INSURANCE DISCOVERY IN-MOTION

June 16, 2014

Connecticut Legal Conference

Hartford, CT

CT Bar Institute, Inc. 1.5 Credit Hours

Lawyers’ Principles of Professionalism As a lawyer I must strive to make our system of justice work fairly and

efficiently. In order to carry out that responsibility, not only will I comply

with the letter and spirit of the disciplinary standards applicable to all

lawyers, but I will also conduct myself in accordance with the following

Principles of Professionalism when dealing with my client, opposing parties, their counsel, the courts and the general public.

Civility and courtesy are the hallmarks of professionalism and should not

be equated with weakness;

I will endeavor to be courteous and civil, both in oral and in written communications;

I will not knowingly make statements of fact or of law that are untrue;

I will agree to reasonable requests for extensions of time or for waiver of

procedural formalities when the legitimate interests of my client will not be adversely affected;

I will refrain from causing unreasonable delays;

I will endeavor to consult with opposing counsel before scheduling

depositions and meetings and before rescheduling hearings, and I will cooperate with opposing counsel when scheduling changes are requested;

When scheduled hearings or depositions have to be canceled, I will notify

opposing counsel, and if appropriate, the court (or other tribunal) as early as possible;

Before dates for hearings or trials are set, or if that is not feasible,

immediately after such dates have been set, I will attempt to verify the

availability of key participants and witnesses so that I can promptly notify

the court (or other tribunal) and opposing counsel of any likely problem in that regard;

I will refrain from utilizing litigation or any other course of conduct to harass the opposing party;

I will refrain from engaging in excessive and abusive discovery, and I will comply with all reasonable discovery requests;

In depositions and other proceedings, and in negotiations, I will conduct

myself with dignity, avoid making groundless objections and refrain from engaging I acts of rudeness or disrespect;

I will not serve motions and pleadings on the other party or counsel at such

time or in such manner as will unfairly limit the other party’s opportunity to respond;

In business transactions I will not quarrel over matters of form or style, but will concentrate on matters of substance and content;

I will be a vigorous and zealous advocate on behalf of my client, while

recognizing, as an officer of the court, that excessive zeal may be

detrimental to my client’s interests as well as to the proper functioning of

our system of justice;

While I must consider my client’s decision concerning the objectives of the

representation, I nevertheless will counsel my client that a willingness to

initiate or engage in settlement discussions is consistent with zealous and effective representation;

Where consistent with my client's interests, I will communicate with

opposing counsel in an effort to avoid litigation and to resolve litigation that has actually commenced;

I will withdraw voluntarily claims or defense when it becomes apparent that they do not have merit or are superfluous;

I will not file frivolous motions;

I will make every effort to agree with other counsel, as early as possible, on a voluntary exchange of information and on a plan for discovery;

I will attempt to resolve, by agreement, my objections to matters contained

in my opponent's pleadings and discovery requests;

In civil matters, I will stipulate to facts as to which there is no genuine dispute;

I will endeavor to be punctual in attending court hearings, conferences, meetings and depositions;

I will at all times be candid with the court and its personnel;

I will remember that, in addition to commitment to my client's cause, my responsibilities as a lawyer include a devotion to the public good;

I will endeavor to keep myself current in the areas in which I practice and

when necessary, will associate with, or refer my client to, counsel knowledgeable in another field of practice;

I will be mindful of the fact that, as a member of a self-regulating

profession, it is incumbent on me to report violations by fellow lawyers as required by the Rules of Professional Conduct;

I will be mindful of the need to protect the image of the legal profession in

the eyes of the public and will be so guided when considering methods and content of advertising;

I will be mindful that the law is a learned profession and that among its

desirable goals are devotion to public service, improvement of

administration of justice, and the contribution of uncompensated time and

civic influence on behalf of those persons who cannot afford adequate legal assistance;

I will endeavor to ensure that all persons, regardless of race, age, gender,

disability, national origin, religion, sexual orientation, color, or creed

receive fair and equal treatment under the law, and will always conduct

myself in such a way as to promote equality and justice for all.

It is understood that nothing in these Principles shall be deemed to

supersede, supplement or in any way amend the Rules of Professional

Conduct, alter existing standards of conduct against which lawyer conduct

might be judged or become a basis for the imposition of civil liability of

any kind.

--Adopted by the Connecticut Bar Association House of Delegates on June 6, 1994

Melissa A. FedericoAssociate860.240.6042 | mfederico@murthalaw.com

Education:Roger Williams University School of Law, J.D.Stonehill College, B.A.

Description:Ms. Federico is a trial attorney practicing in the areas of complex commercial litigation and insurance coverage and recovery. She has litigated and advised clients in complex matters concerning a wide array of insurance products including general liability, D&O, excess and umbrella and reinsurance. She has also counseled corporate risk managers regarding their insurance portfolios. Representative insurance matters include:

• represented hospital’s captive excess insurer to obtain coverage from reinsurer for medical malpractice claims and secured full indemnification funding.

• counseled bankruptcy trustee to obtain insurance coverage in suit against officers of debtor corporation.• counseled bankruptcy trustee of pharmaceutical company to obtain maximum insurance coverage

coverage for creditor claims. • represented municipalities to obtain insurance recovery under various property and casualty policies.

Ms. Federico has been recognized by Super Lawyers as a Connecticut Rising Star in Insurance Coverage in 2013. She is a graduate of Stonehill College and received her J.D. from Roger Williams University School of Law. She is a member of the Insurance Law and Litigation Sections of the Connecticut Bar Association. She is also a volunteer for Lawyers for Children America, a child advocacy organization protecting the rights of children who are victims of abuse, abandonment and neglect.

Bar & Court Admissions:• Connecticut• United States District Court, District of Connecticut• United States Court of Appeals, Second Circuit

Practices & Industries:• Business Litigation• Health Care• Insurance Coverage

Memberships:• Connecticut Society for Healthcare Risk Management• American Health Lawyers Association• Connecticut Bar Association• American Bar Association

Community Activities:• Lawyers for Children America

Recognition:• Feinstein Institute for Legal Service Public Service Award

Prior Experience:• Clerk for the Honorable Judith C. Savage, Providence Superior Court

Attorneys

Robert D. Laurie is a commercial litigator who represents clients in various industries, including financial services, manufacturing, and life sciences. Among other clients, he frequently represents domestic and international insurance companies in disputes concerning insurance coverage determinations, bad faith/extra-contractual claims, reinsurance, life insurance and related financial products. Bob also frequently represents clients in commercial contract disputes, commercial fraud, shareholder and partnership disputes and product liability.

Bob is an experienced trial lawyer who has successfully presented cases in various state and federal courts (jury and courtside). He has also represented clients in domestic and international arbitration and

mediation proceedings, among other engagements. The following is a sample of Bob’s recent matters:

• Obtained a defense verdict on behalf of insurance company against plaintiff’s claims that the insurer was liable for alleged negligent repairs and remediation performed by an independent contractor referred to the plaintiff following a loss under a commercial insurance policy.

• Obtained dismissal of a complaint alleging breach of a regional distribution and sales agreement and unfair trade practices.

• Successfully defended life insurer in an arbitration involving claims of fraud and breach of contract made by beneficiary relating to insurer’s procedures concerning issuing policy amendments and the conduct of agents.

• Obtained summary judgment on behalf of insurance company upholding its denial of coverage under a CGL policy for a multi-million dollar claim arising from a data-loss event.

• Obtained unanimous defense verdict on behalf of an insurance company following a two-week jury trial in the U.S.D.C. for the District of Connecticut concerning an insureds’ claims of breach of contract and bad faith insurance practices following a fire-loss claim at the insureds’ 400-acre estate.

• Successfully defended international medical device manufacturer in a product liability litigation filed in the U.S.D.C. for the District of Connecticut.

In addition to litigation, Bob regularly advises clients on various contract and risk management issues, including lease, license and distribution agreements. Bob also advises clients on the construction and wording of various types of insurance and reinsurance agreements.

Bob recently served on the Executive Committee of the Insurance Committee of the International Bar Association. He is also a frequent publisher and speaker on topics relating to commercial litigation and the insurance and reinsurance industry.

Bob was recently named as a 2013 New England Super Lawyer® in the practice areas of insurance coverage litigation.

Outside of the law, Bob is currently serving as the President of the Board of Directors of The Bridge Family Center, a non-profit organization that provides community-based programs, residential services, youth services, child-parent support, mental health counseling and art and recreational programs for children and families in Connecticut. In addition, Bob has many interests, including surfing, hiking, running and spending time with his wife, two daughters, son, and “Newfie” dog.

Robert D. LauriePartner

Blue Back Square, 65 Memorial Road, Suite 340West Hartford, CT 06107-2434Direct Tel: 860.760.8405 Tel: 860.760.8400 Fax: 860.760.8401rlaurie@sgllawgroup.com

www.sgllawgroup.com

Attorneys

Practice Areas

• Insurance Coverage and Extra-Contractual Litigation • Complex Civil Litigation • Commercial Litigation • Environmental Litigation • Product Liability Litigation • Reinsurance

Education

• Western New England College, B.A. • Suffolk University Law School, J.D., cum laude

Admitted to Practice

• Connecticut – All Courts • Massachusetts – All Courts • New Hampshire - All Courts

ProfessionalAffiliations

• International Bar Association, Insurance Committee • American Bar Association, Tort, Trial & Insurance Practice Section • ARIAS U.S. • The British Insurance Law Association • Professional Liability Institute • Professional Liability Underwriters Society • Defense Research Institute • Connecticut Bar Association • Massachusetts Bar Association

Recent Publications/Speaking • Speaker, Cyber Insurance: What You Need to Know in 2012 (August 2012), Knowledge Congress Webinar. • Co-Author, “Data Loss Under CGL Policies: The Proverbial Square Peg In A Round Hole,” Inaugural Issue of Advisen Cyber Liability Journal, March 2012. • Co-Author, “Just How Late is Too Late,” Connecticut Law Tribune, November 2009. (PDF) • Author, “Late Notice Revisited: Recent Decisions Further Obscure the Viability of a Late Notice Coverage Defense,” The ACE Group, Claims Bulletin, August 2009. • Speaker, “The Current Status of the Law on Notification of Circumstances and Claims in Different Global Jurisdictions,” The 2009 Conference of the International Bar Association, Madrid, Spain. • Speaker, “Insurance on Asbestos Liabilities,” The 2008 Conference of the International Bar Association, Buenos Aires, Argentina. • Co-Author, “Déjà Vu All Over Again – Auction Rate Securities are the Latest Debacle to Hit the Financial Services Industry,” Mealey’s Emerging Insurance Disputes, August 2008. • Speaker, “United States Insurance Regulation – Developments in the Movement for Reform,” The 2007 Conference of the International Bar Association, Singapore. • Co-Author, “Mass. High Court Says Excess Carrier Not Bound By Primary’s Settlement Decision,” National Underwriter, November 5,2007. • Speaker, “The Insurability of Punitive Damages,” Association of Insurance Compliance Professionals, National Conference, October 2006. • Co-Author, “Trouble In Front,” Run-Off Business, Summer 2004. • Author, “Navigating the Seas of D&O Policy Rescission,” National Underwriter, September 20, 2003. • Author, “Not So Fast: Ruling in the Legion Insurance Company Rehabilitation Proceeding Provides Direct Access to Reinsurance Only in Limited Circumstances,” Edwards & Angell Insurance & Reinsurance Update, September 2003. • Co-Author, “Proposed SEC Proxy Disclosure Rules; Investors’ Savior or Plaintiffs’ Bar Weapon?,” Financial Advisor Magazine, November 2002.

Hinckley, Allen & Snyder LLP, Attorneys at Law

Michael T. McCormack860-725-6200mtmccormack@hinckleyallen.com

PRACTICE AREASInsurance CoverageProduct Liability & Toxic TortLitigationSecurities

EDUCATIONCatholic University of America, J.D., 1992

Managing Editor, The Journal of Contemporary Health Law andPolicy, 1991-1992

Providence College, B.S., 1989cum laudePast President, Hartford Region of the Providence College AlumniAssociation

BAR MEMBERSHIPSConnecticut, 1993Massachusetts, 2011United States District Court, District of Connecticut, 1994United States Supreme Court, 2004United States Court of Appeals, Second Circuit, 2009United States District Court, District of Massachusetts, 2013

WORK EXPERIENCEHinckley Allen

Partner (2008 – Present)

Tyler Cooper & Alcorn, LLPPartner (2004 - 2008)

SPECIAL HONORSNamed among “Greater

Hartford’s Top Attorneys”for Business Litigation byHartford Magazine, July

2012

Recipient of theMartindale-Hubbell® AV

Peer Review Rating

PROFESSIONALAFFILIATIONS

American Bar Association:Member - InsuranceCoverage Litigation

Committee, Torts andInsurance Committee,Intellectual Property

Committee

Connecticut Bar Association:Insurance Law Section, Chair;

Member - Business TortsCommittee, Intellectual

Property Committee,Litigation Committee

Hartford County BarAssociation

Michael is a partner in the Litigation Group where he practices in the area ofcomplex commercial litigation and insurance coverage and recovery matters forcorporate and individual policy holders. In his practice, Mike assists clients with theassessment and pursuit of claims for recovery of insurance benefits in complexmatters under various types of insurance policies, including general liability,property, director and officer liability, health and disability, and errors and omissionspolicies. Mike also advises corporate risk managers and other business executivesregarding their insurance portfolios, and he represents insurance industry clients inadministrative regulatory proceedings. In addition to his insurance practice, Mikerepresents manufacturers, distributors and sellers of products in product liability,mass tort, and warranty claim disputes and litigation. Mike also represents financialservices clients in securities litigation, arbitration, and regulatory proceedings..

......

1952 Whitney Avenue, Hamden, CT 06517 P: 203.287.2116 F: 203.287.8847 www.sdvlaw.com

Jeremiah Welch, Partner jmw@sdvlaw.com

Education: J.D. Pepperdine Univ., 1995 B.A. Rhode Island, 1992

Admissions: New York State Court U.S. District Court, Southern District of New York U.S. District Court, Eastern District of New York California State Court U. S. District Court, Central District of California District of Columbia Court Connecticut State Court U.S. District Court, District of Connecticut Professional Activities: New York Bar Association, Member Connecticut Bar Association, Member

Insurance Law Section American Bar Association, Member Risk and Insurance Management Society, Member

New York Chapter Real Estate Board of New York

Mr. Welch focuses his practice on corporate risk transfer and insurance recovery. Mr. Welch

advises corporate counsel, risk managers and insurance brokers on risk transfer program design and ways to improve existing programs including corporate insurance procurement and contractual risk transfer through indemnity, insurance and other means. Mr. Welch is frequently called upon to advise businesses and the broker community on the impact of new developments in legislation and case law affecting risk transfer throughout the United States, as well as in established and emerging markets around the globe. Mr. Welch represents clients in negotiating the risk transfer components of their contracts, and, together with clients’ brokers, in negotiating and procuring insurance. He is frequently asked to draft endorsements and new policy language addressing a variety of issues encountered by policyholders and brokers in the insurance marketplace. He also provides counsel on issues of regulatory compliance for both brokers and clients with self-insured and/or self-administrated risk.

Mr. Welch also maintains an active litigation practice, representing a variety of clients in insurance

recovery matters throughout the country. Mr. Welch has handled disputes including large scale construction loss, natural disaster loss, terrorism related mass tort coverage and catastrophic commercial property loss/business interruption. Like all of the lawyers at SDV, Mr. Welch does not represent insurance companies, enabling him to give policyholder clients un-conflicted advice and representation.

Mr. Welch frequently presents on a variety of risk transfer topics for clients and at national

industry conferences. He has also authored numerous publications. Prior to joining SDV Mr. Welch was a partner in a prominent defense firm in Los Angeles,

California where he represented various professional and corporate clients through all phases of litigation including jury trial and arbitration.

Mr. Welch is a U.S. Army veteran.

CBA Connecticut Legal Conference Insurance Law Section

June 16, 2014

Seminar - Insurance Discovery In-Motion

Moderator – Michael T. McCormack, Hinckley Allen Judge – Michael T. McCormack, Hinckley Allen Policyholder Counsel – Jeremiah M. Welch, Saxe Doernberger & Vita, P.C. Insurer Counsel – Robert D. Laurie, Seiger Gfeller Laurie LLP Amicus Facilitator – Melissa A. Federico, Murtha Cullina LLP

Broker-Client Privilege

by Jeremiah M. Welch

Facts

Owner hired Contractor to install a new roof on Owner’s building. Two years after

finishing its work, Contractor received a letter from Owner alleging that the roof was

leaking and Owner had suffered significant water damage to the building interior and

property within the building. Upon receipt of Owner’s letter, Contractor immediately

contacted Broker, who had negotiated and procured general liability insurance policies

on Contractor’s behalf from Insurer. Broker and Contractor have an agreement for

“Claims Services”, which include providing notice to insurers, managing claims for

coverage and acting as a claim advocate for Contractor. Broker and Contractor

discussed the demand but notice of the demand was not provided to Insurer.

Contractor undertook certain repair work, including the roof and building interior.

Two years later, Owner sent a second letter to Contractor reporting that the roof was

again leaking in multiple locations with significant resulting interior property damage.

Owner reported that it had hired a new contractor who was in the midst of performing

repairs. The letter enclosed a complaint and stated that the complaint was being filed in

Connecticut state court. Contractor immediately reported the letter and suit to Broker,

and Broker immediately notified Insurer. Broker discussed with client the potential for a

disclaimer based on late notice and why notice was not given previously. Broker took

notes of that conversation and placed them in a file created for the claim. Following a

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prompt and reasonable investigation, Insurer disclaimed coverage, citing Contractor’s

failure to give notice of the original demand and the resulting prejudice to Insurer’s

rights.

Broker contacted Attorney and they discussed via email Insurer’s disclaimer and why

notice was not provided as a result of Owner’s first letter. According to Broker, following

discussion of the demand and possible impact of a claim on future insurance premiums,

Contractor instructed Broker not to give notice, believing it could make a deal with

Owner to repair the damage without ever needing to involve Insurer. Broker

recommended to Contractor that it retain Attorney, and Contractor did so. Broker

explained in an email to Contractor that while it should have given notice earlier, Insurer

was probably not actually prejudiced by the delay, and Contractor should therefore fight

for coverage. Following his own investigation, Attorney filed a declaratory judgment

action for coverage against Insurer.

During the pendency of the coverage action, Broker periodically emailed Coverage

Attorney for updates on the status of the litigation, which Attorney provided, always

copying Contractor. Several emails discussed strategy and chances of success.

Attorney also asked for, and was provided, a copy of Broker’s claim file.

During the coverage action, Insurer subpoenaed certain documents from Broker, and

Contractor responded with a request for a protective order with respect to certain items:

a. Broker’s notes from call with Contractor

b. Email communications between Broker and Attorney about coverage

dispute before Contractor retained Coverage Attorney

c. Email communications between Broker and Attorney after Contractor

retained Attorney

d. Email status updates from Attorney to Broker

Issue – Does the Attorney-Client Privilege Apply?

1. Attorney-Client Privilege

"The attorney-client privilege protects communications between client and attorney

when made in confidence for the purpose of seeking or giving legal advice." Ullman v.

State, 230 Conn. 698, 711, 647 A.2d 324 (1994). "In Connecticut, the attorney-client

privilege protects both the confidential giving of professional advice by an attorney

acting in the capacity of a legal advisor to those who can act on it, as well as the giving

of information to the lawyer to enable counsel to give sound and informed advice."

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Metropolitan Life Insurance Co. v. Aetna Casualty and Surety Co., 249 Conn. 36, 52,

730 A.2d 51 (1999). "As with all privileges, the [party] claiming the attorney-client

privilege has the burden of establishing all essential elements." Harp v. King, 266 Conn.

747, 770, 835 A.2d 953 (2003). And since the rule tends to prevent a full disclosure of

the truth in court, it should be strictly construed. Turner's Appeal, 72 Conn. 305, 317-18,

44 A. 310 (1899).

2. Contractor’s Arguments

Broker is Contractor’s agent, and therefore what Broker communicates to

Attorney has the same protection as what Contractor communicates.

o "The presence of certain third parties, however, who are agents or

employees of an attorney or client, and who are necessary for

consultation, will not destroy the confidential nature of the

communications." State v. Gordon, 197 Conn. 413, 424, 504 A.2d 1020

(1985).

o Contractor’s communications to Broker are communications from client to

attorney, through an agent

Broker’s service agreement creates an agency relationship for the

purposes of investigating and advocating claims

Broker’s communications with Attorney share the same privilege as

an employee of Contractor would

Analogous to where an Insurer employs a TPA - A claimant cannot

obtain the communications between TPA and insurer (this may be

anticipation of litigation)

See Royal Surplus Lines Ins. Co. v. Sofamor Danek Grp., Inc., 190

F.R.D. 463 (W.D. Tenn. 1999) (Court found broker to be an agent

of policyholder based on analysis of several factors: (1) who first

set the agent in motion, (2) who controlled the agent’s actions, (3)

who paid the agent, and (4) whose interest the agent was

attempting to protect.)

See In re Tetra Technologies, Inc., 2010 U.S. Dist. LEXIS 33012

(S.D. Tex.) (holding that privilege applied as long as broker-client

communications were for the purpose of facilitating the rendition of

legal services).

Broker is part of the defense team and an expert on insurance issues, such that

the attorney-client privilege should apply to any otherwise privileged

communication between Contractor and Attorney to which Broker is a party.

o See Atmel Corp. v. St. Paul Fire & Marine Ins. Co., 409 F. Supp. 2d 1180

(N.D. Cal. 2005). (Disclosure of privileged communications to broker did

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not waive the privilege because broker is a “necessary advisor” to

policyholder on insurance issues.)

Insurer can depose Contractor directly on facts surrounding notice issues. No

reason to risk invasion of privilege

o If Broker had a candid conversation with Attorney about the facts and what

Broker knows, it is easier for Insurer to get that story directly from Broker

than to get all the pieces of the story separately from each source

(documents, Broker witnesses, Contractor witnesses, etc.) – the attorney-

client privilege is designed to enable that candid conversation, not make

Insurer’s discovery less difficult.

The privilege should extend to communications made when litigation was

anticipated, even though Attorney had not been retained

o Factually no different than privilege applying to insurance adjuster, insured

and defense attorney (See e.g. Harris v. Processed Wood, 455 N.Y.S. 2d

411 (4th Dept. 1982) (holding that privilege applies to notice

communication between insurer and insured prior to counsel being

retained).

o Insurers use the same privilege to prevent communications with their

insureds from getting to the plaintiff/claimant where the insurer is

defending (courts vary in terms of which privilege they cite in support of

this result, but the outcome is the same – the attorney-based privilege is

extended to insurer-insured communications about the claim before an

attorney was retained). (This is a majority rule: NY, CA, CO, FL, IA, KY,

IL, ME, MO, OH, RI, TX, WA, WV.)

3. Insurer’s Arguments

The attorney-client privilege does not protect facts (i.e. the story is not privileged

because it has been shared with Attorney)

o Insurer should be able to question Broker, at least, on the extent to which

Broker participated in events (e.g. Did Contractor instruct you not to notify

Insurer?)

Broker is not Contractor’s agent

o "Statements made in the presence of a third party are usually not

privileged because there is then no reasonable expectation of

confidentiality." State v. Cascone, 195 Conn. 183, 186, 487 A.2d 186

(1985).

o The service agreement obligates Broker to perform services for Contractor

as an independent contractor, not an agent.

o See SR Int’l Bus. Ins. Co. v. World Trade Ctr. Props., LLC, 2002 U.S. Dist.

LEXIS 10919, at *8.

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Broker was not acting under either Contractor’s or Attorney’s direction

o Up to the point Contractor retained Attorney, Broker was the one providing

direction – there is no “broker-client” privilege

o Niemitz v. Barkhamsted, Superior Court, Judicial District of Litchfield,

Docket No. CV06-5000208S (November 5, 2007, Marano, J.), 2007

Ct.Sup. 20221, which holds that where an insurance adjuster received a

communication at the express direction of counsel for the insured, the

attorney-client privilege may be available.

o Fenton v. Shillelagh Corp., Superior Court, Judicial District of New Haven,

Docket No. Cv94-0365519 (December 26, 1995), 1995 Conn. Super.

LEXIS 3610, 1995 WL 705814. Where the attorney for the insured

submitted an affidavit indicating that he directed the claims manager of

insured's insurance company to have a representative prepare a

statement his client regarding the incident in question, which statement

was held to be privileged.

o Facts do not support premise that the communications between Broker

and Contractor were for the purpose of, or facilitation of, obtaining legal

advice.

Attorney-client privilege should not apply before attorney was retained.

o Some states do not extend the privilege for insurers for pre-attorney

insurer-insured communications. (Minority position: AK, NV, AZ, HI, NC,

WI.)

o The states that do extend the privilege to adjusters have never recognized

a similar privilege for broker-insured communications in a coverage

dispute.

o Insurer’s have a fiduciary relationship with insured, brokers do not

Issue - Does the Work-Product Privilege Apply?

1. Work-Product Privilege

The work product doctrine provides that "a party may obtain discovery of

documents and tangible things . . . prepared in anticipation of litigation or for trial

by or for another party or by or for that other party's representative only upon a

showing that the party seeking discovery has substantial need of the materials in

the preparation of the case and is unable without undue hardship to obtain the

substantial equivalent of the materials by other means. In ordering discovery of

such materials when the required showing has been made, the judicial authority

shall not order disclosure of the mental impressions, conclusions, opinions, or

legal theories of an attorney or other representative of a party concerning the

litigation." Practice Book Section 13-3(a).

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The burden of establishing that the information sought constitutes an attorney

work product is on the party asserting such a claim. Geib v. Sheraton Stamford

Hotel, Superior Court, Judicial District of Stamford/Norwalk at Stamford, Docket

No. X08CV05-5000466S (December 3, 2008, Jennings, J.) (2008 Ct.Sup. 19286,

2008 Conn. Super. LEXIS 3152). Since Rule 26 of the Federal Rules of Civil

Procedure addresses work product in like terms, Connecticut courts have looked

to federal decisional law in order to adjudicate work product issues arising under

Practice Book §13-3. See Garcia v. Yale New Haven Hospital, Superior Court,

Judicial District of New Haven, Docket No. CV95-037032 (July 2, 1999, Lager, J.)

(25 CLR 78, 1999 Conn. Super. LEXIS 1821).

"Three conditions must be met to earn work product protection. The material

must (1) be a document or a tangible thing, (2) that was prepared in anticipation

of litigation, and (3) was prepared by or for a party, or by his representative." In re

Grand Jury Subpoenas Dated December 18, 1981 & January 4, 1982, 561

F.Sup. 1247, 1257 (E.D.N.Y. 1982).

2. Contractor Arguments

Attorney’s status reports are work product

Insurer has alternative means to obtain the information – depose Contractor

Sending reports to Broker is not waiver because Broker is Contractor’s agent and

a litigation consultant to Attorney (same arguments raised above)

Courts have held communications from insured to insurance adjuster to be

privileged from disclosure to plaintiff

3. Insurer Arguments

The privilege cannot apply where the attorney was not involved

o Under Connecticut law the lack of involvement of counsel can be

dispositive of a claim that reports are work product. "Work product can be

defined as the result of an attorney's activities when those activities have

been conducted with a view to pending or anticipated litigation. The

attorney's work must have been an essential step in the procurement of

the data which the opponent seeks, and the attorney must have performed

duties normally attended to by attorneys." (Citations and internal quotation

marks omitted.) Stanley Works v. New Britain Redevelopment Agency,

155 Conn. 86, 95, 230 A.2d 9 (1967). See also Amica Mut. Ins. Co. v.

Fasarella Pro Painting & Design, LLC, 2011 Conn. Super. LEXIS 1910,

12-13.

Contractor has not shown that the documents in question were specifically

prepared in preparation for litigation versus prepared as part of Broker’s normal

business practice.

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o See QBE Insurance Corp. v. Interstate Fire and Safety Equipment

Company, U.S.D.C., D.Conn., Docket No. 3:07cv1883(SRU) (February

18, 2011, Underhill, U.S.D.J.) 2011 U.S. Dist. LEXIS 16406, 2011 WL

69282. The defendant Interstate sought to depose the adjuster who had

investigated the fire on behalf of the plaintiff insurer, and specifically

sought to question the adjuster about claim notes he had prepared. The

plaintiff QBE Insurance sought to protect the claim notes as attorney work

product. The issue was whether or not those notes had been "prepared in

anticipation of litigation or for trial by or for another party or its

representative" under Federal Rule 26(b)(3)(A). Citing Weber v. Paduano,

U.S.D.C., S.D.N.Y Docket No. 02cv3392 (GEL) (January 22, 2003, Lynch,

U.S.D.J.), 2003 U.S. Dist. LEXIS 858, 2003 WL 161340, The QBE court

cautioned against protecting documents from discovery simply because of

a "ritualistic incantation" by insurers that documents are prepared in

preparation for litigation and drew a "fact specific" distinction between

documents prepared in the ordinary course of an insurer's business of

investigation of a claim and documents created "because of" anticipated

litigation.

o Other "objective benchmarks" relied upon by the federal courts, bearing

on the anticipation of litigation issue for purposes of the work product

privilege in an insurance matter include the following: (1) whether the

investigation is of a third-party claim, the very nature of which is

anticipating litigation, or a first-party claim; (2) that insurer-authored

documents are more likely than attorney-authored documents to have

been prepared in the ordinary course of business; (3) that the work

product doctrine most strongly protects the mental processes of the

attorney, providing a privileged area in which to analyze and prepare a

client's case as opposed to documents which consist of factual materials

and analyses of facts; (4) that actions taken by an insurance company

immediately after being notified of a potential claim are almost always part

of its ordinary business of claim investigation; and (5) and that blanket

assertions of work product protection as to entire files, rather than specific

documents are never sufficient to prevent discovery, since the party

opposing discovery must establish that each document is work product.

Weber v. Paduano, U.S.D.C., S.D.N.Y Docket No. 02cv3392 (GEL)

(January 22, 2003, Lynch, U.S.D.J.), 2003 U.S. Dist. LEXIS 858, 2003 WL

161340

This is not analogous to communications between insured and adjuster because

the adjuster is the attorney’s agent, not the insured’s, and such communications

are not per se privileged

8

o Communications by an insured to his carrier are not, without more,

privileged. Jacques v. Cassidy, 28 Conn. Supp. 212, 257 A.2d 29 (1969).

Although such a communication may become privileged if the adjuster

takes a statement from an insured while acting as the attorney's agent and

at his instruction, Fenton v. Shillelagh Corp., 1995 Conn. Super. LEXIS

3610, 1995 Ct.Sup. 14365, No. CV94-0365519S (Superior Court, Judicial

District of New Haven, at New Haven, December 26, 1995)

Broker was not functioning as an “expert” consultant. None of the facts suggest

such.

o See Sony Computer Entertainment America v. Great American Insurance

Co., 229 F.R.D. 632 (N.D. Cal. 2005) (holding that where the record

showed no evidence of broker’s function as an expert, the attorney-client

privilege would not apply). (Note: The court probably should have been

analyzing this as a work-product privilege issue, not an attorney-client

issue.)

Issue – Does the Common Interest Privilege Apply?

1. Common Interest Privilege

In general, "once a privileged communication has been purposely disclosed to a

third party, the attorney-client privilege is waived, unless the disclosed material

falls under the common interest rule." United States v. United Techs Corp., 979

F.Sup. 108, 111 (D.Conn. 1997). The common legal interest rule was intended

"to protect the free flow of information from client to attorney . . . whenever

multiple clients share a common interest about a legal matter." United States v.

Schwimmer, 892 F.2d 237, 243-44 (2d Cir. N.Y. 1989). This rule requires that

"the communication in question was given in confidence and that the client

reasonably understood it to be so given." Id., 892 F.2d at 244. The parties

claiming protection under the rule must share a "common interest about a legal

matter," but "it is . . . unnecessary that there be actual litigation in progress." Id.,

892 F.2d at 243-44. "Third parties receiving copies of the communication and

claiming a community of interest may be distinct legal entities from the client

receiving the legal advice and may be a non-party to any anticipated or pending

litigation." Duplan Corp. v. Deering Milliken, Inc., 397 F.Sup. 1146, 1172 (D.S.C.

1974).

2. Contractor Arguments

If Broker is truly a “third party” and not an agent, and no attorney-based privilege

otherwise applies, the common interest privilege should apply.

9

o Broker and Contractor are aligned in interest against Insurer. Broker

believes Insurer was not prejudiced by notice delay, Broker advised and

referred Contractor to Attorney, and Broker has since been functioning as

a member of the defense team. The facts do not suggest a dispute

between Broker and Contractor.

o The common interest doctrine does not require that both parties have

potential liability to a common plaintiff. Again, in the insurer-insured

defense context, the courts have applied the common interest privilege to

protect insurer-insured communications because the insurer and insured

are both clients of the attorney.

3. Insurer Arguments

Broker does not share a common legal interest – it has no liability to defend,

rather it is merely advocating for a client it shares with Attorney

o See SR Int’l Bus. Ins. Co. v. World Trade Ctr. Props., LLC, 2002 U.S. Dist.

LEXIS 10919, at *14-15.

The joint defense privilege, also called the "common-interest" rule, is an

extension of the attorney-client privilege that protects communications between

parties and the parties' attorney when the parties have decided upon and

undertaken a joint defense strategy in litigation. Steadfast Ins. Co. v. Purdue

Frederick Co., 2005 Conn. Super. LEXIS 2417, 2005 WL 2433341 No.

X08CV020191697 (September 7, 2005, Adams, J.) "It serves to protect the

confidentiality of communications passing from one party to the attorney for

another party where a joint defense effort or strategy has been decided upon and

undertaken by the parties and their respective counsel . . . Only those

communications made in the course of an ongoing common enterprise and

intended to further the enterprise are protected." United States v. Schwimmer,

892 F.2d 237, 243 (2d Cir. 1989).

Contractor and Broker do not share a common legal interest – Broker’s liability, if

any, would run to Contractor, not insurer. Similarly, Broker has no rights against

Insurer.

o See J.E. Dunn Construction Co. v. Underwriters at Lloyd’s London, 2006

U.S. Dist. LEXIS 26694 (W.D. Mo.).

o In the tripartite relationship setting, the attorney actually has two legal

clients. This is not the case with the broker and insured. The attorney has

no legal relationship with the broker.

1

SETTLEMENT COMMUNICATIONS BETWEEN POLICYHOLDER, DEFENSE COUNSEL, AND PRIMARY INSURER

by Melissa A. Federico

Facts

Mighty Manufacturer was sued in several actions alleging that its product, a

commercial toaster, was defective and had caused multiple fires burning restaurants to

the ground. In the course of the defense of the actions, Mighty’s President and founder

advised the company’s defense counsel that he was nearing retirement and did not

want to spend his last few years fighting the products liability actions. He stated that

this was precisely why he purchased insurance, and wished to settle the cases as

quickly as possible to be done with the ordeal. Mighty’s defense counsel settled the

actions for a total of $65 million shortly after discovery commenced.

Mighty was insured under a “tower” of seven comprehensive general liability

(CGL) policies issued by seven insurance companies, each of which provided $10

million of coverage for products liability claims. The highest layer was issued by Excess

Seven Company. The policy provided that Excess Seven will “indemnify Mighty for the

amount of loss which is in excess of the applicable limits of liability of the underlying

insurance . . . .” The Excess Seven policy “follows form,” adopting language of the

underlying primary policy.

Pursuant to the settlement, the primary and first three excess insurers paid their

limits directly to the claimants in the products liability actions. The fifth, sixth, and

seventh layers denied coverage on the grounds that they did not believe that the

settlement amount was reasonable. After some urgent negotiations, the fifth and sixth

layers agreed to pay $8 million each (some, but not all of their limits). However, the

seventh layer insurer- Excess Seven- continued to refuse. Mighty, desperate to

conclude the settlement, paid the $9 million balance (the $2 million “gap” of each of the

fifth and sixth layers, and the remaining $5 million that Excess Seven refused to pay).

Mighty then sued Excess Seven for coverage and bad faith.

2

In discovery in the coverage action, Excess Seven seeks all

communications between Mighty’s defense counsel and its primary and

excess carriers, claiming the documentation is relevant to its defense that

Mighty did not exhaust all of the previous layers of coverage. In response, Mighty

produced copies of the reimbursement checks from the other carriers but refused to

produce settlement negotiation communications and the settlement releases. Excess

Seven also sought communications between Mighty and its defense counsel regarding

the investigation, defense and settlement of the underlying claims, including reports by

counsel on the status of the claims. Excess Seven claims that the documents are

relevant to its defense that Mighty violated the terms of the policy by settling the actions

for an amount that was unreasonable given the available defenses. In response to the

discovery request, Mighty claims that all of the documents were protected by the

attorney client privilege. Excess Seven moved to compel responses to both requests.

First Issue:

Whether Mighty’s confidential settlement communications with its primary

insurers are discoverable in a coverage action against its excess carrier.

Insurer’s Arguments

1) Connecticut Practice Book Section 13-2 provides that a party may obtain discovery of documents material to the subject matter involved in the action. The settlement communications are material to the issue of whether Mighty satisfied the exhaustion requirement, thereby triggering Excess Seven’s obligations under the policy, as asserted in Excess Seven’s Special Defense. Applying the Practice Book’s liberal standard, the documents are relevant and discoverable. The fact that Mighty may have an alternative interpretation of the exhaustion requirement is not grounds for withholding the requested documents in discovery, but rather is a potential argument for the admissibility of such documents at trial.

2) Connecticut Code of Evidence Section 4-8 and/or Fed. R. Evid. 408 do not protect the documents from disclosure because those are evidentiary rules, not discovery rules, the latter of which are clearly broad enough to allow discovery.

3

Mighty’s Arguments

1) The exhaustion argument is one of contract interpretation for the court to resolve at a later date, and the requested materials are not among those factual materials that will aid the Court in interpreting the policy language. HSB Group, Inv. V. SVB Underwriting, Ltd., 664 F. Supp. 2d 158, 189 (D. Conn. 2009). See also Metro. Life Ins. Co. v. Aetna Cas. & Sur. Co., 255 Conn. 295, 306 (2001). Communications between Mighty and a third party made 7 years after Mighty entered into its policy with Excess Seven are not relevant to the determination of the parties’ intent at the time of formation of the contract.

2) Even if the policy required the underlying insurers to pay, the confidential settlement communications leading up to those payments are irrelevant. Either the payments were made or they weren’t, and all that Excess Seven would need to support its argument are copies of the payments, which were already provided.

3) The communications are protected from disclosure under Fed. R. Evid. 408 in

light of the strong public policy favoring settlements and encouraging uninhibited settlement negotiations. Valiante v. VCA Animal Hospitals, Inc., 2011 WL 219672 (D. Conn. 2011).

Second Issue:

Whether communications between Mighty and underlying defense counsel are

privileged and protected from disclosure.

Insurer’s Arguments

The communications are discoverable because:

1) The cooperation clause in the policy between Mighty and Excess Seven precludes Mighty from having a reasonable expectation of confidentiality regarding the documents when Mighty settled the action and, therefore, the attorney-client privilege never attached. See Double G.G. Leasing, LLC v. Underwriters at Lloyd's, London, 116 Conn. App. 417, 432, 978 A.2d 83, 92 (2009) (observing that the substantial or material breach of the cooperation provisions of the insurance policy by an insured puts an end to the insurer's obligation and providers the insurer an absolute defense to an action on the policy).

2) The “common interest” in the underlying action makes it unreasonable for Mighty

to expect to maintain confidentiality.

4

Mighty’s Arguments

The communications are not discoverable because:

1) The cooperation clauses do not justify disclosure because Excess Seven failed to associate in the defense of the action, and denied coverage which relieves Mighty of its duty to cooperate. Metropolitan Life Ins. Co. v. Aetna Cas. & Sur. Co., 249 Conn. 36 (1999).

2) The common interest exception to the attorney-client privilege does not apply because Mighty and Excess Seven’s interests immediately became conflicted as soon as Excess Seven declined to cover the claim. Id. See also Steadfast Ins. Co. v. Purdue Frederick Co., 2005 WL 2433341 (Conn. Super. Ct. 2005).

From: Robert Laurie

Re: Presentation Outline - - Attorney-Client Privilege in a Coverage Dispute

I. Fact Pattern

Henry Homeowner owns a home in Taxville, Connecticut. Mr. Homeowner obtained a

homeowners policy and umbrella policy from TrustUs Insurance Company. The policies

provide personal liability coverage, among other coverages.

During the policy period, Henry Homeowner invited friends and acquaintances over to his home

for a Fourth of July party. As the party was ending, a fight broke out between some of the

guests. Paul, a guest at the party, was allegedly punched and kicked by Henry Homeowner and

others. As a result of the incident, Paul sustained significant and permanent personal injuries.

Henry and others involved were arrested. Henry was charged with assault and breach of peace.

Henry entered into a plea-agreement whereby the state agreed to drop the assault charge and

Henry pled nolo contendre to the breach of peace charge.

Paul ultimately sued Henry Homeowner alleging Henry intentionally assaulted him. Paul

asserted various claims, including a claim for negligence. Henry Homeowner sought coverage

under his policy with TrustUs, claiming that he was breaking up the fight and that his actions

were unintentional. TrustUs then engaged Kevin Smart from SmartLaw, LLC to evaluate

whether coverage existed under the policies and commence a Declaratory Judgment Action.

TrustUs ultimately provided a defense to Henry under a reservation of rights. SmartLaw issued

the reservation of rights letter. TrustUs assigned Brian Big from BigLaw, LLC to defend Henry

in the underlying suit. Henry objected, noting an inherent conflict existed, and demanded that

his own lawyer, John Small from SmallLaw, LLC, defend him in the lawsuit and that TrustUS

reimburse him for the costs. TrustUs agreed but required SmallLaw to provide a detailed case

evaluation and quarterly status updates regarding the underlying litigation.

The underlying litigation did not settle and a jury ultimately issued a verdict against Henry

Homeowner and awarded Paul with $300,000.00 in damages. Thereafter, Henry agreed to assign

to Paul all of his rights and claims against TrustUs in exchange for a release of liability for the

damages arising from the underlying litigation. Paul then asserted counterclaims in the

Declaratory Judgment Action for common law and statutory bad faith.

During discovery in the Declaratory Judgment Action, Paul’s attorneys demanded the production

of all communications between TrustUs and Henry’s attorney, SmallLaw, LLC. Paul’s attorneys

also demanded the production of all communications between TrustUs and its coverage counsel,

SmartLaw, LLC. TrustUs objected to both requests on the basis that the documents were

protected by the attorney-client privilege and work product doctrine, among other privileges.

II. Attorney / Client Privilege- Connecticut

Shew v. Freedom of Information Com’n, 245 Conn. 149 (1998)

III. Work-Product Privilege- Connecticut

Stanley Works v. New Britain Redevelopment Agency, 155 Conn. 86 (1967)

IV. Attorney / Client Privilege – Underlying Defense Counsel Metropolitan Life Ins. Co v. Aetna Cas. & Sur. Co., 249 Conn. 36 (1999)

Ridgeway v. Mount Vernon Fire Ins. Co., 2012 WL 6901203 (Conn. Super. Ct. 2012)

Steadfast Ins. Co. v. Purdue Frederick Co., WL 2433341 (Conn. Super. Ct. 2005)

Waste Mgmt., Inc. v. Int’l Surplus Lines Ins. Co., 144 Ill. 2d 178 (1991).

Rockwell Int’l Corp v. Superior Court, 26 Cal. App. 4th 1255 (1994)

Camacho v. Nationwide Mut. Ins. Co., 2012 WL 6062029 (N.D. Ga. 2012)

Henke v. Iowa Home Mut. Ca. Co., 87 N.W.2d 920 (Iowa 1958)

V. Attorney / Client Privilege – Coverage Counsel

Personal Management, Inc. v. Worcester Ins. Co., 2001 WL 1356370 (Conn. Super.

Ct. 2001)

Message Center Management, Inc. v. Shell Oil Products Co., 2001 WL 357331

(Conn. Super. 2001)

Deutsche Bank Nat. Trust. Co. v. Lichentels, 2008 WL 5725988 (Conn. Super. Ct.

2008)

Hutchinson v. Farm Family Cas. Ins. Co., 273 Conn. 33 (2005)

State ex re. Montpelier US Insurance Company v. Bloom, 2014 WL 1408487 (W.Va.

2014).