Discussions with an insured’s insurance broker are often an important part of the negotiation process for insurance claims. Brokers can provide valuable insights on the drafting and underwriting of the insurance policy as well as the attitudes of insurers on particular issues. But are communications between a client, coverage counsel, and the client’s insurance broker privileged? A previous post addressed California decisions finding that disclosure of privileged information to an insurance broker did not waive privilege because those disclosures were reasonably necessary to provide information to the insurers. In New York, whether such disclosure constitutes a waiver is a fact-specific inquiry.
Courts applying New York law have gone both ways on whether privilege applies to communications with the insured’s broker. See, e.g., Roc Nation LLC v. HCC Int’l Ins. Co., PLC, No. 19 CIV. 554 (PAE), 2020 WL 3170886, at *2 (S.D.N.Y. June 15, 2020) (holding that certain communications between an insured’s counsel and the insured’s broker “made for the purpose of informing [counsel’s] legal advice to [the insured] are properly privileged.”); SR Int’l Bus. Ins. Co. v. World Trade Ctr. Properties LLC, No. 01 CIV. 9291 (JSM), 2002 WL 1334821, at *1-6 (S.D.N.Y. June 19, 2002) (rejecting arguments that communications between the insured’s counsel and its broker were protected by the attorney-client privilege, common interest privilege, or work product doctrine).
The two-state trial court decisions that have examined this issue in detail have indicated that privilege can extend to the insured’s broker if, based on the facts at issue, the broker can properly be considered to be acting as the insured’s agent and therefore within the attorney-client relationship.
In TC Ravenswood, LLC v. National Union Fire Ins. Co. of Pittsburgh Pennsylvania, No. 400759/11, 2013 WL 3199817 (N.Y. Sup. Ct. June 20, 2013), the court explained that, although typically “disclosing a communication to a third party waives [the attorney-client] privilege,” that privilege is “not waived  if the third party is acting as an agent of the attorney or the client.” On the agency issue, the court explained that “[w]hether a third party is an agent ‘is not defined by the third parties’ employment or function,’ but rather depends on whether the client had a ‘reasonable expectation of privacy under the circumstances,’” and that “[w]hen an agent is closely involved in the company’s activities, ‘there is no reason to distinguish between a person on the company’s payroll and a consultant hired by the corporation if each acts for the corporation and possesses the information needed by attorneys in rendering legal advice.’” Id. The court found that this “reasonable expectation of privacy” standard was met where the broker “was specifically hired by [the insured] and its counsel to explain the complex insurance policies at issue for [the insured] and its counsel.” Id. In that case, there was a specific contract between the broker and the insured reflecting this arrangement. Id.
In contrast, in Mt. McKinley Ins. Co. v. Corning Inc., No. 602454/2002, 2017 WL 1401363, at *8-9 (N.Y. Sup. Ct. Apr. 17, 2017), the court found that disclosure to a broker was not protected where the insured did not make a showing that the broker was acting as its agent. The court explained that there “is little question that the privilege, as between attorney and client, may extend to the client’s employees or legal representatives under the agency doctrine” but that the issue of “whether the privilege reaches the client’s insurance brokers” was “[l]ess settled.” Id. at *7. Citing a Southern District of New York case that examined whether privilege should extend to a party’s public-relations firm, the court listed the following factors that should be considered: (1) “whether the corporation had the resources to conduct the activity completed by the third-party on its behalf”; (2) “whether the third-party had authority to make decisions on the corporation’s behalf”; (3) “whether the third-party’s actions, on behalf of the corporation, carried legal implications”; (4) “whether the third-party’s services were substantially related to obtaining legal advice”; and (5) “whether the third-party, as a result of its services for the corporation, uniquely possessed information that the corporation did not have”. Id. at *7-8. The court held that the insured failed to satisfy these factors where it did not submit any affidavit from the broker and failed to make any showing of how the broker was “was necessary to fulfill a function that [the insured] was incapable of handling, that [the broker’s] services were substantially for the purposes of obtaining legal advice—and not simply for insurance brokerage services—or that [the broker] uniquely possessed information that [the insured] did not have.” Id. at *8-9.
New York courts have not established a blanket rule on whether or not disclosure to an insured’s broker waives privilege. Instead, they have applied a fact-specific inquiry that examines the broker’s role relative to the insured and the insured’s counsel. Insureds seeking to assert privilege with respect to these types of communications should anticipate having to make showing along the lines set out by the decisions to date.