Privacy Protection

Privileged Communications

A recent New York court ruling provides some privacy protection for broker- client communications.
By: | April 7, 2014

A recent court decision provides some privacy protection for insurance brokers in their communications with clients.

The decision of the New York Supreme Court in TC Ravenswood LLC vs. National Union Fire Insurance, provides “useful guidance for policyholders who rely on brokers during litigation about insurance coverage,” wrote John Nevius, a New York-based Anderson Kill attorney who represented TC Ravenswood, a New York City unit of TransCanada Corp.

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Nevius’ analysis appeared in an article in Insurance Coverage Law Report.
In the case, the court denied the insurance company’s motion to compel TC Ravenwood’s broker, Marsh Canada Ltd., to produce communications with TransCanada Energy USA Inc., Nevius wrote.

The court held that the broker “was specifically hired by TransCanada and its counsel to explain the complex insurance policies at issue for TransCanada and its counsel” and therefore had “a reasonable expectation of privacy.”

Thus, communications between Marsh and TransCanada were protected by the attorney-client privilege, the court determined.

Additionally, communications between the broker and TransCanada’s counsel were also protected, as were communications between TransCanada and its counsel that were forwarded to the broker, and instances where the broker was copied on original communications, Nevius wrote.

Moreover, communications between non-attorney employees of either the broker or TransCanada, which involved requests for information and advice from counsel, were also protected.

“It is also helpful when asserting privileges if the policyholder has retained the broker for its expertise in a particular area, as the courts have been more receptive to the policyholder’s claim of privilege where the broker’s particular expertise proved valuable or necessary,” Nevius wrote.

For example, the Southern District of New York ruled in ECDC Environmental vs. N.Y. General Insurance Co., that the broker was retained specifically for its expertise in maritime insurance, and as such, its communications were privileged.
“Whether a policyholder’s communications with a broker are privileged is a fact-intensive question which typically hinges on whether the policyholder retained the broker, at least in part, as its agent to help with claim adjustment or the formulation of litigation or settlement strategy,” Nevius wrote.

However, Louis A. Chiafullo, a partner at McCarter & English in Newark, N.J., noted that the New York ruling is not the absolute law of the land.

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While an insurance broker can be an “incredibly helpful ally” when clients submit and negotiate claims with an insurance carrier, it’s important that in-house and coverage counsel be cognizant that in many jurisdictions, their conversations and communications with their insurance brokers may not be protected from disclosure if a coverage lawsuit develops.

“As a general rule, policyholder counsel should not share freely with their brokers any work product or legal analysis, even if the broker also happens to be a lawyer,” Chiafullo said.

“Where counsel for the policyholder feels that such conversations need to take place, counsel would be wise to enter into a confidentiality agreement with the broker and make clear in any communications relating to the disputed claim that the discussion falls under the attorney-client privilege.”

Katie Kuehner-Hebert is a freelance writer based in California. She has more than two decades of journalism experience and expertise in financial writing. She can be reached at [email protected]

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The R&I Editorial Team can be reached at [email protected]