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About the Waiver of the Privilege  

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INTENTIONAL WAIVER  Insurers frequently turn to outside counsel, or internal claims  adjusters who are licensed lawyers, for legal advice regarding their  coverage determinations on claims. In later litigation over denials of  coverage or a carrier\\u2019s claims-handling conduct, a question that  frequently arises is whether the advice provided by such counsel is  protected from disclosure to insureds. Insurers may be obligated to  disclose otherwise-privileged communications if the insurer relies on  \\u201cadvice of counsel\\u201d as a defense to the claim for breach of contract or  bad faith.  It is not unusual for insurers to assert as a defense to charges of  bad-faith by claiming that their conduct was reasonable because they  relied on the advice of counsel. When an insurer asserts the defense, it  puts the substance of the advice it obtained at issue. By so doing most  courts conclude the insurer waived the attorney-client  privilege.[Chicago Title Insurance Co. v. Superior Court, 174 Cal.  App.3d 1142 (1985).]  UNINTENTIONAL WAIVER  In Sony Computer Entertainment America, Inc. v. Great American Ins. Co.,  et al., 229 F.R.D. 632 (N.D.Cal. 2005) Sony Computer Entertainment  Company, Inc. sued American Home Assurance Co. and other insurance  companies for wrongful denial of insurance coverage in connection with  two consumer lawsuits against Sony. The suits arose from claims of  property damage, false advertising, and other injuries in connection  with Sony\\u2019s PlayStation and PlayStation 2 products. American Home filed  motions to compel responses to discovery contesting that Sony\\u2019s  assertion of the attorney-client privilege at the depositions of  Jennifer Liu, an attorney and Sony\\u2019s director of legal and business  affairs.  Sony\\u2019s Ms. Liu was designated by Sony as its person most knowledgeable  for deposition under F.R.C.P. Rule 30(b)(6) regarding one of the  consumer lawsuits. At the depositions, Sony\\u2019s counsel asserted the  attorney-client privilege and the attorney-work product doctrine and  instructed Ms. Liu not to answer questions.  CRIME FRAUD EXCEPTION  A waiver of the privilege also may result when the carrier is sued for  bad faith and/or fraud. For example, California Evidence Code Section  956 provides: \\u201cthere is no privilege under this article if the services  of the lawyer were sought or obtained to enable or aid anyone to commit  or plan to commit a crime or a fraud.\\u201d Even without a statute, the  license to practice law, is not a license to commit a crime.  One federal court ruled that a bad faith claim not involving fraud is  insufficient to trigger the exception. In Freedom Trust v. Chubb Group  of Insurance Cos., 38 F.Supp.2d 1170 (C.D. Cal. 1999) the insured argued  that the privilege had been waived because the insurer denied coverage  in bad faith. The court recognized that the attorney \\u201cdoes not have to  be aware of the fraud for the crime-fraud exception to apply\\u201d and that  the fraud exception includes civil fraud. The court noted a split in  authority nationally as to whether a bad faith claim triggers the  crime-fraud exception.  \\xa9 2021 \\u2013 Barry Zalma