An Examination of the Illinois Insurer-Insured Privilege: What is Protected and What is Discoverable?
In today’s litigation climate, cases often not only involve a plaintiff, a defendant, and their attorneys, but also insurance carriers who have vested interests in the outcome of cases involving their insured. Prior to and throughout the course of litigation, an insured will often not only communicate with their attorney, but also with their insurer. It is common, for example, that an insurer will take a statement from their insured while analyzing a potential claim. The threshold question of which components of an insurance claim file are discoverable is crucial in a litigated matter. This Article explores the Illinois Insurer-Insured Privilege. A misunderstanding of this privilege can have severe consequences, including the disclosure of material information that the parties believed, in good faith, was confidential, and would never be subject to production.
Requirements of the Insurer-Insured Privilege
The Insurer-Insured Privilege stems from the attorney-client privilege. The fundamental purpose underlying the attorney-client privilege is to promote candid and complete discussions between a client and his or her attorney without fearing that they will be compelled to disclose these communications. See Caldwell v. Advocate Condell Medical Center, 87 N.E.3d 1020, 1036 (Ill. App. Ct. 2d Dist. 2017). In order for the attorney-client privilege to apply, a party must show: “(1) the statement originated in confidence that it would not be disclosed; (2) it was made to an attorney acting in his legal capacity for the purpose of securing legal advice or services; and (3) it remained confidential.” Pietro v. Marriott Senior Living Services, Inc., 810 N.E.2d 217, 226 (Ill. App. Ct. 1st Dist. 2004).
During the process of claim investigation and analysis, it is common for insurers to correspond with their insured. Thus, it is not surprising that the Illinois Supreme Court has extended the attorney-client privilege to communications between an insurer and insured. In order to extend the attorney-client privilege to such communications, the party asserting the privilege must first demonstrate that the communication arose with an expectation of confidentiality and remained confidential, and then establish the following: “(1) the identity of the insured; (2) the identity of the insurance carrier; (3) the duty to defend a lawsuit; and (4) that a communication was made between the insured and an agent of the insurer.” Id. Additionally, the Insurer-Insured privilege applies only when information is shared with an insurer for the dominant purpose of communicating the information to an attorney for the protection of the interests of the insured. Caldwell v. Advocate Condell Medical Center, 87 N.E.3d at 1036. Thus, communications between an insurer and an insured will only be protected in third-party liability cases, where the insurer and insured have aligned interests. Communications will not be protected in first-party claims where the insurer and insured have adverse interests. See, e.g., Boettcher v. Fournie Farms, Inc., 612 N.E.2d 969 (5th Dist. 1993). If these requirements are satisfied, communications between an insurer and insured will be protected from discovery under Illinois law.
The first three requirements set forth above are straightforward, as the identity of the insured and insurer is typically self-evident and the duty to defend a lawsuit will usually be conferred explicitly in a contract between the insurer and insured. As for the 4th requirement, Illinois courts have construed it liberally. For example, the Insurer-Insured privilege has been held to extend to communications between an insured and an investigator hired by an insurance company. People v. Ryan, 197 N.E.2d 15 (Ill. 1964). Finally, as indicated above, if a communication is not made for the protection of the interests of the insured, it will not be protected by the insurer-insured privilege. See Chicago Trust Company v. Cook County Hospital, 698 N.E.2d 641, 651 (Ill. App. Ct. 1st Dist. 1998).
If parties comply with the requirements of the Insurer-Insured privilege, correspondences between an insurer and insured will not be discoverable under Illinois law. It is necessary for parties to maintain a thorough understanding of the Insurer-Insured privilege to prevent the unintentional disclosure of information throughout the course of discovery.
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