(Article from Insurance Law Alert, June 2020)
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A South Carolina district court ruled that an insurer did not waive attorney-client privilege by placing the content of certain communications with outside counsel “at issue” in bad faith litigation. Harriman v. Associated Indus. Ins. Co., Inc., 2020 WL 2793610 (D.S.C. May 29, 2020).
Harriman sued Associated Industries Insurance Company seeking coverage for underlying defamation claims filed against her. During discovery, Associated Industries produced certain documents in response to Harriman’s interrogatories and document requests. Associated Industries did not produce a privilege log at that time. Several months later, Associated Industries supplemented its production and produced a privilege log. Thereafter, Harriman moved to compel production of certain documents, including communications between Associated Industries and its outside counsel.
The court denied Harriman’s motion, finding that the requested documents were protected by attorney-client privilege. The court rejected Harriman’s contention that Associated Industries waived privilege by relying on outside counsel’s advice in denying coverage and by failing to produce a timely privilege log. Harriman asserted that attorney-client privilege is waived when an insurer “delegate[s] the initial coverage evaluation to outside counsel and denie[s] coverage based on his advice.” The court ruled that reliance on outside counsel is insufficient to constitute waiver where, as here, the policyholder did not place outside counsel’s advice “at issue” in the litigation, explaining that Associated Industries’ defense did not “necessarily include[] information learned from counsel.” In so ruling, the court emphasized that “privilege is not waived solely when a client consults counsel for advice and the client subsequently takes action based on counsel’s advice.” Additionally, the court refused to find waiver based on Associated Industries’ failure to timely produce a privilege log, noting that waiver was too strong a sanction under the circumstances.