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Nevada District Court Confirms Insurance Company’s Attorney May Be Deposed And The Attorney-Client Privilege Implicitly Waived

Atain Specialty Insurance Co. v. Reno Cab Co, et. al, No. 3:15-cv-00406-MMD-VPC (Dist. NV Feb. 15, 2017).

Background:

On December 23, 2011, a driver for Reno Cab had an argument with a passenger over the cab fare. The argument led to an altercation in which the passenger was killed. The passenger’s family then sued Reno Cab and the driver for wrongful death, battery, and negligent training and supervision. Reno Cab submitted the lawsuit to its insurance provider, Atain Specialty Insurance Company (“Atain”), asking Atain to provide a defense.

After reviewing the allegations of the complaint, Atain denied coverage and asserted two claims for declaratory relief, asking the court to rule Atain (1) “had no duty to defend” and (2) had “no duty to indemnify under the Policy because coverage is excluded under the assault and battery endorsement.” In response, Reno Cab asserted counterclaims against Atain for breach of contract, breach of the implied covenant of good faith and fair dealing, and for violations of the Unfair Claims Practices Act.

During the litigation process, Reno Cab deposed Sally Rock, an Atain employee, and learned Atain denied coverage, in part, after Atain had an attorney, Pamela McKay, review the allegations. Ms. McKay recommended Atain deny coverage. Reno Cab subsequently demanded to take Ms. McKay’s deposition and served Atain with a deposition notice. Atain then filed a motion to cancel the deposition, arguing attorney-client privilege and work-product protection. The magistrate judge denied Atains request, finding Atain implicitly waived the attorney-client privilege and work product protection. Atain then filed an appeal of the magistrate judge’s order with the district court.

The District Court’s Analysis:

Atain argued the magistrate judge erred in finding Ms. McKay could be deposed because Atain had “not asserted the affirmative defense of advice of counsel.” Reno Cab countered that under the rule laid out in Wardleigh v. District Court, Atain gave an “implied waiver of the attorney-client privilege and work product” when Ms. Rock testified she denied coverage based on advice of counsel.

In Wardleigh, the Nevada Supreme Court held: “where a party seeks an advantage in litigation by revealing part of a privileged communication, the party shall be deemed to have waived the entire attorney-client privilege as it relates to the subject matter of that which was partially disclosed.” This is referred to as an “implied waiver of the attorney-client privilege.”

In the present case, the district court agreed with Reno Cab, finding Wardleigh applicable to Atain’s actions. The court concluded: “Atain’s representative testified that Atain’s coverage counsel investigated Reno Cab’s claim and made the decision to deny coverage based on coverage counsel’s recommendation.” The court then held regardless of whether Atain explicitly asserted an advice of counsel defense, “Atain’s response to Reno Cab’s bad faith claim implicitly raises advice of counsel.” As a result, the district court upheld the magistrate judge’s order, forcing Atain’s attorney to testify.

Significance:

The Court’s decision in Reno Cab shows the rule outlined in Wardleigh is still followed in Nevada. Regardless of whether an insurance company explicitly raises the defense of advice of counsel in a bad faith case, the insurance company’s attorney may still be required to testify under the implied waiver of the attorney-client privilege. Such a situation occurs if an agent, officer, or employee of an insurance company reveals part of a privileged communication in an attempt to “seek [] an advantage in litigation.”

ABOUT THE AUTHOR: Chris Lund is an Associate in the Las Vegas, NV office. Mr. Lund specializes in insurance defense, personal injury, professional liability, and general civil litigation. Contact him at (702)724-2648 or clund@tysonmendes.com.