A Pennsylvania district court in CAMICO Mutual Insurance Co. v. Heffler, Radetich & Saitta, LLP (E.D. Pa. Jan. 28, 2013), refused to allow an insurer access to its insured’s defense file, holding that that the insurer was not a client of the insured’s defense counsel. There, CAMICO Mutual Insurance Co. insured Heffler, Radetich & Saitta, L.L.P. (“Heffler”) which was sued for misappropriating class action settlement proceeds. In response to the suit, Heffler selected its defense counsel, and CAMICO agreed to pay defense counsel’s fees.
CAMICO filed this declaratory judgment action seeking a finding apparently regarding the available policy limits. In connection therewith, CAMICO sought production of certain documents related to the underlying lawsuit. Heffler refused, and CAMICO moved to compel. CAMICO argued the application of exceptions to the attorney-client privilege, which the parties agreed would have otherwise protected the documents from production.
CAMICO relied on the co-client exception, which concerns where two or more clients share the same attorney. CAMICO argued that the exception applied because defense counsel represented the joint interests of Heffler and CAMICO with respect to the underlying lawsuit. The district court disagreed, relying on several authorities for the proposition that the insurer is not automatically a client of defense counsel, even when it funds its insured’s defense. Further, the district court found that based on the factual record, CAMICO was not a client of defense counsel. Therefore, the district court denied CAMICO’s motion.
Notably, the district court glossed over three important issues, which merit a brief discussion here: (1) Heffler’s choice of its own defense counsel, (2) the common interest exception as an exception to the attorney-client privilege, and (3) CAMICO’s providing a defense to Heffler in the underlying lawsuit while seeking to litigate the extent of coverage.
First, that Heffler chose its own defense counsel made the arguments in favor of the co-client exception peculiar. If CAMICO had appointed defense counsel for Heffler, there probably would have been a better argument for a co-client exception.
Second, several courts recognize the common interest doctrine as an exception to the attorney-client privilege. E.g., Waste Management, Inc. v. Int’l Surplus Lines Ins. Co., 144 Ill. 2d 178, 579 N.E.2d 322 (1991). Although the district court asserted, without more, that CAMICO’s counsel did not share information with Heffler’s defense counsel, that is the point—CAMICO desired that defense counsel provide its counsel with otherwise privileged information. This may have been a legitimate exception to the attorney-client privilege. And, the Third Circuit and the Supreme Court of Pennsylvania have not taken a position on whether they will follow the Illinois Supreme Court’s interpretation of the common interest exception as set forth in Waste Management.
Third and finally, that CAMICO was not seeking a declaration that it had no duty to defend or indemnify suggests that CAMICO and Heffler could have a common interest with respect to the underlying lawsuit. Most courts that have criticized the Waste Management reject, in pertinent part, the concept that the insurer can seek to vindicate its disclaimer of coverage in a declaratory judgment action, yet have a common interest with its abandoned insured in the underlying tort action. While subject to debate, that CAMICO was merely seeking to litigate the available limits suggests that the common interest exception may be available here.
