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Whose Privilege Is It Anyway?

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The Case:

In re Mid Century Insurance Company of Texas, 2014 Tex. App. LEXIS 2804 (Tex App.-Beaumont, Mar. 13, 2014).

Issue: Can the insurer claim attorney-client privilege to protect the entire defense file from a previous case when producing the file would benefit the insured?

The Facts:

The Herberts were injured in a vehicle accident with Robert Conrad, the son of the insured. The Herberts filed a personal injury suit, which resulted in a judgment in excess of the policy limit. The Herberts then brought a suit against Mid Century Insurance Company of Texas [the insurer for Robert Conrad and his son].

The Herberts obtained an assignment of the right to waive any attorney-client or work product privileges, then sought to obtain - by subpoena duces tecum - the file of the attorney Mid Century hired to defend the underlying case. The Herberts also filed a Motion to Compel the production of the file.

Mid Century produced the file and privilege log in camera. The trial court granted the Motion to Compel and ordered that the file be turned over to the administrator of Conrad's estate.

Mid Century contends that the file contains confidential communications between counsel and a representative of the client, privileged communications, and core work product of the attorney. The Herberts did not challenge the privileged nature of the documents in the file but argued that the privileges belong to Conrad and were waived through the assignment of claims. Mid Century contends that Conrad's waiver of privileges could not affect any privileges they possess by virtue of the tripartite relationship between counsel, the insured, and the insurer.

The Court of Appeals' Analysis:

The court rejected Mid Century's argument that the trial court disregarded established rules and principles when it declined to recognize the insurance company's assertion of privilege in the face of the insured's assignment of the Stowers demand and the right to waive attorney-client and work product privileges. For authority Mid Century relied on the Texas Supreme Court's statement that "we have never held that an insurance defense lawyer cannot represent both the insurer and the insured, only that the lawyer must represent the insured and protect his interests from compromise by the insurer." However, the court of appeals pointed out that the Texas Supreme Court has held that an attorney's unqualified loyalty belongs to the insured.

What to take away:

Mid Century was not entitled to mandamus relief from an order compelling counsel for the driver of a vehicle insured by a policy issued by Mid Century to produce his complete defense file to the representative of the driver's estate in subsequent litigation between Mid Century and the assignees of the insured's claims. The court was adamant that a counsel's ultimate loyalty belonged to the insured. This means that if the whole file is requested and it would benefit the insured, then the court may order it to be produced. The court here relied on the Texas Supreme Court's holding that the attorney's loyalty is to the insured over the insurer.

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