Otsuka America, Inc. and Pharmavite LLC v. Crum & Forster Specialty Insurance Company
is the latest in what looks like ongoing erosion of an insurer’s right to rely on attorney-client privilege and the work product doctrine in connection with a determination of insurance coverage.
The insurer denied coverage to the
plaintiffs for a nine million dollar product recall loss. The plaintiffs filed
this action to resolve the insurance coverage issue.
The court correctly identified the
governing law, recognizing that “attorney-client
privilege attaches if information is disclosed in confidence to the attorney
for the purposes of obtaining legal advice or service…in the course of a
professional relationship.” Likewise, the court observed that attorney work
product “applies to documents prepared by counsel acting as such, and to
materials uniquely the product of a lawyer’s learning and professional skills,
such as those reflecting an attorney’s legal research, analysis, conclusions,
legal theory or strategy,” which is prepared for the purpose of litigation. The
court further recognized that “[w]here an attorney acts as a claims
investigator, and not as an attorney, the communications are not privileged.”
The concern with the court’s ruling is
that it appears to have stretched against the insurer the bounds of when an
attorney acts as a claim investigator, conflating the material prepared in
anticipation of litigation privilege with attorney client privilege. Certain
Bates-numbered documents withheld by the insurer, but detailed in its privilege
log, were at the heart of the disclosure dispute, and the court reviewed them
in chambers before ruling.
The court described some of the documents
it reviewed as not having any bearing on anything of a legal nature or
character and, accordingly, would not benefit from either privilege. But, in a
particularly concerning instance, the court too readily described a
pre-disclaimer claim note summarizing the legal opinion rendered by the
insurer’s coverage counsel as beyond the protections of attorney-client
privilege and the work product. It observed that the claim note was written by
someone other than an attorney acting as such, which was not a communication
directly between counsel and a client, and was not only of a legal nature. So,
even though it was the client’s characterization of the attorney’s opinion and
work product, the court did not find it privileged, in part because it was
New York’s intermediate appellate court, the
Appellate Division, however, has held that a trial court abuses its discretion
in ordering disclosure of the legal opinion of outside counsel, and
pre-disclaimer claim notes related to that opinion, where the documents
prepared by an attorney are:
and predominantly of a legal character”
to furnish legal services, because they are absolutely privileged and not
discoverable, regardless of whether there was pending litigation at the time
they were prepared
New York’s highest court has held that
“[s]o long as the communication is primarily or predominantly of a legal
character, the privilege is not lost merely by reason of the fact that it also
refers to certain nonlegal matters.”
Insurers should remember that they are
entitled to invoke privilege like any other corporate defendant and should not
be treated as an unprotected class. Insurers should also be
assertive with the attorney-client privilege and work product doctrine, where
appropriate to prevent further erosion of these important protections. Having
faced such issues before, we are uniquely suited to provide proactive solutions
to protect privilege.
(N.Y. State Supreme Court, New York County, August 30, 2019).
 Celani v. Allstate Indem. Co., 155 A.D.3d 1524, 1526 (N.Y. App.
Div. 4th Dep’t 2017).
 See Rossi v. Blue Cross & Blue Shield of Greater New York, 73
N.Y.2d 588, 594 (1989).
 See id. at 591-92 (“no one questions that corporations, as
other clients, may avail themselves of the attorney-client privilege for
confidential communications with attorneys relating to their legal