In a recent case, Progressive Express Insurance Co. v. Scoma,1 a Florida appellate court swam against a tide of decisions that have eroded the attorney-client privilege in bad faith litigation. In Scoma, an injured third party sued the tortfeasor's insurer for bad faith and sought confidential communications between the insured tortfeasor, the insurer, and their counsel in the underlying tort litigation. The insurer objected based on attorney-client privilege and sought certiorari review when the trial court ordered production of the requested discovery. The Second District Court of Appeal quashed the discovery order, finding that although an injured third party can "stand in the shoes" of the insured to pursue a bad faith claim against the insurer, the third party is not entitled to otherwise privileged communications between the insured, the insurer and their counsel in the absence of an assignment from the insured.

The Scoma case arose from an automobile accident in March 2000 that resulted in the death of Jessica Paige Barnett. Laraine Scoma, as personal representative of Barnett's estate, sued Shannon Courtney for wrongful death and filed a claim against Courtney's insurer, Progressive. Scoma obtained a $1,050,000 verdict against Courtney. Courtney did not appeal the final judgment, which was entered in December 2004.

The Scoma court began its analysis of the insurer's privilege claim with a primer on bad faith terminology. Coverage for the direct benefit of an injured insured is "first-party coverage." Liability coverage that protects the insured from the claims of an injured third party is "third-party coverage." A "first-party claim" refers to an action arising under first-party coverage while a "third-party claim" refers to a claim arising under third-party coverage. While a first-party bad faith claim is brought by the "first party"; i.e., the injured insured, a third-party bad faith claim may be filed by either the insured "first party" or the injured "third party." 2

The insurer's claim of attorney-client privilege in Scoma arose from various types of communications with counsel. The court distinguished between (i) the insurer's communications with an attorney hired to represent only the insurer; (ii) the insurer's communications with an attorney who represented both the insured and the insurer in the underlying tort action; i.e., "joint counsel"3; and (iii) the insured's communications with joint counsel.

The court held that the insurer's attorney-client privilege with counsel it retained to represent its own interest is not waived or abrogated in a subsequent bad faith action brought by a third party. In reaching this conclusion, the Scoma court agreed with XL Specialty Ins. Co. v. Aircraft Holdings, LLC4, a case currently under review by the Florida Supreme Court. In XL Specialty, the court held that the insurer's attorney-client privilege with its own separate counsel is not waived in subsequent bad faith litigation brought by the insured first party. The Scoma court reasoned that if the insured pursuing a bad faith claim is unable to obtain confidential communications between the insurer and its separate counsel, then the insurer's statutory attorney-client privilege5 is certainly not waived in a bad faith action brought by a third party who "is not in privity with the insurer and has never been jointly represented."

The court then found that while the insurer presumably could not maintain a privilege as to communications with joint counsel in a bad faith action filed by the insured,6 the insurer does not necessarily lose the privilege where a third party files the action. The insurer's ability to claim such a privilege hinges on (i) whether the communications were made to joint counsel on a "matter of common interest" such that the insurer could rely upon the communications as confidential with respect to third parties; and (ii) whether the third party "stood in the shoes" of the insured such that she had access to the insured's communications with joint counsel. If so, then she would also have access to the insurer's communications with joint counsel.

The Scoma court then reasoned that a third party's right to bring a bad faith action against the insurer does not give the third party the insured's statutory rights to attorney-client privilege under section 90.502, Florida Statutes, unless the third party was the insured's "successor" or "assignee." Since Scoma was neither, she was not entitled to the insured's confidential communications with joint counsel, and thus was not entitled to the insurer's confidential communications with joint counsel.7

In reaching this conclusion, the second district disagreed with Dunn v. National Security Fire & Casualty Co.8 and Continental Casualty Co. v. Aqua Jet Filters Systems, Inc.,9 which held that a third party bringing a bad faith action is entitled to all materials in the insurance company's claim file up to the date of the judgment in the underlying tort suit because the third party "stands in the shoes" of the insured. The Scoma court noted that these cases interpreted Boston Old Colony v. Gutierrez10 and Stone v. Travelers Ins. Co.11 without considering the impact of section 90.502, which did not apply when Boston Old Colony and Stone were decided. The court further noted that all these cases were influenced by Thompson, which relied in part on third-party beneficiary analysis that was expressly overridden when the legislature created section 627.7262, Florida Statutes, which prevented the joinder of insurance companies in tort lawsuits.

The Scoma court concluded:

[P]ermitting a third party who brings a bad faith claim to abrogate the attorney-client privilege previously held by the insured and insurer would seem to undermine the policy reasons for having such a privilege, such as encouraging open and unguarded discussions between counsel and client as they prepare for litigation.

The court remanded the case for an in camera inspection and for the trial court to consider whether the requested documents were indeed confidential attorney-client communications and whether the documents between the insured, the insurer and their joint counsel were a result of representation of common interest.