On February 23, 2011, the Pennsylvania Supreme Court decided Gillard v AIG Insurance Company. This important decision provided long-awaited guidance on the confusing and inconsistent legal landscape of attorney-client privilege in Pennsylvania.

The issue before the Supreme Court was whether, and to what degree, the attorney-client privilege attaches to attorney-to-client communications?

In a 5-2 opinion, the Supreme Court held that "in Pennsylvania, the attorney-client privilege operates in a two-way fashion to protect confidential client-to-attorney or attorney-to-client communications made for the purpose of obtaining or providing professional legal advice."

This ruling is especially significant because it overrules the prior decision of the Pennsylvania Superior Court in Nationwide Mutual Insurance Company v. Fleming, that the attorney-client privilege only applies to confidential communications made by the client to the attorney and not from the attorney to the client. See Nationwide Mutual Insurance Company v. Fleming, 924 A.2d 1259 (Pa. Super. 2007). The Superior Court decision of Nationwide remained the precedent until the Gillard decision.

The Gillard case involved a bad faith claim arising from the insurance companies' handling of Appellee William Gillard's uninsured motorist claim. Gillard sought the production of all documents from the file of the law firm representing the insurers in the underlying action, AIG. AIG withheld and redacted documents created by counsel on the basis of attorney-client privilege. Gillard then sought to compel production, asserting that attorney-client privilege in Pennsylvania pursuant to 42 Pa.C.S. § 5928 is limited to confidential communications initiated by the client. The lower court, the Philadelphia Court of Common Pleas, adopted this one-way street point of view, and the Superior Court affirmed.

In its decision, authored by Justice Thomas Saylor, the Supreme Court acknowledged prior inconsistency among Pennsylvania courts with regard to the scope of the attorney-client privilege: "the disharmony relates to the ongoing tension between the two strong, competing interests-of-justice factors in play -- namely -- the encouragement of trust and candid communication between lawyers and their clients ... and the accessibility of material evidence to further the truth-determining process." The Court recognized that "if open communication is to be facilitated -- a broader range derivative protection is implicated." Thus, it agreed with other courts which already recognized "the difficulty in unraveling attorney advice from client input" and "the need for greater certainty to encourage the desired frankness" in communication. It opined that "it would be imprudent to establish a general rule to require the disclosure of communications which likely would not exist ... but for the participants' understanding that the interchange was to remain private."

The Supreme Court rejected Gillard's position, noting that it did not find it clear that the Legislature intended strict limits on derivative protection. In determining the appropriate scope of the derivative protection, the majority stated that "it is essential to consider the underlying purpose of the privilege." It stated that "we appreciate that client communications and attorney advice are often inextricably intermixed, and we are not of the view that the Legislature designed the statute to require 'surgical separations' and generate the 'inordinate practical difficulties' which would flow from a strict approach to derivative protection."

The two dissenting opinions by Justice Seamus McCaffery and Justice Michael Eakin took a strict constructionist view of statute. The Justices dissented on the grounds that the plain language of the statute provides for a one-way privilege from client to attorney. Further, the dissent was troubled with the fact that the majority was affording protection to communications that did not implicate or contain confidential facts disclosed by the client.

So why is Gillard significant? It protects both client-to-attorney and attorney-to-client communications. It fosters and broadly protects all communications between attorneys and their clients made for the purpose of obtaining or providing professional legal advice, regardless of whether the communications contain or implicate facts initially disclosed by the client to the attorney. It allows both in-house and outside counsel to initiate important communications with their clients with the understanding that such communications are finally protected, privileged communications.