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Washington Federal Court Restricts Discovery of Attorney-Client Communication with Insurer Under Cedell

April 29, 2016 9:07 AM | Anonymous

Very few developments in Washington insurance law have received more attention over the past five years than the Washington Supreme Court’s ruling in Sedell v. Farmers Ins. Co., 176 Wn.2d. 686, 295 P.2d 239 (2013).  On February 25, 2016, Judge Ronald B. Leighton in the Federal District Court for the Western District of Washington entered an order in Linder v. Great Northern Ins. Co., 2016 U.S. Dist. LEXIS 289, in which the Court granted in part and denied in part a motion for protective order filed by the insurer regarding certain documents and communications between lawyers for the insurer and their client under Sedell.

The Linder case involved a claim for water loss at the insurer’s home in Kalama, Washington.  Before production of certain correspondence between the lawyers and the insurer, counsel for the insurer redacted and withheld five categories of documents that it claimed were protected from discovery.  The Court conducted an in camera review of the documents to determine if any of the documents were properly withheld as attorney client-privilege and/or work product.  The Court stated the general principle announced in Sedell that Washington Court presume that communications between insurer and its attorney are discoverable, but the insurer may overcome this presumption by showing that its attorney is not engaged “quasi-fiduciary tasks” such as investigating, evaluating, or processing a claim.  When the insurer is instead counseling the client about its potential liability, and the attorney’s mental impressions are not at issue, the insurer’s communications with the attorney are protected.  Under Sedell, the policy holder may overcome the privilege if it makes a showing that “a reasonable person would have a reasonable belief that an act of bad faith tantamount to civil fraud has occurred.”

            In the Linder case, the Court held that the communications between the attorneys at one of the four law firms that communicated with the insurer must be produced under Sedell because they were performing “quasi-fiduciary tasks.”  However, communications between the other three law firms and the insurer need not be produced because they were not performing such tasks and there was no showing that the civil fraud exception applied.  The Court also found that certain legal invoices and billing statements that contained privileged descriptions of its legal work revealed the motive of the client, litigation strategy, and/or the specific nature of the services provided such as researching particular areas of law.  The Court found that these documents were protected under the attorney-client privilege citing to Clarke v. Am. Commerce Nat’l Bank, 974 F.2d 127, 109 (9th Cir.) (1992).

While the Court in Linder did not announce a new development in the law following Sedell, it is important for insurers operating in Washington to recognize how Washington Courts are interpreting and applying Sedell in various contexts.

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