Florida Supreme Court Upholds Insurer’s Attorney-Client Privilege in Bad Faith Actions

Mar 17, 2011

 

The Florida Supreme Court rendered a definitive ruling today, March 17, 2011, in Genovese v. Provident Life and Accident Ins. Co., upholding the sanctity of attorney-client communications between a carrier and its appointed counsel handling the defense of a first-party claim for benefits when the carrier is later sued for bad faith.  This is good news for carriers who can now rest assured that their communications with defense counsel during the underlying action cannot be subject to disclosure simply because the insured has alleged bad faith.

The controversy began in 2005, when the Florida Supreme Court held in Ruiz v. Allstate that an insured was permitted to discover the carrier’s entire underlying claim file -including “work product” materials- in first-party bad faith actions.  After Ruiz, insureds who filed bad faith actions against their carriers began seeking the production of all claim file materials, including communications between the carriers and their defense counsel who handled the underlying coverage or benefits litigation.  Carriers appealed these broad discovery orders and several Florida state appellate courts carved out an exception to Ruiz for attorney-client communications in the context of first-party coverage litigation. 

However, the Florida federal courts consistently rejected this “carve-out” and interpreted Ruiz more broadly to compel the production of all documents, including attorney-client communications, claiming that this is in conformity with upholding the good faith obligations of an insurer in claims handling.  Having no definitive decision on the issue, the federal courts “predicted” the Florida Supreme Court would follow this interpretation based on the language in Ruiz and its rationale.  But the federal courts were wrong.  The Florida Supreme Court stated in Genovese that because of the uniqueness of the attorney-client privilege to “encourage full and frank communication between the attorney and the client,” those communications are not discoverable in a first-party bad faith action.  

The Genovese court noted, however, that where the carrier has hired an attorney to investigate the underlying claim and render legal advice, this may implicate both the work-product doctrine and the attorney-client privilege.  In those cases, the trial court is required to conduct an in camera inspection of the documents to determine whether the communications are truly protected by attorney-client privilege.  Similarly, the court’s opinion is not applicable in cases of any statutory or judicially created waiver or exception to the privilege, including when an insurer in a bad faith action raises the defense of “advice of counsel” and the communication is necessary to establish the defense.

 

The Court’s opinion, which is attached in PDF format, can also be accessed by clicking here.   

 

Should you have any comments or questions, please contact Colodny Fass.

 

 

 

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