(Article from Insurance Law Alert, November 2023)
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Holding
An Illinois district court granted in part and denied in part a motion to compel the production of certain documents, and addressed the scope of the common interest doctrine and the “at issue” waiver of privilege. Ansur Am. Ins. Co. v. Borland, 2023 U.S. Dist. LEXIS 190193 (S.D. Ill. Oct. 23, 2023).
Background
Ansur hired the defendant attorneys to represent its insured in an underlying product liability action. Thereafter, Ansur filed a legal malpractice suit alleging that the defendants failed to adequately defend the insured, resulting in a higher than anticipated policy limits settlement. In response, the defendants argued that Ansur was partly responsible for its alleged loss.
In the malpractice suit, Ansur refused to produce certain materials on the basis of attorney-client and work product privilege. The defendants moved to compel the production of various materials, and the court addressed the following privilege-related issues: (1) whether certain individuals at Ansur were part of its “control group” such that their communications would give rise to a privilege; (2) whether Ansur and its reinsurers share a common legal interest such that the sharing of privileged documents would not waive privilege; and (3) whether Ansur waived privilege as to certain documents by placing their contents “at issue” in the litigation.
Decision
Under Illinois law, when a corporate client invokes attorney-client privilege, the corporation must demonstrate that the employee involved in the communication falls within the “control group” of the company. The court explained that the control group consists of two tiers: top management decision makers, and employees who directly advise top management. In determining whether certain individuals were members of Ansur’s control group, the court emphasized that the focus must be on the level of decision-making responsibility and the nature of advice given to decision makers, rather than the executive’s job title.
The court also addressed the defendants’ assertions that Ansur waived privilege as to certain materials by sharing those materials with its reinsurers. Ansur argued that privilege remained intact under the common interest doctrine, which holds that the privileged status of otherwise protected documents is not waived by distribution to non-control group parties where the parties to the communication share an “identical” interest and work “toward a common legal goal.” The court noted that it was unable to determine whether an underlying privilege existed in the first place without an inspection of the documents at issue, but stated that “assuming an underlying privilege does exist, Ansur has submitted affidavits demonstrating the common legal interest between Ansur and its reinsurers.” Specifically, the court noted the common interest in holding the defendants liable for their alleged malpractice and in recovering losses resulting from that malpractice. However, the court emphasized that communications between Ansur and its reinsurers are not protected by the common interest doctrine if the content of those materials is not privileged in the first place, such as documents “related to finance or other insurance matters,” as opposed to legal advice or legal strategy.
Finally, the court rejected the defendants’ contention that Ansur waived privilege as to certain documents by placing the contents of such documents “at issue.” As the court noted, this doctrine prevents a party from strategically disclosing privileged communications to use “as a sword,” but simultaneously invoking privilege “as a shield” to other communications. The court concluded that Ansur did not place the contents of any privileged materials “at issue” because it was defendants’ affirmative defense of contributory negligence (rather than the claims in the action filed by Ansur) that implicated the disputed communications.
Comments
The decision sheds light on an important distinction in the context of whether certain individuals are members of a company’s “control group” for purposes of attorney-client privilege. The court emphasized that in order to be a member of a control group under Illinois law, the employee must provide substantive advice that is relied upon by company decision makers, rather than mere facts or information that is relied upon by decision makers. Further, the decision suggests that an employee’s senior executive status, without more, does not automatically qualify an individual as a control group member.