Another Court Addresses The Peril Of A ROR Drafted By Coverage Counsel
My Wall Street Journal Op-Ed: Status Of Covid Coverage Litigation
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Another Court Addresses The Peril Of A ROR Drafted By Coverage Counsel

The third time isn't always a charm.
 
My annual Top 10 Coverage-palooza last year included two decisions where courts concluded that attorney-client privilege was waived when counsel drafted a coverage letter that was then sent by an adjuster. 
 
In Canyon Estates Condo. Association v. Atain Specialty Ins. Co., No. 18-1761 (W.D. Wash. Jan. 22, 2020), the disclaimer letter had been drafted by the insurer's outside counsel. As the court put it: "Assisting an adjustor in writing a denial letter is not a privileged task."
 
While I believe that the Canyon Estates Condo. decision was wrongly decided six ways from Sunday, it stands as a reminder that attorney-client privilege may be waived when outside counsel is engaged in investigating and evaluating or processing a claim, and not in providing the insurer with counsel whether or not coverage exists under the policy and law.
 
In Travelers Property Cas. Co. v. 100 Renaissance, LLC, the Mississippi Supreme Court addressed whether attorney-client privilege was waived when a disclaimer letter was drafted by the insurer's in-house counsel and sent from the adjuster. Answer - yes.
 
As the court put it: "If the claims handler relied substantially, if not wholly, on in-house counsel to prepare her denial letter, the reasoning of in-house counsel should be discoverable."
 
Much, much more about both of these decisions here.
 
Earlier this week, another court weighed-in on the possible waiver of attorney-client privilege when a coverage letter is drafted by outside counsel. 
 
In Curtis Park Group v. Allied World Specialty, No. 20-552 (D. Colo. September 28, 2021), the court held that an insurer's outside counsel could be deposed, as the court concluded that he had been "a key person in the claims investigation process." At issue was coverage under a builder's risk policy. The insurer was asserting a defense based on a construction defect.
 
As the court noted: "The great weight of Colorado authority demonstrates that information an attorney learns when serving as a claims adjuster is not protected by the attorney-client privilege or the work product doctrine."
 
But Curtis Park Group has an additional element that the court took note of. Coverage counsel had been involving in drafting a denial letter. This was further support for allowing the deposition of coverage counsel. As the court saw it, the insurer was obligated to explain how it concluded that a construction defect caused the damage. Thus, counsel could be deposed to explain how he "configured this information into the denial letter."   
   
On one hand, Curtis Park Group is like other decisions holding that attorney-client privilege may be waived when outside coverage counsel is engaged in investigating and evaluating or processing a claim, and not in providing the insurer with counsel whether or not coverage exists under the policy and law.
 
However, when coverage counsel is also involved in drafting a reservation of rights or denial letter, these recent decisions provide support that discovery may extent to such letter, on account of counsel having been engaged in the investigation process -- and not limiting his or her services to providing the insurer with counsel whether or not coverage exists. Policyholders seem to be focusing more on this issue. Insurers are well-served to limit the role of outside counsel to providing advice on whether or not coverage exists under the policy and law.

My Wall Street Journal Op-Ed: Status Of Covid Coverage Litigation

If you are following Covid coverage litigation or involved in it, I have a piece in today's Wall Street Journal that looks at the status of that litigation. Hope you can check it out.

https://www.coverageopinions.info/WSJCovidRaid.pdf