Bad faith claims are those asserted against an insurance company after the failure to pay out benefits under a particular policy. The circumstances of a bad faith claim can vary, from an insurer failing to acknowledge a claim to refusing to pay a judgment. In either case, a bad faith claim involves special questions of law.
One issue that often arises in bad faith claims is the matter of attorney-client privileged communications between a party and its insurer during the course of the underlying litigation. Recently, an appellate court certified a question to the Florida Supreme Court concerning the issue of attorney-client privilege.
In Boozer v. Stalley, a car accident case, the issue of attorney-client privilege was discussed at great length by the District Court of Appeal for the Fifth District of Florida. In that case, the parties were involved in an automobile accident that caused injuries to the plaintiff. The defendant driver was covered by at least two auto insurance policies, with a total of $1.1 million in bodily injury liability coverage. In the underlying personal injury case, a jury returned a verdict in excess of $11 million. The defendant’s insurer paid the policy limits of $1.1 million, which left a substantial unsatisfied judgment.
In order to collect the remainder of the judgment, the plaintiff filed a bad faith action against the defendant’s insurer. Since bad faith actions typically involve issues about claim investigation and settlement, the plaintiff attempted to depose the defendant’s attorney, who had been involved in the litigation from the outset. The plaintiff also sought the attorney’s files from the underlying personal injury action. Unsurprisingly, the attorney asserted the attorney-client privilege and refused to provide any information or documents related to his representation of the defendant in the underlying action. The matter was then taken to the appellate court for review on the discovery issue.
The Court of Appeal reviewed long-standing Florida law regarding bad faith claims, as well as the doctrines of work product and the attorney-client privilege. The court discussed third-party bad faith claims, in which the injured third party “stands in the shoes” of the insured individual. In these types of cases, Florida courts have allowed discovery of the insurer’s claim and litigation files, despite the assertion of attorney-client privilege, because of the duty owed by the insurer. However, the appellate court noted that several recent Florida decisions had diverged from the well-settled law in Florida.
First, the Florida Supreme Court seemingly departed from distinguishing between first-party and third-party bad faith claims in Allstate Indemnity Co. v. Ruiz. In Ruiz, the Florida Supreme Court held that work product materials were discoverable in either type of bad faith action. However, subsequent to Ruiz, many district and federal courts in Florida held that the attorney-client privilege was in fact maintainable in bad faith claims. The disparity in judgments among Florida courts apparently turned on the difference between third-party and first-party claims, as well as the distinction between work product and the attorney-client privilege.
Accordingly, in Boozer, the Fifth District court recognized the uncertainty in this area of the law and certified a question to the Florida Supreme Court. When answered by the Supreme Court, the question of whether attorney-client communications are discoverable in a third-party bad faith case will provide guidance in these cases.
If you or someone you know has reason to believe that an insurance company has acted in bad faith, you may have a claim. The Southwest Florida injury lawyers at Lusk, Drasites & Tolisano are skilled in dealing with insurance companies after an accident. To speak with one of our experienced attorneys, contact us online or call toll-free at (800) 238-7442.
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