FEDERAL MAGISTRATE HOLDS INSURED-BROKER COMMUNICATIONS ARE PRIVILEGED WHEN FACILITATING LEGAL SERVICES

In a discovery ruling that has potentially far-reaching effects on the discoverability of insurance brokers’ files in litigation, a  federal magistrate judge in Austin recently found a policyholder’s communications to an insurance broker about a pending lawsuit were privileged attorney-client communications.  Homeland Ins. Co. of New York v. Clinical Pathology Labs., Inc., No. 1-20-CV-783-RP, 2022 WL 17255798 (W.D. Tex. Nov. 28, 2022) (slip op.) involved medical malpractice claims against the insured.  The insured apparently communicated regular updates on the litigation to its insurance broker, Aon, and when the carrier sought Aon’s file in discovery, the insured argued those updates were privileged attorney-client communications. 

This claim led to a careful examination of the boundaries of attorney-client privilege.  Although it is generally thought of as existing between attorney and client, the privilege also applies to the client’s representatives and the lawyer’s representatives.  The question then was whether Aon was the insured’s representative and thus within the privilege or whether the insured had waived any privilege by sending the communications to a third party.

Texas has a well-developed and varied body of law on the sometimes-thorny question of when an insurance intermediary acts as the agent of the insured versus the agent of the insurer.  But relatively little of it focuses specifically on privilege.  Here, the court relied on two other federal district court opinions as well as cases from other jurisdictions holding that for privilege purposes, a broker acts as the insured’s representative when its communications are made for the purpose of facilitating the rendition of legal services to the insured.

Here, the insured and its attorney had begun including Aon in many of their communications about the pending lawsuit, and the insured put on an affidavit stating they had included Aon so Aon would understand developments in the suit and therefore be able to assist the insured in securing insurance coverage for those claims.  The court found this explanation, along with the privilege logs, adequate to support at least a prima facie finding of privilege.

Editor’s Note:  The moral of the story is three-fold:  (1) think carefully about whom to copy on privileged communications, (2) do not assume the insurance broker is your representative – they may legally be the representative of the other side; and (3) if you do include an insurance broker in privileged communications, you may be able to protect the privilege by arguing they were facilitating the rendition of legal services.  Additionally, this magistrate judge’s report has not yet been adopted by the district judge and thus is not yet final.