New York Courts Skeptical of Insurers Seeking to Hide Coverage Analysis as Privileged
One of the most basic discovery requests in insurance coverage litigation is for the insurer’s claims-handling documents and coverage analysis. A policyholder suing for insurance coverage is entitled to understand the insurer’s pre-denial coverage analysis, which is after all one of the core business functions of an insurance company along with marketing and selling policies.
Simply put, an insured must be allowed access to all documents held by the insurer, including communications and claim files that might speak to why the insurer denied the claim. In recent years, however, insurers have begun to involve both in-house and outside counsel in these deliberations, and have consequently asserted the protections of the attorney-client privilege and the work product doctrine to shield these critical business documents from discovery.
Fortunately, New York courts are developing a body of case law that properly treats such communications as discoverable. When an insurer communicates with counsel to assist in determining whether a claim is covered in the first instance, such communications are made primarily in furtherance of the insurer’s business function, as opposed to legal advice, and therefore are not immune from discovery. Any resulting memoranda simply reflects the same work that claims handlers have been performing since the establishment of the insurance industry. That the analysis was undertaken by an attorney rather than a non-attorney has no significance in the nature and purpose of the work being performed and the discoverability of the resulting analysis and documents.
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