Don't Let Insurers Use Attorney-Client Privilege To Shield Claims Handling Documents

Upon receiving an insurance claim from its policyholder, an insurer is obligated to promptly and reasonably investigate, adjust, and determine whether to pay a claim. Those are fundamental aspects of an insurer's business that arise with respect to every claim. Reports by insurance investigators or adjusters, prepared during the processing of a claim, are discoverable as made in the regular course of the insurer's business.

Insurers frequently allege that attorneys working for the insurers perform or assist with the claim investigation or adjustment and then assert privilege in an effort to avoid producing such reports during litigation. Policyholders should be wary of any such assertion and consider case law from across the country compelling insurers to produce claims handling documents (and related testimony) generated by or in connection with insurer coverage counsel. Many courts hold that the decision to have lawyers undertake or be involved in basic claims handling functions does not imbue this business task with privilege, and protection from discovery. Thus, communications among these attorney claims handlers, independent claims personnel, and insurers about the results of their claim handling activities should not be cloaked in privilege.

For example, the New York Appellate Division held, "[d]ocuments prepared in the ordinary course of an insurance company's investigation to determine whether to accept or reject coverage and to evaluate the extent of a claimant's loss are not privileged [and] . . . do not become privileged merely because an investigation was conducted by an attorney." Brooklyn Union Gas Co. v. Am. Home Assur. Co., 803 N.Y.S.2d 532, 534 (1st Dep't. 2005). New York courts recognize that attorney work product applies only to documents "prepared by counsel acting as such, and to materials uniquely the product of a lawyer's learning and professional skills, such as those reflecting an attorney's legal research, analysis, conclusions, legal theory or strategy." ACWOO Intl. Steel Corp. v. Frenkel & Co., 564 N.Y.S.2d 40 (1990). Moreover, in order for attorney-client communications to be privileged, the document must be primarily or predominantly a communication of a legal character. See Spectrum Sys. Intl. Corp. v. Chemical Bank, 78 N.Y.2d 371, 378 (1991). It is also important to consider that the burden of establishing any right to protection is on the party asserting it, and the protection claimed must be narrowly...