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HNRK Coverage Corner

Insurer’s Claims-Handling Documents Not Privileged Even If Prepared By Attorneys

On August 30, 2019, Justice Masley of the New York County Commercial Division issued a decision in Otsuka Am., Inc. v. Crum Forster Specialty Ins. Co., Index No. 650463/2019, ruling that coverage opinions prepared by outside counsel for an insurer are discoverable, explaining: 

In the context of insurance, the payment or rejection of claims is a part of the regular business of an insurance company. Consequently, documents prepared in the ordinary course of an insurance company’s investigation to determine whether to accept or reject coverage and to evaluate the extent of a claimant’s loss are not privileged, and, therefore, discoverable. Thus, these documents do not become privileged merely because the investigation was conducted by an attorney. Where an attorney acts as a claims investigator, and not as an attorney, the communications are not privileged. Additionally, reports prepared by insurance investigators, adjusters, or attorneys before the decision is made to pay or reject a claim are not privileged and discoverable, even when those reports are mixed/multi-purpose reports, motivated in part by the potential for litigation.

The common thread [in the cases finding that documents prepared by an insurer’s attorneys are not privileged] is that the insurance companies retained counsel to provide a coverage opinion, i.e. an opinion as to whether the insurance companies should pay or deny the claims. Stated otherwise, counsel were primarily engaged in claims handling.

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