With the decreasing size of many in-house litigation departments and an increasing number of insurance brokers, it’s becoming more common for companies to allow insurance brokers to assist them in their legal proceedings. But including these professionals could backfire, particularly in California. Understandably, brokers may want to provide additional services to give their clients tactical advantages when litigating cases.  These additional services may include monitoring and pushing the cases forward, providing summaries of the lawsuit for their clients, evaluating the impact of litigation on the renewal of future coverage, and providing advice when multiple layers of coverage are at issue. Frequently, brokers request to be CC’d in case updates and want to be included in conference calls when litigation decisions are made.

However, when insurance brokers are included in litigation strategy and decision-making, the shared communications run the risk of waiving the attorney-client protections under California’s Evidence Code section 952. Thus, attorneys and their clients must exercise extreme caution before sharing information with others outside of the attorney-client relationship.

Attorney-Client Privilege Exists for Communications to “authorized Representatives”,” but Insurance Brokers May Not Be “Authorized Representatives”

Attorney-client communication exists between a client and their lawyer, in confidence, during their professional relationship. [i] A “client” is “a person who, directly or through an authorized representative, consults a lawyer for the purpose of retaining the lawyer or securing legal service or advice from him in his professional capacity.”[ii]

In California, there is no published state court opinion that addresses whether an insurance broker is an authorized representative of a client. There is, however, a federal district court opinion in which the  Northern District of California found that an insurance broker can indeed satisfy this definition.[iii]  In Sony Computer Entertainment America, Inc. v. Great American Ins. Co. (Sony), the Court found the client waived the attorney-client privilege under California law, because it failed to establish that disclosures in the presence of an insurance broker were “reasonably necessary” for his consultation with counsel.  Sony is not controlling, but it may nevertheless be cited in California state courts.  Particularly in view of Sony, attorneys and their clients should be extremely cautious when including insurance brokers in their communications.

Examining Attorney-Client Privilege in and Out Of the Corporate Structure

When a business is a party to a lawsuit, it is important to determine the extent to which attorney-client communications are protected. This determination largely hinges on whether the “clients” involved are direct employees of the corporate client or third parties. Insurance brokers, unless they are employed as part of the corporate structure, are considered third parties.

Therefore, the key question is whether the broker can be deemed an “authorized representative” who provides advice based on their professional capacity. It is important to note that simply calling an insurance broker an “authorized representative” does not automatically make them part of the litigation team. As the attorney-client privilege is a statutory privilege, the courts interpret it accordingly and carefully consider who can be classified as an “authorized representative.”[iv]

An “Authorized Representative” Must Provide Advice in Their Professional Capacity to Further the Litigation Strategy

California Evidence Code section 952 outlines the attorney-client privilege and specifies that only those who further the client’s interest or those with whom disclosure is required for the transmission of information or the accomplishment of the purpose for which the lawyer is consulted are included in the privileged communication. The California courts have identified two categories of third parties who fall under the attorney-client privilege. [v]

The first category pertains to experts who assist in advancing the litigant’s interests but have no personal interest in the litigation. This category includes physicians, appraisers, or other experts consulted by the attorney to advise the client better. [vi]

The second category includes individuals whose interests are aligned with the defendant and furthers the client’s interest in the consultation. These parties have interests of their own to advance in the matter, but their interests are in some way aligned with those of the client. This broader category includes a spouse, parent, business associate, joint client, or the insurance claims professionals involved in the litigation. Disclosures between parties with common interests are reasonably necessary to accomplish the purposes for which they are consulting counsel. [vii]

How to Keep Communications with Insurance Broker Privileged

There may be valid reasons why insurance brokers are needed to help the defendant with their defense. For instance, the client may need assistance to understand the multiple layers of insurance policies, how settlements or judgments may impact the client’s defense, and the consequences of any settlements or judgments.  Additionally, insurance brokers can advise on litigation’s impact on obtaining future policies.

In order to protect the attorney-client privilege, attorneys and their clients should be cautious in only disclosing information necessary for the brokers to provide such advice. The key is whether the communications were necessary for the brokers to assist the client in the litigation.

Conclusion

Including insurance brokers in the litigation company’s legal proceedings can backfire in California, as including them may waive attorney-client privileges under California’s Evidence Code section 952. Thus, the clients must make informed decisions about when and what they disclose about the litigation strategy. Before sending insurance brokers information about ongoing litigation, the client needs to understand why the insurance broker needs to be included, specifically what advice or contribution the insurance broker will provide them, and what information is needed to provide this advice. As attorneys hold these privileges sacrosanct, we encourage our clients not to include third parties, including insurance brokers, in monitoring privileged strategic litigation communications.

Keep Reading

Cannabis Workers Allege Quota to Trim 4 Pounds a Day Violates the California Labor Code The Ninth Circuit Reminds Us: Every Word Matters NO WAY, PRO SE! The Consequences of Abusing the Judicial System as a Pro Se Litigant in Colorado Victim of Financial Mismanagement or Unlawful Retaliation? New Jersey City University Program Founder Claims School Retaliated After Reporting Alleged Sexual Harassment “Real Housewives” Gets a Reality Check Missing a Chapter: Insufficiency of Expert Deposition Testimony in Medical Malpractice Litigation Crash Course: Why Summary Judgment Misses the Mark in Illinois Multi-Cause Limousine Crash Collision Bitter Truths: Lead, Cadmium, and Defective Pleadings in California Chocolate Class Action Is Your Ticket to the Baseball Game Unconscionable? Court Finds Ticket is a Valid Contract But Arbitration Clause was Unenforceable

More by this author

The Law of Unintended Consequences: Including Insurance Brokers in Litigation Strategy Communication May Waive the Attorney-Client Privilege 5 New Ways to Evaluate Cases in Light of Skyrocketing Social Inflation To The Victor Goes the Spoils… All of the Spoils Florida Jury Awards $50 Million in Habitability/Mold Case Leveling the Playing Field: Defense Counsel Used “Honest Fouls” in California and Beat a $16 Million Jury Demand Landlords and Tigers and Bears – Oh My! How Landlords are Becoming the Villains of COVID-19 and What They Can Do About It California’s Supreme Court Opens a Path So Plaintiffs Can Recover Greater Nuclear Verdicts™ Against “Deep Pocket” Defendants The California Court’s “Fastpass” to Trial within 120 days – Considerations in Approaching California’s Preference Statute in a Post-Pandemic World

Sources

[i] (Cal. Evid. Code, § 952).

[ii] (Cal. Evid. Code, § 951).

[iii] Sony Computer Entertainment America, Inc. v. Great American Ins. Co. (N.D.Cal.2005) 229 F.R.D. 632, 633-634

[iv] See Id.

[v] Citizens for Ceres v. Superior Court (2013) 217 Cal.App.4th 889

[vi] Id. at 915.

[vii] Id. at 845–846