Carriers without a physical presence in a given location often turn to Independent Adjusters to handle claims   The case of Friedman Route 10, LLC v. Certain Underwriters at Lloyd’s London, et al. highlights the sometimes choppy waters that carriers must navigate in order to protect communications between all of the involved parties when an IA is retained to adjust the claim.

The insured submitted a property damage claim under a policy issued by Certain Underwriters at Lloyd’s, London.  As was Lloyd’s practice, it engaged an IA to investigate and administer the claim, and also to serve as the point of contact for the insured.  Lloyd’s also retained legal counsel for purposes of rendering a coverage opinion relative to the insured’s claim.  Counsel also operated under the local direction of and in consultation on all legal issues with the IA

Unable to resolve the claim, the insured filed suit, initially against Lloyd’s only, seeking compensatory damages in excess of the policy limit.  The plaintiff issued a subpoena to the IA seeking production of its file.  Before issuing a response to the subpoena, the IA turned its file over to counsel, who withheld certain communications between counsel and the IA that it contended were protected from disclosure under the attorney-client privilege.  The plaintiff argued that the IA was a separate entity from Lloyd’s and never a client of the attorneys and therefore not entitled to privilege.  After an in camera review of the withheld documents, the judge ordered complete production.

Ultimately, the defendants, eventually including the IA, filed an interlocutory appeal to preclude production of the documents they argued as privileged.  The Appellate Court found that counsel’s retention by Lloyd’s was not simply for routine claims investigation, but instead was for the specific purpose of analyzing the legal issues surrounding plaintiff’s claims using the investigation and findings of the IA and its consultants.  On the theory that the IA shared “a common interest” with Lloyd’s, the Court found that the communications at issue with counsel were indeed privileged and not subject to disclosure.

Thanks to Emily Kidder for her contribution to this post.  If you would like more information, please write to Mike Bono.