HOW TO PROTECT YOUR CLAIMS FILE

Your defense counsel calls to say that a subpoena has been issued for the entire claims file in that difficult auto accident case you are working on. So, you pull up the file and send out all of the materials. It could be months before the real trouble related to this request will begin. It will come in the form of another call asking for available deposition dates. Then you will sit down with your noble and handsome defense counsel to review your notes and find yourself saying out loud “I don’t know why I wrote that … .” 

At the outset of most claims, trial lawyers will make obtaining the claims file a top priority goal. They know insurance claims professionals are thorough note takers and their files can sometimes contain the most amazingly incriminating statements. We have seen claims notes in which claims professionals mock the appearance or character of a party; boast about never paying a claim’s full value; and even employ unquestionably racist language. Finding such careless notes is any plaintiff’s attorney’s dream. Discovering such loose remarks can be the difference in winning a large award and going home empty handed. 

Generally, a broad demand for the insurer’s entire claims file is unlikely to be granted, but claimants will likely be given access to some parts of the claims file. Where the parties are unable to agree on the materials to be produced, Louisiana courts sometimes require an in camera inspection (an inspection by the judge in his chambers) to determine which portion should be withheld.  

Hungry trial lawyers know how helpful the claims file may be to their claim. By the time the subpoena for the claims file arrives, the battle to protect it has already been won or lost. You can better protect your file by following a few proactive suggestions. 

At the outset of most claims, trial lawyers will make obtaining the claims file a top priority goal. They know insurance claims professionals are thorough note takers and their files can sometimes contain the most amazingly incriminating statements. We have seen claims notes in which claims professionals mock the appearance or character of a party; boast about never paying a claim’s full value; and even employ unquestionably racist language. Finding such careless notes is any plaintiff’s attorney’s dream. Discovering such loose remarks can be the difference in winning a large award and going home empty handed. 

A broad demand for the insurer’s entire claims file is unlikely to be granted, but claimants will likely be given access to some parts of the claims file. Where the parties are unable to agree on the materials to be produced, Louisiana courts sometimes require an in camera inspection (an inspection by the judge in his chambers) to determine which portion should be withheld.  

Relevance is the primary obstacle to any plaintiff’s request for claims file materials. If material is not relevant – meaning it has a tendency to make any fact of consequence more probable or less probable - it should not be discoverable.  If a request for production of any portion of the claims file passes the relevance test, the documents will be discoverable unless the documents are protected by the attorney-client privilege or the work-product doctrine. 

In this area, there can be disparities from court to court over what might be considered privileged or protected. Some courts apply the attorney-client privilege to protect only those disclosures necessary to obtain legal advice. Under this approach, confidential communications between the insurer and its attorney may not be privileged if the attorney was not acting as a legal advisor when the communication was made. Attorney communications are not privileged if made in the ordinary course of the insurer’s business. If the nature of the communication indicates they were not regarded as confidential, or they were made to be repeated by the attorney to others, they are stripped of the privilege. The privilege also does not apply to communications made to commit a crime or a tort … in case you might be considering that sort of thing.

There is no separate privilege for communications between an insured and its insurer, but those communications might fall within the attorney-client privilege if they concern potential liability under the policy.  Some courts hold that communications from insured to insurer are generally made for the benefit of the insurer’s lawyer in defending the claim.     

Claims professionals must be careful not to waive the attorney-client privilege. Once the privilege is established, it can be invoked at any time. Unfortunately, once the privilege is waived, it cannot be re-invoked. Claims professionals can waive the privilege by disclosing privileged information to a third-party, such as an expert, a witness, or to plaintiff’s counsel. Even a careless, unintentional, or inadvertent disclosure may be enough to waive the privilege.

In contrast to the attorney-client privilege, the work-product doctrine protects an attorney’s private files and recorded impressions from discovery. The work-product rule does not require that an attorney be involved in preparing the material, but it does require that the materials were prepared in anticipation of litigation. Determining whether a document was created in anticipation of litigation is challenging because the nature of the insurer’s business is to investigate claims. That means such investigations may fall within the insurer’s ordinary course of business rather than in anticipation of litigation. Although an insurer’s reports, memoranda, and investigations after an accident are created with an eye toward possible litigation, courts are split on what standard to apply to determine whether a document has been created in anticipation of litigation and not in the ordinary course of business. Court rulings have allowed the protection to begin anywhere from when litigation can be reasonably anticipated to when suit is actually filed. It is difficult for a claims professional to know when a court will consider a the work-product protection to have begun.

 It is also important to understand that when an insurer is sued by its insured for bad faith claims handling, the courts will permit broader discovery and more of your claims file will be turned over. While relevance remains the primary gate-keeper to protect your file, far more will be considered relevant in a first-party bad-faith claim. Wide exceptions to the work-product privilege are sometimes granted in bad faith litigation, but a blanket waiver of the work-product privilege is not the rule.   

In bad faith claims, the insurer may waive any privilege that would otherwise attach to its counsel’s communications if it asserts reliance on advice of counsel as one of its defenses. Some courts hold that the privilege has been waived because the insurer’s defense has implicitly put into issue the advice that it received from its counsel.  

As the claims professional on the file, your work in anticipating and addressing privilege, work-product, and discovery issues as the claims file is created will decide whether and how much of the claims file is discoverable. Here are some suggestions for how to keep your claims notes free from harmful entries:

• As early in the claim as reasonably possible, your notes should show when you think litigation may be anticipated. Because we cannot know for certain when a court will decide that materials were prepared in anticipation of litigation, it is best to assume the work-product doctrine offers no protections until litigation has actually started.
• Mark your correspondence to your attorney or her staff as privileged. One of the best claims professionals I work with marks the head of every email he sends to counsel as “PRIVILEGED & CONFIDENTIAL.”
• Stick to the facts. Your opinions and observations are important in the handling of the file, but the claims diary is mostly a place for facts.
• If you use hand-written notes in creating your claims notes, keep the handwritten notes in a separate file.
• Before saving your claims notes to the system, proof them carefully. Keep in mind that everything you write may be read by a judge or an adverse party. Try to read your diary entries through their eyes.
• Avoid unnecessary modifiers (adjectives and adverbs) in your notes. “Accident” is different from “very serious accident” when explaining to opposing counsel - under oath - why you did not interview every witness.
• If your claims file system permits it, save your claims notes in draft mode and come back after some time has passed to proofread and save them. This is particularly important when a conversation has been contentious or difficult. It is only human that your note would read differently if composed while you are irritated. Give yourself a little time before proofreading it, or ask your supervisor to proofread it, before putting it into the system where it cannot be changed.
• Avoid writing handwritten notes on the jacket of the file. Those notes are frequently requested and discovered. When you are deposed, you will find yourself trying to explain what you wrote.
• Recording quotes in your claim notes can present problems and should be avoided. Irrelevant quotes should never be included. If you do record quotes in your notes, use quotation marks so the note reflects the witness’ remark and not your observation or opinion.
• Use your attorney to hire all of the litigation experts in the case, even if you are the one to decide who the expert will be. The attorney-client privilege may still be raised to shield communications between your lawyer and a consultant hired by the lawyer to assist the lawyer in rendering legal advice. Where it is anticipated that a non-legal expert will be required, the lawyer should send a retention letter to the non-legal expert, describing the nature of the expert’s duties and obligations, the necessity of the expert’s investigation, analysis, and opinion for the purposes of the attorney’s rendering of legal advice, and the confidential nature of all communications and information exchanged between the expert and the attorney.
• If you communicate directly with a litigation expert, proofread your communications to remove privileged or protected information. Legal advice may be discoverable if it is included in materials provided to an expert.
• Disclose privileged communications or materials only on a need-to-know basis. Because they occur in the ordinary course of the insurer’s business, communications made during the routine investigation of the claim may be discoverable, including insurer-insured and even attorney communications.  Statements should be made carefully and memorialized only when necessary.  
• Segregate privileged communications from business documents. Both privileged communications and business documents containing privileged information should be clearly defined as privileged.  To the extent possible, legal and business advice should not be mixed within a single document. 
• For electronically generated documents, consider converting them to .pdf format before producing them, but maintain all produced documents in their native formats through at least the full resolution of the case. 

Hungry trial lawyers know how helpful the claims file can be to their case so they will fight to get as much of it as they can. In most cases, some of the claims file will be produced, but you can help to protect the claims file by vigilantly documenting when litigation is anticipated and keeping your notes free from remarks helpful to a potential opponent. After all, by the time the subpoena for the file arrives, the battle has already been won or lost. Taking a proactive approach by anticipating and addressing privilege, work-product, and discovery issues as the claims file is created will later inform whether and how much of the claims file is discoverable. 

* Special thanks to Robert Bischoff for his patient and generous assistance with this piece.

Lance E. Harwell is a Member of Staines & Eppling, APLC practicing, publishing articles, and presenting seminars in the fields of auto liability, longshore, Louisiana worker’s compensation, general liability, insurance coverage, bad faith insurance claims handling, fire and property defense, and Louisiana business enterprises.  He is a Melvin Jones Fellow and a recipient of the APAS Frank Hara Memorial Award for community service. When he is not practicing law, Lance often volunteers with the University Park Lions Club or the Asian-Pacific American Society. Otherwise, he can be found cheering for his Louisiana Ragin’ Cajuns.  He is married to a woman he does not deserve and is the father of one really great son.

The opinions and comments expressed in this article are those of Lance E. Harwell, who is not responsible for the inaccuracy of content or any loss or damages incurred by any party as a result of reliance on information contained in this article. Content may not be published or reproduced without the written consent of the author. Prior articles may not be updated for accuracy as pertinent information changes over time. The content of this and other articles composed by Lance E. Harwell provide general information not specific to any particular case or set of facts and should not be construed as legal advice, nor do they establish an attorney-client relationship.