Recently, the California Court of Appeal decided County of Los Angeles Board of Supervisors v. Superior Court, 235 Cal. App. 4th 1154 (2015), a case considering whether the Los Angeles County Sheriff's Department could be required to produce legal defense bills in response to a California Public Records Act request. While not an insurance case, the case could have implications for a common practice in the insurance context: submitting defense bills to the insurer.
The Board of Supervisors court held that attorney billing statements are “confidential communications” within the meaning of California Evidence Code Section 952, and therefore their production could not be compelled. Significantly, the court held that the LA County Sheriff could not be required to simply redact portions of the attorney time descriptions that reflected attorney opinions or advice. Indeed, the court concluded that a communication between attorney and client, arising in the course of representation for which the client sought legal advice, need not include “legal opinion or advice” at all in order to qualify as a privileged communication. Because the bills were, by definition, an attorney-client communication, they were privileged in their entirety.
This new ruling presents a conundrum for California insureds. An insurance company that is footing the bill for the defense of a lawsuit will of course demand to see the bills, and as a practical matter it is unrealistic to expect that the insurer will pay them without being able to review the descriptions. In situations where the insurer is defending without a reservation of rights, the insured's and the insurer's interests are completely aligned and the two are effectively joint clients. But by providing the defense bills to an insurer who has reserved its right to deny coverage – or who has not yet taken a coverage position at all – is the insured waiving privilege? If the plaintiff in the underlying lawsuit demands that the insured produce “all communications with its insurer,” could the insured then be required to produce its legal bills to plaintiff?