Protecting Confidentiality in Communications with Excess Carriers[dagger]

I.

INTRODUCTION

The parties, interests, and constituents who participate in litigation are becoming more compounded On major pieces of litigation, trial consultation are asked to manage and balance the demands of communications with not sole their clients and in-house consultation but primary and excess carriers and oftentimes counsel for excess carriers. ofttimes these communications seem problem-free. Everyone shakes together to protect the insured. Sometimes, admitting the interests of these different constituencies diverge. When they do, consultation must be vigilant in assessing and apprising their respective clients about not alone the substantive implications of these conflicts, on the contrary also about the implications these conflicts might have upon confidential and privileged communications.

The challenges of maintaining confidential and privileged communications are not fresh in the context of insurance relationships. They exist in the tripartite relationship where consultation must manage communications flowing between themselves, the primary insurer, and the insured. at short intervals the primary insurer agrees to guard under a "reservation of rights" where its defense is conditional on the primary insurer's rights to disclaim coverage upon certain specified grounds. This reservation of rights "creates potential conflicts with look up to to the defense: the insurer may tender mere token defense, the insurer may young ox [the] result to [a| prudence under an uninsured theory of regaining (and) the insurer may gain access to confidential or privileged information which it may later use to its advantage."1

When the interests of the insured do not match the interests of the insurer, vexed questions arise for the attorney seeking to subserve the best interests of the one and the other The financial and practical reality is that the defense interchange of opinion has been appointed by the insurer, and the insurer assumes at least initial financial responsibility for defense counsel's fees2 At the same time, defense interchange of opinion assumes an attorney-client relationship with the insured where counsel's communications with the insured are secureed by the attorney-client privilege. Practitioners are familiar with the dilemmas the traditional tripartite relationship creates -for example, whether defense consultation can report facts to the insurer that might affect coverage.3

From the tripartite paradigm, a scarcely any themes emerge as useful guidelines in navigating the issues pos by means of more complex relationships. First, defense consultation is best served by keeping in mind that his or her primary allegiance is to the insured. While the case law is sometimes inconsistent, the sweep is to hold that the lawyer owes a what one ought to do of loyalty primarily to the insured.4 The lawyer must always remember that "general professional ideals impel the lawyer in the direction of protecting the interests of the insured."5 This obligation includes keeping the insured informed of all major disentanglements and protecting privileged communications between the lawyer and insured.6

More composed of several elements cases test how these principles apply. These cases involve more players and divergent interests-clients and general interchange of opinion multiple primary insurers, and exces insurers and their representatives. For example, an exces carrier might decline coverage on the other hand seek further information to review its coverage decisions. More commonly exces carriers may remain noncommittal about coverage on the contrary appoint their own (not the insured's) consultation and request that the primary insurer or trial consultation keep them apprised of the litigation. The exces carrier, primary carrier, and the client might have different strategies upon defenses or settlement. This article examines when and by what means such scenarios impact the attorney-client privilege and the nature and aim of communications amongst the different players in mingled litigation.

II.

LEGAL AND PRACTICAL IMPLICATIONS OF SHARING INFORMATION WITH AN EXCES CARRIER

As enterprises react to novel diverse, and evolving risks, insurance coverage schemes have become more mixed Modern insurance disputes are not limited to coverage disputes between policyholders and primary insurers. More and more, cases feature disputes involving multiple layers of insurers, including exces carriers and reinsurers.7 Litigation involving those insurers is intriguing. The potential claims of exces insurers have forced primary insurers and defense attorneys to consider the impact of providing confidential information access to the exces carrier or its attorney, oftentimes before a coverage decision has been made.

Request for information from exces carriers or their attorneys are routine. Companies receiving these askings often face extensive exposure or pay s that will outstrip their primary coverage. Loathe to doing anything that might active a claim of lack of cooperation, the insured's course is to provide the information. The compressing to provide the details of the claims and trial counsel's assessments thereof high hill when the company seeks to have the exces carrier participate in adjustment Excess carriers often are not however obligated for defense or indemnity take away froms because a primary carrier is still defending the claim. Nonetheless, and quite reasonably, exces carriers want access to information that will help them assess not sole the existence of coverage, on the other hand how the defense is being handled, what the in all senses might be, and whether adjustment is appropriate.