October 28 , 2019

The attorney-client privilege can often be a daunting topic to tackle, especially when an insurance carrier is involved in the matter. The objective of this article is to briefly discuss the attorney-client privilege, and how the presence of an insurance company may affect that privilege.

Generally, the attorney-client privilege applies to a client’s communications made in confidence to an attorney acting in a legal capacity, for the purposes of seeking legal advice or legal services. So, a client’s disclosure of information in the presence of a third party, such as an opposing counsel, may waive the privilege. A client, though, does not have to make the privileged communication directly to his or her attorney. Rather, the client can communicate to, or in the presence of, an agent of the attorney. Therefore, in some instances, the attorney-client privilege can attach to communications made between a client and non-lawyer. Indeed, as Illinois Rule of Evidence 201(b)(2) provides, a client’s communications to an agent may still be protected. See Ill. S. Ct. R. 201(b)(2) (“All matters that are privileged against disclosure on the trial, including privileged communications between a party or his agent and the attorney for the party, are privileged against disclosure through any discovery procedure.”)

For purposes of the attorney-client privilege, a non-lawyer can act as an agent either for the client or the lawyer when the non-lawyer is necessary to facilitate communications between the client and the lawyer. A non-lawyer is also considered an agent for the lawyer when that non- lawyer assists the lawyer in providing legal advice or in rendering legal services to the client. Consequently, the presence of ministerial agents, such as clerks, secretaries, and paralegals, or the presence of a hired investigator, may not vitiate the pri[vilege, because the assistance of those individuals would be indispensable to the lawyer’s work or for the transmission of confidential facts. What is vital to the privilege, though, “is that the communication be made in confidence for the purpose of obtaining legal advice from the lawyer.” In re Grand Jury Proceedings, 220 F.3d 568, 571 (7th Cir. 2000) (internal quotations and citation omitted). If a client is not seeking legal advice, or if the client is seeking the non-lawyer’s advice, such as the advice of an accountant, then no privilege exists.

In People v. Ryan, 30 Ill. 2d 456 (1964) (an insured, who was involved in automobile accident, disclosed to the insurance carrier’s investigator that she had consumed alcohol before driving), the Illinois Supreme Court established the insured-insurer privilege, by extending the attorney-client privilege. The insured-insurer privilege protects from disclosure communications between an insured and insurer and between an insured and an independent contractor hired by the insurer, when the insurer has a duty to defend the insured.

The basis for extending the attorney-client privilege to cover the insured-insurer relationship is the insurer’s role as an agent in that relationship. Essentially, the Court in Ryanthat the insured is typically not represented at the time of communicating with the insurer; yet, the insured delegates the task of selecting an attorney and conducting the defense of the insured

in accordance with the terms of a common liability contract. So, the insured could properly assume that he or she is communicating to the insurer as “an agent for the dominant purpose of transmitting” information to an attorney “for the protection of the interests of the insured.” Ryan, 30 Ill. 2d at 461. Consequently, an insured’s statement to an insurance company “is considered to be a privileged communication in the hands of the insurance company and clothed with the same exemption from disclosure as if given to an attorney directly.” Monier v. Chamberlain, 66 Ill. App. 2d 472, 485 (3d Dist. 1966).

To extend the attorney-client privilege, the party asserting the privilege must prove: (1) the identity of the insured, (2) the identity of the insurance carrier, (3) the duty to defend a lawsuit, and (4) that a communication was made between the insured and an agent of the insurer. Chicago Trust Co. v. Cook County Hospital, 298 Ill. App. 3d 396, 407 (1st Dist. 1998). In addition, the court in Chicago Trust Co. noted that the insured-insurer privilege, as an offshoot of the attorney-client privilege, applies only when the insured may properly assume that he or she provided a communication to the insurer for the dominant purpose of transmitting it to an attorney for the protection of the interests of the insured. SeeHolland v. Schwan’s Home Serv., Inc., 2013 IL App (5th) 110560 (court rejecting company’s argument that a workers’ compensation adjuster’s claim file was protected by the attorney-client privilege, because that file contained employee statements pertaining to the employee’s medical treatments, work restrictions, and conditions of ill-being, and not for purposes of obtaining a lawyer or seeking legal advice, so the communications were not in the nature of attorney-client communications.)

Because an insurance carrier is considered an agent for purposes of the privilege, the privilege may not apply when potential adversaries share the same insurance carrier. When an individual makes a statement to an agent who is also, at the same time, an agent for a potential adversary, the privilege likely will not apply. The Court in Monier v. Chamberlain, 35 Ill. 2d 351 (1966) extended this principle to the insured-insurer relationship as an exception to the general rule that statements made by the defendant to his or her insurance carrier are generally privileged from discovery as confidential communications.

The intent of the insured as well as the insured’s relationship with the insurer at the time the insured makes a statement to the insurance company are determinative of whether the privilege has been destroyed. For instance, when an insured makes a statement to his or her insurance company with the implicit understanding that the statement will be transferred to an attorney selected by the insurer, the privilege applies. However, when potential adversaries have the same insurance carrier, either adversary’s statements to the insurance company are not privileged if made prior to the commencement of a lawsuit. This is because the insurer would not know at that time which insured it will represent. If one of the insured has obtained independent counsel prior to when the adversary has provided a statement, though, the adversary’s statements to his or her insurance company may be privileged, based upon the reasoning that the adversary made them in confidence. See Dari v. Uniroyal, 41 Ill. App. 3d 122, 124-125 (1st Dist. 1976).

A related concept is the common-interest waiver to the attorney-client privilege. When parties share a common interest in a matter and an attorney represents the two parties or acts for their mutual benefit, either party’s communications with the attorney in furtherance of that

common interest are not privileged in a subsequent controversy between those two parties. See Waste Management, Inc. v. International Surplus Lines Insurance Co., 144 Ill. 2d 178 (1991). So, if a lawyer has represented an insured and an insurer in attempting to defeat litigation brought against the insured, and the insured later sues the insurance company to cover the underlying judgment, either party may be able to discover each other’s communications with the lawyer concerning the underlying lawsuit.

Nonetheless, parties who share a common interest in defeating a litigation opponent may still share with each other information relating to that interest without waiving the attorney-client privilege. See Selby v, O’Dea, 2017 IL App (1st) 151572. This common-interest exception to waiver is not a new privilege or an expansion of the attorney-client privilege. Instead, it is an exception to the general rule that disclosure of privileged information to a third party destroys the privilege. What is protected by the common-interest exception are statements made to further the parties’ common interest: (1) by one party’s attorney to the other party’s attorney; (2) by one party to the other party’s attorney; (3) by one party to that party’s own attorney if made in the presence of the other party’s attorney; and (4) from one party to the other party with counsel present. Selby, at ¶ 105. One rationale behind this exception is that Illinois already protects client statements between necessary agents of the attorney or the client, including those who assist in the preparation of a case. The exception, therefore, permits attorneys to better prepare for a case, by assuring that opposing parties will not be able to access their legal preparations. It also enables parties to be more informed, as well as promotes candor between the parties.

To invoke the common-interest exception to waiver, there has to be some form of agreement between the parties, such as a joint defense or common-interest agreement, at the time the disclosure of information is made.  As the First District Appellate Court in Ross v. Ill. Cent. R.R. Co., 2019 IL App (1st) 181579 noted, disclosing privileged information to a third party generally results in waiving the privilege, because the disclosure is inherently inconsistent with facilitating a confidential attorney-client relationship. So, even when a common interest exists between parties, the “client must, at the time of the disclosure, have an agreement with the receiving party that that party will treat the information as privileged.”  Ross, at ¶ 44.