Update: Work-Product Doctrine

The court further dismissed the insurers' argument that the common interest exception applies to save the protections that would otherwise be available under the aforementioned privileges since litigation was neither pending nor on the horizon to unite their legal interests. The court's holding applied to the bulk of the documents reviewed in camera, which were prepared by the insurers' coverage counsel prior to the date the disclaimer was communicated to the insured. In that regard, the court used the date of disclaimer as the operative event because the insurers did not produce evidence showing when the coverage decision was actually made ' and their effort to do so on appeal was dismissed as an issue of fact that the insurers failed to preserve at the trial level. However, the court's brief decision denotes in dicta that documents prepared subsequent to the insurer's decision to disclaim coverage would be protected pursuant to the attorney work-product privilege.

The appellate court's affirmance in this case arguably portents that New York's trial courts may espouse an equally limited view of those privileges insurers have come to rely on during that crucial stage of an investigation preceding a coverage denial. In light of this decision, insurers joining forces to investigate coverage would be wise to enter into a common interest or other agreement explicitly recognizing their common interest and their intention to preserve the privileges otherwise applicable to their communications. Insurers and their counsel may also take caution to note when litigation is reasonably anticipated by them, which in many instances pre-dates the date of disclaimer, and which may invoke an added layer of privilege to documents produced subsequent to that date.

Marc S. Voses and Steven P. Nassi are partners with Nelson Levine de Luca & Hamilton, LLC.

In the March 2014 issue, in our article titled “Blurred Lines,” we discussed a number of decisions from various jurisdictions concerning the applicability of the attorney-client privilege and work-product doctrine in the context of an insurer's claims investigation. Among those decisions was National Union Fire Ins. Co. of Pittsburgh, Pa. v. TransCanada Energy USA, Inc., No. 650515/2010, 2013 WL 4446915 (N.Y. Sup. Ct., Aug. 15, 2013)

In that case, a New York trial court concluded that documents relating to various insurers' claim investigation, most of which were created before the insurers' denial of coverage, were discoverable on three grounds: 1) coverage investigations are an “ordinary business activity for an insurance company” and do not constitute legal advice; 2) because the insurers did not produce evidence showing when the coverage decision was actually made, the court determined that the decision was made when the denial letter was issued, such that any documents created prior to the denial letter are not protected work product or trial-preparation materials; and 3) the attorneys freely communicated with all of the insurers, which are independent third parties to each other, and there was no attempt to segregate the communications or keep them confidential; thus, the common interest privilege exemption did not apply and the parties waived any attorney-client privilege that may have otherwise applied.

On Feb. 25, 2014, New York's appellate division for the first department affirmed the lower court's decision in TransCanada, holding that documents generated in connection with outside counsel's investigation of a claim, and coverage advice in connection therewith, are tasks performed in the ordinary course of an insurers business and, therefore, beyond the scope of the attorney-client or attorney work-product privileges. National Union Fire Ins. Co. of Pittsburgh, Pa. v. TransCanada Energy USA, Inc. , No. 650515/2010, 2014 NY Slip Op 01283 (Feb. 25, 2014). Moreover, the appellate court found that such documents are also not privileged as materials prepared in anticipation of litigation where litigation is neither pending nor reasonably anticipated by the party seeking to invoke the privilege.

The court further dismissed the insurers' argument that the common interest exception applies to save the protections that would otherwise be available under the aforementioned privileges since litigation was neither pending nor on the horizon to unite their legal interests. The court's holding applied to the bulk of the documents reviewed in camera, which were prepared by the insurers' coverage counsel prior to the date the disclaimer was communicated to the insured. In that regard, the court used the date of disclaimer as the operative event because the insurers did not produce evidence showing when the coverage decision was actually made ' and their effort to do so on appeal was dismissed as an issue of fact that the insurers failed to preserve at the trial level. However, the court's brief decision denotes in dicta that documents prepared subsequent to the insurer's decision to disclaim coverage would be protected pursuant to the attorney work-product privilege.

The appellate court's affirmance in this case arguably portents that New York's trial courts may espouse an equally limited view of those privileges insurers have come to rely on during that crucial stage of an investigation preceding a coverage denial. In light of this decision, insurers joining forces to investigate coverage would be wise to enter into a common interest or other agreement explicitly recognizing their common interest and their intention to preserve the privileges otherwise applicable to their communications. Insurers and their counsel may also take caution to note when litigation is reasonably anticipated by them, which in many instances pre-dates the date of disclaimer, and which may invoke an added layer of privilege to documents produced subsequent to that date.

Marc S. Voses and Steven P. Nassi are partners with Nelson Levine de Luca & Hamilton, LLC.