Lawyer Who Took Examination Under Oath Provides Legal Advice and Communications to Insurer are Privileged
For decades bad faith lawyers representing policy holders have claimed that lawyers representing insurers who, among other things, examine an insured under oath are claimed to be “super-adjusters” and not lawyers practicing law. They make these claims to obtain the advice and counsel provided by the lawyers to the insurer client and defeat the ancient attorney client privilege.
In Dyrol Harding and Ayanna Parker Harding v. State Farm Fire And Casualty Company, 17 CV 4622 (CBA) (RML), United States District Court Eastern District Of New York (March 16, 2018) the plaintiffs’ sought communications from lawyers retained by State Farm. The parties to an insurance coverage denial action requested an in camera (privately reviewed by the judge in his or her chambers) review of four documents that plaintiffs believe defendant improperly withheld. The parties submitted the documents to chambers for the trial judge’s review.
Plaintiffs in this diversity case, Dyrol and Ayanna Parker Harding (“plaintiffs”), contend that defendant State Farm Fire and Casualty Company (“defendant” or “State Farm”) improperly denied them coverage for their homeowner’s insurance claim and is, therefore, in breach of its contract of insurance. State Farm contends the denial was justified because plaintiffs were no longer residing in the home at the time of the loss, as required by their policy.
Because all four of the disputed documents are, on their face, communications from defendant’s outside counsel (not counsel in this matter) to defendant, the court analyzed them under New York law to determine whether they are privileged attorney-client communications.
Under New York law, absent a client’s waiver, “an attorney or his or her employee, or any person who obtains without the knowledge of the client evidence of a confidential communication made between the attorney or his or her employee and the client in the course of professional employment, shall not disclose, or be allowed to disclose such communication.” [N.Y. C.P.L.R. § 4503(a)(1).]
The elements of the attorney-client privilege are the existence of an attorney-client relationship, a communication made within the context of that relationship for the purpose of obtaining legal advice, and the intended and actual confidentiality of that communication. For the privilege to apply when communications are made from attorney to client – whether or not in response to a particular request – they must be made for the purpose of facilitating the rendition of legal advice or services, in the course of a professional relationship.
The privilege is limited to communications – not underlying facts. The communication itself must be primarily or predominantly of a legal character.
However, the privilege is not lost merely by reason of the fact that it also refers to certain nonlegal matters, as the nature of a lawyer’s role is such that legal advice may often include reference to other relevant considerations. An investigative report is not privileged merely because an investigation was conducted by an attorney; a lawyer’s communication is not cloaked with privilege when the lawyer is hired for business or personal advice, or to do the work of a nonlawyer. The critical inquiry a judge must make when reviewing documents in camera, is whether, viewing the lawyer’s communication in its full content and context, it was made in order to render legal advice or services to the client.
First Two Documents
The first documents the judge reviewed were two emails, dated September 13, 2016 and October 14, 2016, from outside counsel at the firm Cozen O’Connor to defendant’s claim specialist, Pierre Jean.
Defendant states that the firm was retained “to provide its legal advice, opinion, or conclusion as to the potential for subrogation against possible negligent third parties who may have been responsible for causing the fire damage to the subject premises,” and that these are therefore protected attorney client communications. Defendant maintained that simply because subrogation documents and communications may not have been prepared for or in anticipation of litigation against the Plaintiffs does not render them any more susceptible to disclosure.
The trial court’s in camera review confirmed to the judge that these documents constitute communications by defendant’s outside counsel made for the purpose of facilitating the rendition of legal advice or services, in the course of a professional relationship, and which appear intended to be confidential. They also appear to have actually been confidential, as only defendant and counsel were copied on the messages. The court concluded that the first two documents are privileged attorney-client communications.
Second Two Documents
The other documents the court reviewed are two letters, dated December 2, 2016 and February 16, 2017, from defendant’s outside counsel at the firm Feldman, Ruby, Kirby & Farquharson, P.C. to defendant’s claim specialist, Pierre Jean. Defendant states that these documents “primarily and predominantly consist of outside counsel’s communications with State Farm regarding his legal advice, opinions, or conclusions as to State Farm’s rights and obligations under the policy and controlling precedent. These communications were intended to be and remain confidential.”
Plaintiffs argued that the firm was “retained by Defendant to conduct an examination under oath of Plaintiff Dyrol Harding as required under the policy,” and that he was therefore conducting an investigative function that is no different from that of an “independent adjuster reporting about a recorded statement taken of the insured.” Essentially, plaintiffs are arguing that because counsel’s work was that of a non-lawyer, it is not privileged, and must therefore be turned over as a document “prepared in the ordinary course of an insurance company’s business.”
Defendant countered, however, that the mere fact that an insurer involves an attorney in its investigation does not automatically deprive the insurer of its right to enjoy the privilege of confidential attorney-client communications. Defendant also notes the principle that so long as the communication is primarily of a legal character, the privilege is not lost, even though it refers to non-legal concerns.
Were plaintiff’s characterization of this outside counsel’s work as being merely that of a non-lawyer correct, its arguments would have merit. However, defendant has asserted that it retained counsel for a broader purpose than just conducting an examination: providing its legal opinion and advice about what defendant should do with respect to the claim.
The court’s in camera review confirmed that the scope of counsel’s work was well beyond that of a non-lawyer investigator. Both letters are of a primarily legal character which were “made for the purpose of facilitating the rendition of legal advice or services, in the course of a professional relationship,” and were intended to remain confidential. The letters do much more than simply report the statements made in the course of the examination under oath. They provide defendant with extensive legal analysis, advice, and recommendations regarding the issues at the heart of the case. As a result, the court found that these are privileged attorney-client communications.
All four documents are privileged attorney-client communications. Defendant therefore properly withheld them from plaintiffs and will not be compelled to produce them to plaintiff, in whole or in part.
Over the last 50 years I have taken hundreds of examinations under oath for insurer clients. My work, as was the work of State Farm’s lawyers in this case, was always the work of a lawyer who, after completing the EUO, would then provide the client with my legal analysis and advice that no insurance adjuster could provide. Since State Farm’s counsel provided, as did I over the last 50 years, extensive legal analysis, advice, and recommendations about a claim its communications are clearly privileged. Lawyers are lawyer, not adjusters, even when they do some work that could be performed by an adjuster.
© 2018 – Barry Zalma
This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States. The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at http://www.zalma.com and firstname.lastname@example.org.
Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
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