West Virginia Reviews Attorney-Client Privilege in Insurer/Coverage Counsel Extra-Contractual Claims

West Virginia Reviews Attorney-Client Privilege in Insurer/Coverage Counsel Extra-Contractual Claims

By Mark G. Jeffries, Associate

On April 10, 2014, the West Virginia Supreme Court of Appeals held in State ex rel. Montpelier U.S. Ins. Co. and Charleston, Revich & Wollitz LLP that the attorney-client privilege protects confidential communications between an insurer and its coverage counsel even when both are sued in a first-party bad faith claim. The Court rejected, however, the argument that the law firm’s retention agreement and billing statements were privileged or irrelevant.

In Montpelier, [enhanced version available to lexis.com subscribers], the plaintiffs filed claims against both their insurer and its coverage counsel asserting first-party bad faith and civil conspiracy. First, the civil conspiracy claim alleged that the insurer retained the law firm solely to provide it with coverage denial opinions so that the insurer would have a defense to bad faith claims.

During discovery, the plaintiffs sought all coverage opinions the law firm had issued to the insurer, training materials the law firm prepared for any of its insurance clients related to coverage interpretation and extra-contractual liability, and the law firm’s retention agreement and billing statements related to the at-issue coverage opinion. Overruling the carrier’s objections, the circuit court ordered the law firm to produce all of the documents. The insurance carrier and its coverage counsel filed a Petition for Writ of Prohibition.

The plaintiffs argued that the attorney-client privilege did not apply because the law firm had written insureds regarding the carrier’s position on coverage; however, the West Virginia Court disagreed and held that legal opinions requested by the carrier were protected from disclosure. The plaintiffs also argued that, because the law firm was a party defendant, the attorney-client privilege was inapplicable. The Court summarily rejected this argument, noting that because the attorney-client privilege belongs to the client whether the attorney is a joint defendant is irrelevant to determining the application of the privilege.

The Court also found the training materials to be privileged because they reflected the law firm’s opinion on specific topics, explained legal concepts and procedures, and counseled on specific policy issues. These documents, the Court maintained, clearly demonstrated specific requests by the firm’s clients for legal opinions on specific subjects.

In an issue of first impression in West Virginia, the Court found that the retention agreement between the law firm and insurer, and the billing statements the law firm submitted to the insurer, were neither privileged nor attorney work product. Although the Court noted that under certain circumstances, retention agreements and details in attorney billing statements may reveal confidential attorney-client communications or the attorney’s mental impressions or legal theories, those at issue in Montpelier did not. Accordingly, the documents were not protected by either the attorney-client privilege or the work product doctrine. Moreover, the Court found that they were relevant to the plaintiffs’ civil conspiracy claim. Thus, the Court prohibited the enforcement of the portion of the trial court’s order compelling the disclosure of the coverage opinions and training materials, but permitted the disclosure of the retention agreement and billing records.

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