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Insurer - Insured - Attorney: Are Communications with my Lawyer Privileged

    Client Alerts
  • April 10, 2007

When an insurance company retains a lawyer to defend its insured in a lawsuit, a “tripartite” relationship is created between the insurer, the insured, and the attorney retained to represent the insured.  North Carolina courts and state bar rulings have long held that a lawyer defending an insured at the request of an insurer has an attorney-client relationship with both the insured and the insurer.  The rulings also make clear that the attorney’s primary allegiance is to the insured. 

This tripartite relationship can lead to interesting questions about the privileged nature of communications.  As a general rule, confidential communications between a client and its attorney are privileged.  If an insurance company has hired the attorney and is therefore in a tripartite attorney-client relationship with the attorney and its insured, does that mean the communications between the insured and the attorney are not privileged with respect to the insurance company? 

The North Carolina Supreme Court recently answered that question “yes.”  The court ruled that communications between the insured and the attorney, to the extent they relate to representation in the case for which the insurance company retained the attorney, are not privileged as to the insurance company.(1) The attorney-client privilege does attach, however, to any communications unrelated to the defense of the underlying action, as well as to any communications regarding issues adverse between the insurer and the insured.  Specifically, any communications between the insured and its counsel relating to an issue of coverage are not discoverable, because the interests of the insurer and its insured with respect to issues of coverage are always adverse.(2)

The Nationwide v. Bourlon court went beyond those rulings because of the specific allegations asserted between the insured and the insurer.  The insured alleged that the insurance company had failed to properly defend the underlying lawsuit.  The court ruled that those allegations waived any potential attorney-client privilege concerning communications with the lawyer who defended the underlying case, because the lawyer’s defense of the case was directly at issue in the insured’s dispute with the insurance company. 

For the insured who is being represented by a lawyer retained by the insurance company, it is important to know your rights and to know the limitations of your relationship with the lawyer.  You have the right to retain independent counsel on any issues that may be adverse to the insurance company, such as any dispute over coverage under the insurance policy.  Be aware that if a dispute arises with the insurance company, your communications with the lawyer retained by the insurance company may be discovered by the insurance company.  If you have any questions or concerns about the relationship, you may want to consult with independent counsel.

(1) Nationwide Mutual Fire Insurance Co. v. Bourlon, 617 S.E.2d 40 (N.C.App. 2005).  This ruling was affirmed by the North Carolina Supreme Court in March 2006.

(2) 617 S.E.2d at 47.