The court granted the insured's motion to compel documents withheld for privilege by the insurers. Certain Underwriters at Lloyd's v. Amtrack, 2016 U.S. Dist. LEXIS 27041(E.D. N.Y. Feb. 19, 2016).
Plaintiffs were insurers who did business in the London Insurance Market and who issued one or more liability policies issued to Amtrak. Amtrak demanded coverage under the policies for alleged environmental contamination and/or asbestos exposure. Coverage was denied and the insurers filed for a declaratory judgment.
Discovery disputes arose in the litigation. Amtrak sought communications deemed privileged by the insurers even though, due to the unique structure of the London insurance market, the communications were shared with third parties.
Through a declaration,the insurers described how the London insurance market operated. Coverage for a major corporation like Amtrak would involve insurance placed in layers with each policy attaching at the exhaustion point of the underlying policy. A single policy might have one to dozens of insurers.
To facilitate communications between insurers and their attorneys, the attorneys did not communicate directly with all of the insurers on a policy. Instead, the attorneys communicated with the lead underwriter, and relied on a London broker to make their reports available to all subscribers on a policy who were represented by such counsel. U.S. lawyers representing insurers in the London Market would send attorney reports to a servicing company for the London insurers. The servicing company would then forward the attorney reports to the London brokers, who placed them in a claim file for distribution to the participating insurers. The London brokers would use messengers to take the claims file to various claims handlers, who would review the file. The file was then returned to the broker's office.
In seeking documents the insurers withheld as privileged, Amtrak argued that because the London brokers were neither attorneys nor clients, the attorney reports through the London brokers waived any privileged. In opposition, the insurers argued that using brokers to distribute privileged communications was standard in the London market and not understood to waive the privilege.
The court found the documents were not protected by attorney-client privilege. The fact that a particular method of distributing and/or retaining documents was standard in an industry did not determine whether that method of distribution complied with the law governing attorney-client privilege. The insurers failed to establish that attorney-client communications like the attorney reports were distributed through and/or retained by the London brokers were intended to be kept confidential. Amtrak's motion to compel was therefore granted.