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| Erin Ronstadt

Insurers Cannot Hide Behind Legal Counsel – the “Fiduciary Exception” to Attorney-Client Privilege

When you consult with an attorney, your conversations with that attorney are protected as privileged, and there is little exception to this rule. While this protection may be important for the average person, insurance companies have been afforded this protection in the ERISA context when it came to communications with their legal counsel. Under the guise of this privilege, insurance companies have been able to keep important documents from plan beneficiaries that should be available under ERISA.

Thanks to a recent Ninth Circuit case, insurance companies in ERISA cases can no longer assert the attorney-client privilege for documents between themselves and legal counsel. In Stephan v. Unum, 697 F.3d 917 (9th Cir. 2012), the Court held that the fiduciary exception applied to the attorney-client privilege when it came to insurance companies. This means that when an insurance company is acting as a fiduciary by administering plan benefits under ERISA, its foremost duties and “real client” is the plan beneficiary; therefore, beneficiaries should be entitled to all information regarding administration of the plan.  Read more about the case here.

Moving forward, ERISA plaintiffs can expect to ask for – and receive – communications between insurers and their counsel. From a litigation perspective, this is great news for plaintiffs with ERISA cases in the Ninth Circuit.  Oftentimes, the best evidence of conflict is found within the insurers’ internal communications, and now, insurers can no longer hide adversarial claims handling and bias by simply construing communications as “attorney-client privilege.” Given the difficulties ERISA plaintiffs face with the standard of review, this is a welcome change and advantage to litigation, especially when one remembers the original purpose of ERISA: to protect the best interests of claimants.

If you have an ERISA litigation question, please contact our Firm for assistance.

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