Arizona District Court: Insurer Expert’s Deposition Testimony Impliedly Waived Attorney-Client Privilege in Bad Faith Case

The Takeaways 

·       Bad faith defense counsel should caution their bad faith experts not to speculate that an insurer’s claim decisions were based on advice of counsel. 

·       The Hunton case continues the trend of Arizona federal courts finding an implied waiver of the attorney-client privilege in bad faith cases more often than Arizona state courts. 

In Hunton v. American Zurich Ins. Co., 2017 WL 3712445 (D.Ariz. Aug. 29, 2017) (Order), an insurance bad faith case, the Arizona District Court granted a motion to reconsider and held that an insurer’s bad faith expert impliedly waived the attorney-client privilege, because the expert testified during his deposition that: 

·      He did not know why an adjuster waited several months to approve a claim, but “speculated that it was based on? a series of e-mails…between [the adjuster] and counsel”; and 

·       He did not know why the adjuster ultimately approved the claim but he “suspected it was a discussion [the adjuster] had with counsel the day [the adjuster] accepted” the claim. 

The Ruling

This order overruled the Arizona District Court’s previous ruling that, after an in camera inspection, certain documents were properly withheld based on the attorney-client privilege, in part, because the Insurer was defending based on objective reasonableness alone.   

The District Court held the insurer, “through the testimony and opinion of its bad faith expert, [put] the subjective beliefs of the claims adjuster directly as issue, and those beliefs implicate the advice [the adjuster] received from” counsel.? Furthermore, “[b]y electing to defend [based] on the subjective, not just objective, reasonableness of its adjuster’s actions, [the Insurer] placed at issue its subjective beliefs and directly implicated the advice and judgment it received from [counsel] incorporated in those actions.”? Thus, the Insurer “rendered the advice and judgment its adjuster received from [counsel] relevant to the case.”  

The District Court then reasoned the Insurer attempted an improper use of the attorney-client privilege as both a sword and a shield.?? On one hand, the Insurer sought to use the privilege as a shield to protect evidence the Insured would need to challenge the adjuster’s subjective belief.? On the other hand, the Insurer sought to use the privilege as a sword through the Insurer Expert’s opinion that the was no bad faith because the adjuster apparently resolved any concerns through advice of counsel. ? 

If you would like additional information regarding the implied waiver of the attorney-client privilege in Arizona, please contact Nate Meyer at 602.248.1032 or ndm@jaburgwilk.com for the following articles: 

·      How to Avoid the Implied Waiver of the Attorney-Client Privilege in Arizona Bad Faith Cases

·      Guidelines to Assist an Insurer’s Analysis of Whether a Court Will Find an Implied Waiver of the Attorney-Client Privilege in Arizona Bad Faith Cases

·     Tips to Avoid the Implied Waiver of the Attorney-Client Privilege in Arizona Bad Faith Cases