On June 9, the New York Court of Appeals issued a decision on the attorney-client privilege and "common interest doctrine," which is an exception to the general rule that parties waive the attorney-client privilege by sharing protected communications with third parties. The court construed the common interest doctrine narrowly and held that it applies only when the attorney-client communication "relate[s] to litigation, either pending or anticipated." This ruling has implications for reinsurance because cedents sometimes rely on the common interest doctrine in providing certain information to reinsurers.
In Ambac Assurance Corp. v. Countrywide Home Loans, Inc., 2016 N.Y. LEXIS 1649, 2016 N.Y. Slip Op. 04439 (June 9, 2016), Countrywide and Bank of America declined to produce certain of their attorney-client communications concerning their 2008 merger in subsequent litigation with Countrywide's insurer. Countrywide and Bank of America acknowledged that they were separate entities at the time of the communications, but nevertheless argued that they could withhold the communications because they had a "shared legal interest in the merger's successful completion," thus bringing the documents within the protection of the common interest doctrine. The Court of Appeals disagreed.
The court began its examination of the companies' claim by noting that the attorney-client privilege shields from disclosure any confidential communication between an attorney and a client made for the purpose of requesting and receiving legal advice. This privilege is often waived when an attorney-client communication is disclosed to a third party – and once waived, the privilege is typically waived not only as to the client's adversary, but as to others as well. The common interest doctrine is an exception to these principles. It applies when two or more entities separately retain counsel to advise them on matters of common legal interest and then engage in or share some of those privileged communications with one another.
The question presented by the Ambac case was whether, under New York law, a communication must relate to pending or reasonably anticipated litigation in order to be protected from disclosure under the doctrine. The court held that it must. "[A]ny such communication must . . . relate to litigation, either pending or anticipated, in order for the exception to apply." Slip Op. at 2. The court added that "the policy reasons for keeping a litigation limitation on the common interest doctrine outweigh any purported justification for doing away with it." Id. at 22.Insurers and reinsurers may wish to take note of the Court of Appeals' decision in Ambac. Cedents and reinsurers sometimes share attorney-client privileged information about a policyholder's underlying claim for coverage, under an expectation that the common interest doctrine will prevent the communications from becoming discoverable by the policyholder. See, e.g., Fireman's Fund Ins. Co. v. Great Am. Ins. Co., 284 F.R.D. 132 (S.D.N.Y. 2012). The Ambac decision suggests that more caution is in order, at least in situations where the applicability of the attorney-client privilege is governed by New York law. Cedents and reinsurers should be confident that the status of the policyholder's coverage claim satisfies the requirement of a pending or reasonably anticipated litigation. Under the principles set forth in Ambac, the generalized common interest of cedent and reinsurer would seem to be insufficient to protect shared attorney-client communications; rather, that common interest must relate to a specific dispute that is in actual litigation or for which the cedent and reinsurer can demonstrate it was reasonable to conclude would result in litigation.
Day Pitney Alert
On November 17 – 18, Michael Mullins will speak at the ARIAS U.S. Fall Conference and Annual Meeting at the New York Marriott Marquis.
Jonathan Handler and David Lieberman wrote an article, "Citizenship of LLCs and Subject Matter Jurisdiction in the Federal Courts: A Serious Concern Begging for Resolution," for Bloomberg BNA's Securities Regulation & Law Report. The article is about how many practitioners fail to understand a key legal distinction between LLCs and corporations as it relates to their state of citizenship.
Day Pitney Alert
On January 5, Day Pitney hosted a speech by Robert L. Capers, the U.S. Attorney for the Eastern District of New York, to the White Collar Crime Committee of the American Bar Association's Business Law Section (WCCC) at the firm's New York City office.
Eric Fader was quoted in an article, "Unknown Future of ACA Puts Blues Plans In an Uncomfortable Spot Heading Into '17," published in The AIS Report on Blue Cross and Blue Shield Plans.
Bill Goddard was quoted in an article, "4 Key Battles To Watch Over NAIC's Cyber Model Law," in Law360. The article is about the National Association of Insurance Commissioners draft of a model law outlining how insurers must safeguard consumers' information and respond in the event of a data breach.
John McLafferty was quoted in an article,"New pay equity law offers fertile ground for litigation," in Massachusetts Lawyers Weekly.
Bill Goddard and Susan Huntington were mentioned in an article, "Fewer exchange options could increase health premiums," in The Hartford Business Journal.
On June 7, the firm hosted its semiannual Insurance Compliance Best Practices Meeting. The meeting was attended by the compliance officers of eight leading insurance companies. The agenda featured a presentation by Katherine L. Wade, Commissioner of the Connecticut Insurance Department. In addition, the agenda covered the National Association of Insurance Commissioners model laws on data security and corporate governance disclosure, U.S. Department of Labor new Fiduciary Rule, and compliance officer liability exposure. Presentations on the agenda topics were made by Bill Goddard, Jim Bowers, Steve Cash, Eliza Fromberg, Mike Fernicola, and Dan Raccuia.