NOVEMBER 2018 BAD FAITH CASES: COMMON INTEREST DOCTRINE BARS DISCOVERY OF POST-VERDICT COMMUNICATIONS BETWEEN INSURED’S COUNSEL AND UNDERLYING PLAINTIFF’S COUNSEL IN SUBSEQUENT BAD FAITH ACTION (New Jersey Superior Court Appellate Division) (Unpublished)

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The insured doctor sued his medical malpractice carrier in bad faith for not settling a malpractice case within policy limits. The eventual verdict far exceeded policy limits. The doctor’s counsel and patient’s counsel communicated after the excess verdict, and the injured patient intervened in the bad faith action.

The insurer issued a subpoena on the patient’s counsel, seeking any post-verdict communications between them and any documents they exchanged post-verdict. They agreed pre-verdict communications and documents were discoverable.

The trial court ruled there was no common interest privilege and ordered compliance. The appellate court reversed.

The court recognized that communications to third parties are usually outside the attorney client privilege, but courts have fashioned a common sense exception when those third parties share the client’s interest. This “common interest doctrine permits ‘the free flow of information between or among counsel who represent clients with a commonality of purpose,’ and ‘offers all parties to the exchange the real possibility for better representation by making more information available to craft a position and inform decision-making in anticipation of or in the course of litigation.’”

The court laid out the common interest test: “(1) the parties must share a common purpose, though it is not necessary for their interests to be identical: (2) it is ‘not necessary for actual litigation to have [been] commenced’; (3) the common interest may arise during civil proceedings; and (4) there is no requirement for ‘the common interest [to] be legal rather than purely commercial.’”

The common interest doctrine applied here because “[t]he communications were made in the course of anticipated and actual litigation and [the doctor and patient] share the common purpose of seeking an order for [the insurer] to pay the outstanding [excess verdict]. The disclosures were intended to be confidential and were not made to a third party ‘in a way inconsistent with keeping it from an adversary.’”

The court refused the insurer’s effort to pierce the privilege, on the basis the information was needed to defend the bad faith case. It found the relevant issue was pre-verdict settlement discussions, and the parties agreed to produce those communications; however, post-verdict discussions were not relevant to that issue and need not be produced.

Finally, simply brining the bad faith action did not waive the privilege.
Date of Decision: October 26, 2018

Dipaolo v. New Jersey Physicians United Reciprocal Exchange, Superior Court of New Jersey Appellate Division DOCKET NO. A-3097-17T2, 2018 N.J. Super. Unpub. LEXIS 2369 (New Jersey App. Div. Oct. 26, 2018) (Ostrer and Currier, JJ.)

 

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