September 24, 2014
When insurance coverage is purchased, there is a usual expectation by the insured that the insurance company will take care of needed defenses in good faith.
However, in some situations, the insured may feel—on reasonable grounds—that the insurance company has acted in bad faith, and has not provided an adequate defense.
Volume 35 of Washington Practice (Washington Insurance Law and Litigation by Matthew King) includes a long discussion of “insurance bad faith”, and of the relevant issues that may develop for attorneys in such cases.
The latest edition of Volume 35 (for 2013-2014) has added a discussion of the attorney-client privilege, in the context of bad faith challenges to insurance companies (at section 23:17).
As noted by King, “unique considerations arise (in this setting) with respect to the attorney-client privilege….”
And an insurer “has a quasi-fiduciary duty to act in good faith toward its insured….”
He also cites a statement by a Montana court that “The time-worn claims of work product and attorney-client privilege cannot be invoked to the insurance company’s benefit where the only issue in the case is whether the company breached its duty of good faith in processing the insured’s claim”.
A Washington case is cited as the basis for a conclusion that bad faith may be tantamount to civil fraud.
When considering potential bad faith insurance cases, it is important for attorneys (on both sides) to recognize the limitations associated with asserting attorney-client privilege.
Deviations from the usual assumed scope of the privilege can change attorney strategies and procedures,
A good understanding of case precedent is essential.
The balancing of good faith obligations and attorney-client privilege is an example of how competing considerations are often treated under the law, in many different contexts.
Various types of balancing tests are often applied, combined with the underlying considerations of reasonableness. This is one approach to preventing over-rigid applications of protective statutes.
More information on Washington insurance law and litigation may be found in Volume 35 of Washington Practice.
In addition, whenever attorneys wish to locate specific resource materials, Methods of Practice (volumes 1 to 1C) of Washington Practice, can provide useful assistance. The insurance law volume is summarized in Chapter 86, Volume 1C of Methods of Practice. Excerpts from all of the volumes of Washington Practice are presented in an easily-searchable format, so that potential cites may be quickly located. The individual volumes of interest may then be examined for the needed details.