Because Arizona cases touching on this issue are copious, confusing, and complex, we note the following guidelines—though sometimes conflicting—have emerged from Lee and its progeny and will assist an Insurer’s analysis of whether a court will find an implied waiver of the Privilege:
- The mental state of an Insurer must be an issue to impliedly waive the Privilege.[1]
- An Insurer cannot impliedly waive the Privilege if it defends a bad faith claim solely on objective reasonableness.[2]
- A court, however, may reject an Insurer’s claim it is defending a bad faith based solely on objective reasonableness.[3]
- An Insurer must affirmatively inject the relevance of attorney-client communications into the litigation to impliedly waive the Privilege.[4]
- These acts do affirmatively inject the relevance of attorney-client communications into litigation:
- An Insurer asserts its actions were subjectively reasonable based, in part, on its agents’ evaluation of the law and part of that evaluation is informed by counsel.[5]
- An Insurer’s adjusters testify that they considered and relied upon the legal opinions or legal investigation of in-house counsel to deny a claim.[6]
- Counsel directs an Insurer to act in bad faith, i.e. counsel directs an Insurer to: make an Insured jump through needless adversarial hoops, take actions without a reasonable basis, or delay a claim.[7]
- An Insurer asserts a defense dependent upon the advice or consultation of counsel.[8]
- An Insurer asserts its settlement offers were subjectively reasonable, in part, because it determined it had a strong probability of prevailing on coverage.[9]
- An Insured testifying he did not seek policy benefits because, based on prior counsel’s advice, he did not think benefits were available and consequently did not seek benefits earlier.[10]
- These acts do not affirmatively inject the relevance of attorney-client communications into litigation:
- An Insurer and counsel simply conferring and/or trading information for advice.[11]
- An Insurer taking actions based on counsel’s advice.[12]
- An Insurer forming subjective evaluations of its claims and defenses based on counsel’s advice.[13]
- An Insured (or an Insurer) filing a bad faith action.[14]
- An Insurer’s mere denial of bad faith or affirmative claim of good faith.[15]
- An Excess Insurer suing a Primary Insurer for bad faith based upon a breach of the duty to give equal consideration to settlement offers within policy limits.[16]
- An Insurer relying on advice of counsel to issue a denial letter.[17]
- An Insurer consulting with counsel to evaluate the objective reasonableness of its position.[18]
- An Insurer asserting its actions were subjectively reasonable and admitting it consulted with counsel regarding the subjectively reasonable actions.[19]
- An Insurer does not waive the Privilege unless application of the privilege would deny the Insured access to information vital to the Insured’s claim, i.e. the Insurer cannot use the Privilege as both a sword and a shield.[20]
- Neither the relevance nor importance alone of attorney-client communications is sufficient to impliedly waive the Privilege.[21]
- A court probably will not find an implied waiver of the Privilege if the Insured has other evidence of bad faith available.[22]
- Even if an Insurer impliedly-waives the Privilege, the waiver is limited to content actually communicated to the Insurer.[23] The implied waiver does not extend to counsel’s file.[24]
[1] See Twin City Ins. Co. v. Burke, 204 Ariz. 251, 63 P.3d 282 (Excess Insurer did not waive the privilege, in part, because the mental state and conduct of the Excess Insurer’s agents and counsel were not at issue); Empire West Title Agency, L.L.C. v. Talamante ex rel. Cty of Maricopa, 234 Ariz. 497, 323 P.3d 1148 (Purchaser did not waive privilege, in part, because the Purchaser’s state of mind was not an issue).
[2] See Nguyen v. Am. Commerce Ins. Co., 2014 WL 1381384 *5 (Ariz.App. Apr. 8, 2014) (Memorandum Decision) (Insurer did not impliedly waive the Privilege, in part, because the Insurer defended solely on objective reasonableness).
[3] See Mendoza v. McDonald’s Corp., 222 Ariz. 139, 153-54, 213 P.3d 288, 302-03 (App. 2009).
[4] See State Farm v. Lee, 199 Ariz. 52, 56, 13 P.3d 1169, 1173 (2000) (En Banc) (stating the first and second criteria of the implied waiver test, i.e. a litigant impliedly waives the Privilege if, “(1) assertion of the privilege was a result of some affirmative act, such as filing suit or raising an affirmative defense, by the asserting party; (2) through this affirmative act, the asserting party put the protected information at issue by making it relevant to the case.”); see also Mt. Hawley Ins. Co. v. Slayton ex rel. Cty. of Coconino, 2013 WL 708535 (Ariz.App. Feb. 26, 2013) (Memorandum Decision) (in case which arose from a General Contractor (“GC”) Insurer suing a Subcontractor (“Sub”) Insurer to recover defense and indemnity costs, Court of Appeals held that the GC Insurer did not impliedly waive the Privilege, in part, because the GC Insurer did not inject attorney-client communications into the lawsuit by attempting to rely on attorney-client communications to prove its defense and settlement of the underlying case was reasonable).
[5] See Lee, 199 Ariz. at 57, 13 P.3d at 1174; Nguyen, 2014 WL 1381384 *5 (Insurer did not impliedly waive the Privilege, in part, because the Insurer never took the position that “its subjective view of the law was reasonable ([much less that its] subjective view necessarily incorporated advice from its counsel.”); Ingram v. Great Am. Ins. Co., 112 F.Supp. 3d 934, 939 (D. Ariz. 2015) (Insurer impliedly waived privilege where it denied workers compensation claim after a subjective evaluation of the law).
[6] Roehrs v. Minnesota Life Ins. Co., 228 F.R.D. 642, 646-647 (D. Ariz. 2005) (Order) (an Insurer impliedly waived the Privilege because the adjusters affirmatively injected attorney-client communications into the litigation by testifying at their depositions that “they each considered and relied upon, among other things, the legal opinions or legal investigation [of in-house counsel] in denying” the claims) (emphasis added); but see Safety Dynamics Inc. v. Gen. Star Indem. Co., 2014 WL 268653 at *1 (D. Ariz. Jan. 24, 2014) (Order) (Roehrs is not precedent, distinguished Roehrs, and declined to follow Roehrs).
[7] See Mendoza, 222 Ariz. at 153-154, 213 P.3d at 303-04.
[9] In Cosgrove v. Nat’l Fire & Marine Ins. Co., 2016 WL 4578139 (D. Ariz. Sept. 2, 2016), a bad faith case arising from an alleged breach of the duty to give settlement offers within policy limits equal consideration, the District of Arizona held that an Insurer impliedly waived the Privilege with coverage counsel because the Insurer asserted its settlement decisions were subjectively reasonable, in part, because: it determined there was an 80...
