redactions

  • Show the same level of care and analysis when redacting documents.
  • Take care that only relevant portions of documents/communications are redacted
  • Beware of re-designating formerly privileged documents as 'non-responsive'.

Privilege log – providing documents in camera

  • Select emails carefully – judges will look to distinguish between business and legal advice in in-house counsel emails. Where judges find a pattern of construing privilege in a consistently overbroad or inaccurate manner, the party seeking to uphold a privilege may lose credibility and will risk losing credibility with the court.
  • Does a representative sampling of documents produced in camera make sense?
  • Does the court require additional evidentiary bases for privilege? At one extreme, courts may require an affidavit, deposition transcript or other evidence for an insurer to establish an evidentiary basis, beyond the privilege log, for each element of each privilege/protection claimed for each document or category of document.
  • Does the requesting party argue that an exception to privilege applies?
  • With regard to disclosure to third parties, make it clear from the privilege log/other who the third party is and, if applicable, why disclosure to the third party does not break the privilege.

Other documents sought from an insurer

  • Be detailed in objections to discovery demands beyond simply stating a case name and apply the case or legal theory to the facts of the case.
  • Submit a burden affidavit in a timely manner – for example, when first objecting to a production request in an opposition to a motion to compel.
  • When raising an undue burden argument, state specific facts evidencing the burden.
  • Raise attorney-client privilege/work product protection, as applicable.
  • The court may narrow the time period and otherwise limit the request, but may order production. If documents must be produced, attorney-client privilege should be raised to redact what is produced, with a showing to the court of the unredacted documents in camera.
  • The court may permit a representative sample of the other policyholder documents for its review in camera.

Manner of production of claims files

  • Parties may seek native documents from insurers with metadata intact. Make it clear to the court that the party requesting native documents must show how the production of metadata is relevant to its claims.
  • Check the spoliation rules in the new e-discovery amendments to the Federal Rules of Civil Procedure (which took effect on December 1 2015), with respect to electronic case files.
  • Emphasise other concerns as to why the production of native files with metadata is harmful, such as:
    • the proprietary nature of certain software used by insurer;
    • the insurer's right to withhold privileged information;
    • (if applicable) the need to limit the production of information regarding unrelated policyholders that is irrelevant to the case; or
    • the added costs of reproducing information already produced in PDF/other format.
  • Various insurers produce documents in non-native formats, which can be in PDF, TIFF (imaged file) or hard copy format. PDF/TIFF format will likely be better received than hard copy, since it can then be created in searchable form, building the argument that the function of the PDF/TIFF is more like the functionality of metadata.
  • When utilising PDF or TIFF formats, produce documents in searchable form. Producing in searchable form will strengthen an insurer's argument that the documents mimic the native format in that they are searchable.
  • Insurers may encounter an objection to a paper or PDF production that such production does not satisfy Federal Rule of Civil Procedure 34(b)(2)(E), which states that electronically stored information must be produced as it is "kept in the usual course of business" – the party seeking production will argue that this requires native format with all accompanying metadata.
  • Insurers which have already produced ESI in PDF/other non-native format can raise Federal Rule 34(b)(2)(E)(iii)'s guidance, which states that normally "[a] party need not produce the same electronically stored information in more than one form".
  • If any additional reproductions are required, request that the costs be borne by the moving party, especially where searchable PDFs were produced and the moving party did not show the relevance of metadata to claims.

For further information on this topic please contact Rachel Kim at Mendes & Mount LLP by telephone (+1 212 261 8000) or email (rachel.kim@mendes.com). The Mendes & Mount website can be accessed at www.mendes.com.

Endnotes

(1) The analysis was based on the author's National Survey of 2014-2015 Cases Relating to Attorney-Client Privilege/Work Product Doctrine, a case law compendium of 150 cases decided in 2014-2015 relating to attorney-client privilege in the context of insurance coverage litigation. For further details please contact Rachel Kim at rachel.kim@mendes.com.

(2) See Charter Oak, Civil Action DKC 09-0100 (D Maryland May 17 2013); also Charter Oak, 2015 US Dist LEXIS 43109 (April 1 2015).

(3) Ingenco Holdings, LLC v Ace Am Ins Co, 2014 US Dist LEXIS 170357 (WD Wash Dec 8 2014).

Published by permission of DRI (Voice of the Defense Bar – www.dri.org); copyright of this article and any portion of this article (including edited versions) belongs to DRI and the author, as set forth in the DRI Agreement.

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