When policyholders are faced with litigation and discovery requests in that litigation, it is common for disputes as to the privileged nature of various communications to arise. Often, those disputes focus on an underlying plaintiff’s efforts to discover communications between the policyholder or its insurer(s) on matters of interest to the plaintiff and the development of its case.. On occasion, however, these disputes can also implicate other third parties with whom the policyholder has had communications, such as consultants, agents, or the policyholder’s brokers. Are communications involving policyholders and their brokers privileged? No single, clear cut answer to this question can be provided, with the outcome often depending upon the specific circumstances in which the communications arose, and the purpose for which the communications were made.
A recent, April 5, 2010, decision of the Southern District of Texas in In Re Tetra Technologies Inc., No. 4:08-cv-0965, 2010 WL 1335431 (S.D. Tex. April 5, 2010), provides useful guidance to policyholders as to when and whether communications between a policyholder’s employees and counsel and its brokers are protected under the umbrella of the attorney-client privilege. In Tetra, plaintiffs in an underlying securities case challenged the policyholder’s claim that communications between its employees and its brokers were privileged, arguing that the fact the communications involved a third party — the broker — “destroy[ed]” application of the attorney-client privilege. Tetra countered that its brokers were acting as its agents, thereby falling within the definition of an attorney-client communication.
The Court concluded that the “scope of the attorney-client privilege is shaped by its purposes…. What is vital to the privilege is that the communication be made in confidence for the purpose of obtaining legal advice from a lawyer.” Page *5. As long as the communications between the policyholder and its brokers were “made to facilitate the rendition of legal services and involve an attorney, … they fall within attorney-client privilege.” Id. Nevertheless, the Court made itself available to conduct in camera reviews of any “contested documents to determine whether they should indeed fall within the attorney-client privilege.” Id.
Not all policyholder/broker communications will fall within the attorney-client privilege. A policyholder hoping to protect itself under the privilege should strive to ensure that the broker communications that it hopes to have fall within the privilege, at least, (a) involve an attorney and (b) are made to “facilitate the rendition of legal services.” Routine or ordinary course of business communications involving only non-lawyers may not satisfy these conditions.
Accordingly, when a setting arises where a policyholder desires to communicate with its broker and to involve it in matters of legal concern, it should proceed to document how and why the broker is acting in a manner to facilitate the policyholder’s receipt of legal services. For example, the policyholder would be wise to obtain a formal retention agreement with the broker, preferably via outside counsel or, if necessary, via in-house counsel, in which the express purpose of the retention is described as including the soliciting and obtaining from the broker of its assistance as the policyholder’s and its counsel’s agent in connection with and so as to assist counsel’s rendition of legal services on the policyholder’s behalf. As part of that retention, provision should best be made that all communications pursuant to it include counsel and be marked with a legend such as “privileged and confidential attorney-client communications” or, where appropriate, “prepared at the direction of counsel.”
Implementation of the foregoing procedures may not ensure that attorney-client protection attaches to all broker communications (nor does their non-implementation mandate a contrary result), but the prospects of obtaining the protections of the privilege are certainly enhanced if they are implemented.
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