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Current Developments in the Commercial Divisions of the
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Posted: April 25, 2017

Communications With Insurance Brokers Not Privileged

On April 17, 2017, Justice Bransten of the New York County Commercial Division issued a decision in Mt. McKinley Insurance Co. v. Corning Inc., 2017 NY Slip Op. 30704(U), holding that an insured’s communications with its insurance brokers were not privileged, explaining:

Corning did not produce approximately 50 confidential communications between and among it, its attorneys and its insurance brokers, Johnson & Higgins (“J&H”). Asserting the attorney-client privilege, Corning withheld: (1) documents related to certain asbestos personal-injury actions; (2) documents related to asbestos-related bodily-injury actions; (3) documents related to coverage disputes resulting in handling agreements; and (4) documents related to the PCC bankruptcy.

. . .

While neither Continental nor Corning offers New York case law germane to the circumstances here, Corning urges this court to follow the decision of the District Court for Southern District of New York in In re Copper Mkt. Litig., in which the attorney-client privilege stretched to cover a public-relations firm retained by a corporation. The District Court, relying on the United States Supreme Court decision in Upjohn Co. v United States, reasoned that the public relations firm could fairly be equated with the corporation for purposes of analyzing the availability of the attorney-client privilege to protect communications to which the firm was a party concerning its scandal-related duties. Since In re Copper Mkt. Litig., other District Courts in New York have considered whether the attorney-client privilege should be extended to protect communications between counsel and a non-party, corporate consultant-treated as a de facto employee-such as a
construction-management-services company or a financial advisor. Each decision analyzed several factors that warranted treatment of a non-party as a de facto employee.

One factor is whether the corporation had the resources to conduct the activity completed by the third-party on its behalf. . . . Another factor is whether the third-party had authority to make decisions on the corporation’s behalf. . . . Courts also consider whether the third-party’s actions, on behalf of the corporation, carried legal implications. . . . Next, courts will look at whether the third-party’s services were substantially related to obtaining legal advice. . . . Lastly, courts will examine whether the third-party, as a result of its services for the corporation, uniquely possessed information that the corporation did not have.

Corning attempts to invoke the reasoning in In re Copper Mkt. Litig. but fails to meet its burden of establishing that the attorney-client privilege covers communications with its insurance brokers. In a conclusory fashion, Corning claims that J&H employees acted as agents of Corning and Coming’s attorneys both as functional employees and as translators to assist Corning’s Legal Department in rendering legal advice. It lends no support, however, to these bare-bones statements. Rather than submit an affidavit from any J&H employee to substantiate its claims, Corning offers the affidavit of its counsel who merely alleges, among other things, that J&H employees were responsible for communicating Coming’s position to the Insurers regarding coverage matters, negotiating written agreements in the coverage disputes, and for reporting to Corning and Corning’s Legal Department.

Corning also fails to set forth any allegation that J&H was necessary to fulfill a function that Corning was incapable of handling, that J&H’s services were substantially for the purposes of obtaining legal advice-and not simply for insurance-brokerage services or that J &H uniquely possessed information that Corning did not have. Indeed, it has been held that the necessity element means more than just useful and convenient but requires the involvement be indispensable or serve some specialized purpose in facilitating attorney client communications.

Moreover, this Court is mindful of the admonition in Export-Import Bank of the United States: the attorney-client privilege should not be expanded without considerable caution. In light of Coming’s failure to satisfy its burden of demonstrating the existence of a valid privilege, Continental’s motion to compel is granted.

(Internal quotations and citations omitted) (emphasis added).

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