(Article from Insurance Law Alert, May 2015)
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In a coverage dispute between two insurers, Twin City moved to compel the production of certain documents held by Sun Capital, including broker communications and insurance coverage analyses. Sun Capital refused to produce the materials on the basis of attorney-client privilege and work-product protection. After an in camera review, a Florida federal district court ordered the production of most materials, issuing several potentially significant rulings as to the scope and waiver of attorney-client privilege and work-product protection. Sun Capital Partners, Inc. v. Twin City Fire Ins. Co., 2015 WL 1860826 (S.D. Fla. Apr. 22, 2015).
Work-Product Protection: The court ruled that there is a rebuttable presumption that documents prepared before a final coverage decision is made are not protected work product, and that documents prepared after a final decision are work product. Sun Capital argued that work-product protection attached to all documents created after September 2, 2010, the date of an email from defense counsel to Sun Capital summarizing the points of contention between Sun Capital and Twin City. The court disagreed, noting that Sun Capital did not file suit until two years later and that the parties were still "actively working together towards a resolution" at that time. Instead, the court concluded that November 2, 2012, the date of Twin City’s final denial letter, was the time at which Sun Capital reasonably anticipated litigation. Therefore, only documents created after that date were protected by the work-product doctrine.
"Common Legal Interest" Doctrine: Although a party generally waives attorney-client privilege when it discloses communications to a third party, most courts recognize that an exception to waiver exists if the parties who share the information have a common legal interest (or if the parties are "joint clients" of the same attorney). Here, the court ruled that Twin City and Sun Capital shared a common legal interest "in minimizing Sun Capital’s liability in the underlying action, until that point that the parties reasonably anticipated litigation against each other (November 2, 2012)." Therefore, the court held that pre- November 2 communications exchanged between Sun Capital and its defense counsel and/or its broker, which related to the parties’ common interest in the underlying litigation, must be produced to Twin City.
At Issue Waiver: Twin City argued that Sun Capital waived attorney-client and work-product privilege by affirmatively injecting privileged communications into the litigation. The court agreed. In particular, the court held that because Sun Capital’s complaint alleged that Twin City breached its fiduciary duty by denying coverage for the underlying claim and by limiting its payment under an allocation provision, Sun Capital put "at issue" the work-product materials for the underlying claim. In addition, the court reasoned that upholding privilege would "deny Twin City access to information that would be vital to its defense." Therefore, the court ordered production of communications between Sun Capital and its defense counsel "regarding the defensibility of the underlying claims, the allocation of reimbursement for covered and non-covered losses, and communications regarding the settlement of the underlying claims."