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Insurance lawyers acting as claims settlers | Property Insurance Law Team Blog



Can insurance lawyers conceal their claim documents and billing information when they are alleged to be working with claims clients to conceal reports? That was the question in a case of bad faith in Arizona.1

The court noted the general law that a lawyer acting as an adjudicator does not have a lawyer-client privilege:

The lawyer must act in the role of legal adviser in order for the lawyer-client to be able to attach. If the lawyer acts in another role, as an ordinary businessman, for example as a claims adjuster, the privilege may not be claimed. Diversified Industries, Inc. v. Meredith, 572 F.2d 596, 602 (8th Cir. 1977); see also Samaritan Foundation v. Goodfarb, 862 P.2d 870, 874 (Ariz. 1

993) (For the lawyer-client privilege to apply, the lawyer must act in the role of legal adviser). In other words, to that degree [the insurance company attorney] acted as a claims adjuster, claims process supervisor or claims investigation supervisor, and not as a legal adviser, the lawyer-client privilege does not apply. Harper v. Auto-Owners Ins. Co., 138 FRD 655, 671 (SD Ind. 1991).

The judge then published the insurance lawyer’s billing information:

06/03/2019: Several communications with damage representative for State Auto, Mike Wakefield, regarding case status and getting an expert to inspect the building where the loss occurred.

06/03/2019: Communication with our expert, Todd Springer, regarding his assignment and inspection of the property and building where the loss occurred, and the report from previous expert, Donan Engineering.

06/03/2019: Start reviewing the Donan Engineering report by Marco Platt, to discuss the same by our expert, Todd Springer, so that he can investigate the loss and evaluate Platt’s views and the hailstorm allegations from the insured, ACS.

06/05/2019: Communication with a possible expert witness, Todd Springer, who we can keep to inspect the insured, ACS, property, as well as evaluate and disprove the Donan report, which is an expert arrested before Mr Springer, to defend claim.

06/06/2019: Prepare for a conference call with Mike Wakefield and Mike Myers of State Auto and our expert, Todd Springer, to discuss all aspects of this statement and to involve Mr Springer in the investigation and inspection of the hail-related premises damage, by analyzing and reviewing the report of the former engineer, Donan Engineering.

06/06/2019: Attend a conference call with Mike Wakefield and Mike Myers of State Auto and our expert, Todd Springer, to discuss all aspects of this claim and involve Mr Springer in the investigation of hail damage in the insured’s home.

06/11/2019: Communication with our expert, Todd Springer, regarding his work with hail and damage cases, to defend claims, evaluate the insured, ACS, loss and a response to the report from Marco Platt from Donan Engineering.

06/13/2019: Prepare for a conference call with the expert, Todd Springer, and State Auto Representative Mike Myers, to discuss all aspects of this statement, the Marco Platt report, the building of the insured, ACS, with potential and possible hail damage, and the work we want Mr Springer to do and inspect that damage.

06/13/2019: Conference call with our expert, Todd Springer, and State Auto Representative Mike Myers, regarding damage status, inspection of Mr. Springer by the Insured, ACS, building and alleged hail damage, to evaluate the damages and provide analysis of it alleged damage.

2019-06-17: Prepare for communication with government car representatives, Mike Wakefield and Mike Myers, regarding inspection of our expert, Todd Springer, of the insured’s property, through review and analysis of Donan Engineering’s, take expert, 20+ pages report.

06/17/2019: Telephone conference with representatives of State Auto, Mike Wakefield and Mike Myers, regarding case status, the results and opinions of our expert, Todd Springer, and options for dealing with this issue in the future.

The court noted that the other expert hired and the insurance lawyer wore two hats but ruled that by handing over the lawyer’s billing information, the privilege had been waived:

The defendant is wearing two hats, while at the same time conducting an impartial independent investigation of claims and acting as a defense expert for State Auto pending a dismissal of the plaintiff’s claims. DiCaro cannot wear these two hats without jeopardizing State Auto’s legal privilege over DiCaro-Springer’s communications. However, the court does not reach the question of whether the privilege was destroyed due to its waiver. State Auto disclosed the invoice extracts with the claim file that it submitted to the plaintiff.

This is similar to a post, The court holds documents created by agents during the handling of claims were not privilegedwhere I noted a similar finding of a court:

We’ve all seen it before. The insured makes a claim, the insurance company sends out an adjuster to adjust the claim, the loss is more complex, or a situation arises that the adjuster cannot handle so the insurance company forwards the claim to its legal department. At that time, a lawyer becomes involved and the adjustment of the claim, as well as the communication between the parties is limited and calculated.

The decision of an insurance company to involve a lawyer in what is commonly perceived as the business function of claims management has significant consequences for the privileges that usually protect against disclosure of communication with or work of such lawyers.

The problem arises when lawyers, who act as claimants (also known as Super Adjusters), erroneously undermine the interests of policyholders and hide such actions behind alleged privileges.

IN Otsuka America v. Crum & Forster Specialty Insurance Company, the insured sued and filed motions indicating that certain documents that Crum & Forster withheld as privileged should be detectable. After conducting an in-camera inspection, the court ordered Crum to disclose all documents. Crum moved to argue about the motion with reference to attorney-client and work product privileges. The court found that “a lawyer’s communication is not privileged when the lawyer is hired for business or personal advice, or to perform the work as a non-lawyer.” The Court also found that “[t]payment or rejection of claims is part of an insurance company’s ordinary activities. “

We also noted similar findings in In Washington, there can be no lawyer-client privilege for insurers during the adjustment of a claim, Opinion file for attorney coverage is not privileged in Mississippi and is therefore detectableand The Insurer’s Claim of Privilege for the Attorney’s Pre-Denial Communication was dismissed by the New York Court of Appeals.

Insurance companies can not use lawyers to conceal claim material that indicates misconduct in good faith. In fact, the lawyer’s billing information, combined with other concurrent billing information and notes, can sometimes show that the insurance assistant is in the middle of bad faith.

This should come as no surprise as many insurance companies’ lawyers usually try to prevent their clients from paying anything and have little or no adjustment training while acting as “super-adjusters” – they were trained to legally win cases. Many insurance lawyers have never taken a property insurance adjustment class. They can get insurance by reading insurance law practice. The insurance customer is not the person that insurance lawyers are worried about treating in good faith – but they should be!

I would like to give a shout-out to the insurance advisers who take property adaptation courses and textbooks published by the institutes. For example, I have always admired former insurance adviser Janet Brown because she has a CPCU designation.

Today’s thoughts

Discourage litigation. Persuade your neighbors to compromise whenever you can. As a peace broker, the lawyer has superior opportunities to be a good man. There will still be enough business.
-Abraham Lincoln
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1 ACS International Products v. State Automobile Mut. Ins. Co.No. CV-19-00549 (D. Ariz. July 6, 2021).


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