Supreme Court of Texas Considering Important Issue of Privileged Communications Between Employer and its Insurance Company
Recently, the Supreme Court of Texas heard oral arguments in an interesting case regarding the outer limits of the attorney-client privilege with respect to a workers' compensation insurance carrier attorney's communications with its insured. The communications at issue were made between the carriers and the insured/employer during the administrative proceeding before the Texas Workers' Compensation Commission over the compensability of a workers' compensation claim. The case is styled In re XL Specialty Insurance Company and Cambridge Integrated Services Group Inc. (No. 10-0960).
At issue is a trial court's order that the workers' compensation insurance carriers turn over, in a civil lawsuit over the allegedly bad faith denial of workers' compensation benefits, communications they had with their insured/employer during the course of the underlying administrative litigation over the compensability of the workers' compensation claim.
This case could have important ramifications for the Texas law of attorney-client privilege of communications between an insured and its insurance company's counsel. Employers, and their attorneys, routinely communicate with insurance companies about the status of potential and pending claims. Similarly, counsel for insureds routinely provide litigation updates about the potential strengths, weaknesses, potential exposure and likely outcomes on pending litigation. These types of communications are normally treated as confidential and subject to the attorney-client privilege under the common legal interest doctrine (i.e., the privilege extends communications between parties or attorneys that share a common legal interest). And while the case before the court is slightly different from the way EPL claims are handled because the insured/employer is not party (and is therefore a third-party) to the underlying lawsuit, the Court's pronouncements regarding the limits of the attorney-client privilege could have wide reaching effects on the manner in which employers communicate with their insurance carriers about pending claims.
We'll have more from this case when the Court renders its opinion in the case.
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