Thursday, December 1, 2011

Ohio Supreme Court rewrites, and protects, the tripartite relationship between attorney, client, and insurer

If your business has employment practices liability insurance, or deals with insurance companies for other coverages, you are probably aware of the strange three-headed relationship that exists between you (the insured), your insurance company, and the attorney your insurance company hires to defend you in litigation. One question that always arises in this unique relationship is whether an attorney-client relationship only exists between the attorney and you (the insured), or if it also exists between the attorney and the insurance company. The answer to this question is significant, because if there is no attorney-client relationship between counsel and the insurance company, then the attorney-client privilege will not shield communications between them.

Conventional wisdom in Ohio has been that no attorney-client relationship exists between an insurance company and retained counsel. The seminal case on this issue was Swiss Reinsurance Am. Corp. v. Roetzel & Andress. Earlier this week, however, the Ohio Supreme Court—in State ex rel. Dawson v. Bloom-Carroll Local School District (11/29/11) [pdf]—flipped conventional wisdom on its head. The case focused on the issue of whether someone could compel disclosure, under Ohio’s public records law, of communications between a school district’s insurance carrier and its legal representative. It has much broader implications for the relationship between an attorney and an insurance carrier. The Court concluded that because an attorney-client relationship existed between the insurer and the insured’s retained counsel, the resulting privilege shielded any such communications from disclosure:

In effect, the insurance company stands in the shoes of the district…. Where a person approaches an attorney with the view of retaining his services to act on the former’s behalf, an attorney-client relationship is created, and communications made to such attorney during the preliminary conferences prior to the actual acceptance or rejection by the attorney of the employment are privileged communications.

This case solves a huge problem for employers’ insurance counsel, and consequently for employers. Under Swiss Reinsurance, and because of the lack of any privilege, communications between employment defense insurance counsel and the insurance company were made at the client’s risk. Thanks to a common sense ruling from the Supremes, these communications are now rightfully protected. Counsel should now be able to speak as freely with the insurer as we do with our clients.