Journal of American Law

SPRING 2015

The Journal of American Law is a peer-reviewed journal and the only one of its kind in the country. The Journal is a law review focused on important legal issues ranging from complex litigation to Supreme Court rulings.

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34 Journal of American Law // Spring 2015 Insurers and their coverage counsel tradition- ally have felt secure that coverage opinions prepared by counsel are protected from dis- closure in subsequent coverage litigation by the attorney-client privilege. To their dismay, that increasingly is not the case. Tis article will explain the growing trend of the courts to erode the privilege that attaches to cov- erage opinions and help guide insurers and their coverage counsel in protecting counsel's advice from disclosure. Coverage counsel is ofen brought in when a claim is reported to provide a legal opinion as to whether a claim is covered. As frequently, little or no investigation into the claim has been conducted at the time coverage counsel is retained. Counsel ofen is involved in advising or even directing the investigation. It is here that caution must be employed. Coverage counsel may be asked to wear multiple hats—the hat of an advisor, an in- vestigator, or an attorney who provides legal advice on coverage. Te more hats an attorney wears, the less likely a court will fnd the attor- ney's opinions are protected from disclosure by the attorney-client privilege. Recent cases analyzing the attorney-client privilege in the context of an insurance company's decision to deny coverage have shown an increasing trend of requiring the disclosure of materials traditionally protected from discovery. Coun- sel's opinions to the insurer may well be used by the insured's attorney as a road map in cov- erage litigation and even as evidence in bad faith litigation. Privilege in the Corporate Context Te attorney-client privilege is "the oldest among common-law evidentiary privileges." 1 It is established by statute, and each state has codifed the scope and nature of the protec- tion aforded to privileged communications. For example, in New York, CPLR 4503(a) states that "a privilege exists for confdential communications made between attorney and client in the course of professional employ- ment," and CPLR 3101(b) "vests privileged matter with absolute immunity." 2 In New Jer- sey, communications between a client and an 1 Spectrum Sys. Int'l Corp. v. Chem. Bank, 78 N.Y.2d 371, 377 (1991); see also Costco Whole- sale Corp. v. Superior Court, 47 Cal. 4th 725, 732 (2009) (the attorney-client privilege has been a hallmark of Anglo-American jurisprudence for almost 400 years) (internal citations and quota- tions omitted). 2 Spectrum Sys., 78 N.Y.2d at 377. Michael E. Gorelick is a founding partner of Abrams Gorelick Friedman & Jacob- son LLP, an insurance cov- erage and defense frm with ofces in New York City and East Rutherford, N.J. His practice concentrates on complex insurance coverage matters, representing do- mestic insurers and Lloyd's Underwriters under a wide variety of policies. Mr. Gorelick regularly speaks at educational seminars for insurance carriers, industry forums, and bar association educational seminars. He is a member of the Claims and Litigation Management (CLM) Alliance, Federation of Defense & Corporate Counsel (FDCC), Lloyd's Market Association, and several other industry organizations and has been named a Super Lawyer in the feld of insurance cover- age since 2012. Alexandra E. Rigney is a partner at Abrams Gorelick Friedman & Jacobson LLP. Her practice includes the representation of domestic insurers and Lloyd's Under- writers in insurance cover- age matters under various forms of policies. She is a graduate of Georgetown University and Brooklyn Law School. Ms. Rigney has been named as a Rising Star in insurance coverage by Super Lawyers Magazine. SUMMARY When an attorney is retained by an insurance company or a third party administrator to render an opinion about whether or not a particular claim is covered, it is presumed that the coverage opinion prepared by counsel will be protected by the attorney-client privilege. Increasingly, however, courts have allowed insureds to discover the contents of the claims fles maintained by an insurer, including coverage opinions prepared by counsel. Te cases where an insured has sought disclosure of counsel's opinion range from simple declaratory judgment actions, where the insured challenges the insurer's denial of coverage, to bad faith suits. To protect coverage counsel's opinions from later disclosure in a suit brought by an insured, in- surers and their third party administrators must limit the scope of counsel's assignment to rendering a legal opinion on coverage and must avoid asking counsel to serve as an investigator. Tis article will examine the recent case law interpreting the scope of the attorney-client privilege in the context of an insurer's claim fle, analyzing the growing trend of the courts to erode the privilege that attaches to coverage opinions. It also will serve as a guide to insurers and their agents to assist them in protecting coverage counsel's advice from disclosure. Preserving the Privilege of Coverage Opinions How to Prevent a Shield from Becoming a Sword By Michael E. Gorelick and Alexandra E. Rigney inSuRAnCe/Re-inSuRAnCe

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