A Florida Federal District Court, applying Florida law, found that a policyholder waived attorney-client privilege and work product protection over communications between its insurance broker and underlying defense counsel by putting them “at issue” in a coverage dispute with its insurer.

In a coverage dispute between Sun Capital Partners, Inc. (“Sun”) and Twin City Fire Insurance Company (“Twin City”), Twin City filed a motion to compel Sun’s communications with Marsh, its insurance broker. The court conducted an in camera review of the disputed documents, and ordered production of many of them.

As to work-product, the court stated that under Florida law, the burden is on the withholding party to demonstrate that the documents are protected, and there is a rebuttable presumption that documents prepared before the final decision on an insured’s claim are not work product, while documents prepared after the decision – such that the parties reasonably could anticipate litigation – are protected work product. The policyholder argued that it reasonably anticipated litigation with Twin City in 2010. However, it did not file suit against Twin City until 2012. After analyzing email traffic and the parties’ efforts to reach a non-litigation resolution between 2010 and 2012, the court found that Sun had not overcome the presumption and set November 2, 2012, the date of the insurer’s final denial letter, as the date on which Sun reasonably anticipated litigation. As such, Sun could not claim work-product on those documents prepared before that date.

With respect to Sun’s attorney-client privilege claims, the court stated that it was unclear whether Sun and Twin City were “joint clients” of the underlying defense counsel, but held that the parties had a “common legal interest” in minimizing Sun Capital’s liability in the underlying litigation –  until the point that the parties reasonably anticipated litigation against each other. As such, the court held that communications exchanged with defense counsel prior to November 2, 2012 “for the limited purpose of assisting in the parties’ common litigation related cause” be disclosed. This included documents related to the “calculation of settlement value, evaluations of the strength of the individual claims, and any other litigation outcomes in the underlying litigation.” The court made clear that communications between Sun and its coverage counsel regarding the insurance coverage dispute were not discoverable.

The court also found that Sun had waived privilege by virtue of the “at issue” doctrine because Sun put privileged information at issued. The court reasoned that Sun would need work product communications to prove its allegations pertaining to the application of an allocation in the policy because it would need to show that the allocation between covered and non-covered claims was proper and supported by defense counsel’s evaluations. Moreover, the court found that the privileged documents would be vital to the insurer’s defense. Therefore, although these documents would otherwise be privileged or protected, the court held that Sun placed these items “at issue” and thus, communications regarding the allocation between covered and non-covered losses and regarding the settlement of the underlying claims were discoverable. Sun Capital Partners, Inc. v. Twin City Fire Ins. Co.,  9:12-cv-81397-KAM (S.D. Fla. April 22, 2015)