Safe From Prying Eyes

How to protect your insurance claims files from the discovery process.

By Ryan C. Holt

There is no better time for low-cost resolution of a claim than the days, weeks, or months between the date of loss and the filing of a lawsuit. Claims examiners use this period for fact investigation, forming an initial liability analysis, and gathering medical records to determine the extent of a claimant’s damages. If the claimant has not yet retained counsel, the adjuster’s chances of achieving a low-cost resolution significantly increase.

But what if the claimant is unwilling to settle, hires an attorney, and files suit? What happens to the claims notes, mental impressions penned by the adjuster, reserve data, and other file information?  This article will address the discoverability of the claims file as determined by three appellate courts in separate regions of the United States.

Not every jurisdiction has addressed the discoverability of an adjuster’s claims file. For instance, in South Carolina the absence of on-point appellate authority has led the trial courts to analyze discoverability under “anticipation-of-litigation” language found in its civil rules. This article is not intended to analyze application of anticipation-of-litigation language as found in the Federal Rules of Civil Procedure and several comparable state rules. Such language has been interpreted subjectively from jurisdiction to jurisdiction and, sometimes, from judge to judge. This article instead addresses the work product protection and attorney-client privilege as specifically applied to an adjuster’s claims file.

Case One: Pfender v. Torres

The plaintiff in the New Jersey case of Pfender v. Torres was injured when an automobile rolled over her foot. A single carrier insured both the driver and his employer, which owned the vehicle. The claimant retained counsel, who then sent a letter to the employer. The carrier opened a claims file in response to the letter and hired an outside investigator who obtained a statement from the driver. Plaintiff moved to compel the statement, but the trial court denied the motion.

The court cited precedent and refused to recognize a “blanket privilege with respect to communications between an insured and his adjuster.” (Citing State v. Pavin.) The court agreed that communications should be protected when “made to the adjuster for the dominant purpose of the defense of the insured by the attorney and where confidentiality was the reasonable expectation of the insured.” The court recognized a four-pronged inquiry to determine whether the privilege is triggered: (1) direction of defense counsel; (2) whether the insured was seeking legal advice; (3) whether there is pending litigation; and (4) whether the insured and insurer share the same interests.

Applying this inquiry to the facts of the case, the court found that there was no privilege:

The key factor for denying the claim of privilege is this: the statement was not taken at the specific direction of the insured’s attorney. Indeed, the claim had not even been assigned to an attorney for the insured. Moreover, there was no contemporaneous evidence that the insured was seeking legal advice. Litigation was not pending, and at that early point the insurance company might well have had interests other than protection of this insured’s rights.

The court in Pfender also stated, “The attorney-client privilege should be inapplicable unless and until the interrogation of the insured has occurred at the direction of the attorney assigned to the insured.” It held that the statements were not protected as materials prepared in “anticipation of litigation,” but ordered the trial court on remand to review the statements in camera and protect any mental impressions contained in the statements.

Case Two: Zirkelbach Const. Inc. v. Rajan

The Florida case of Zirkelbach Const. Inc. v. Rajan had a different result. The plaintiff was a homeowner who notified his builder of water intrusion throughout his home. The builder’s insurance carrier investigated the homeowner’s complaints for a number of years before denying the claim. Plaintiff sued the builder and moved to compel parts of the insurer’s claims file. After in camera review of the file, the trial court ordered the majority of its contents produced and withheld the remaining portion of the file because it was prepared in anticipation of litigation.

The court noted that most of Florida’s appeals courts had held that “the work product privilege attaches to statements and materials prepared by a party’s investigator or insurer in anticipation of litigation,” but observed that defining “anticipation of litigation” was different from court to court. This case reveals that Florida—or at least the rule applied by the specific district court that heard the appeal—highly favors protection of claims materials. In Rajan, the court reversed the trial court, citing to district precedent that a claims file could constitute work product even in the absence of pending litigation.

Case Three: Askew v. Hardman

The Supreme Court of Utah has refused to adopt a blanket approach to claims files, instead using a case-by-case approach. In Askew v. Hardman, plaintiff-driver was in a collision with a horse. She sued the horse’s owner and moved to compel the claims file of the horse owner’s insurance carrier. The trial court held that the claims file had been prepared in anticipation of litigation and denied the motion. An appeals court reversed, leaning primarily on the fact that an attorney was not involved in preparation of the claims file, which suggested that it was prepared in the “ordinary course of business.” 

The court held that the question of “whether a document prepared by an insurer is prepared in anticipation of litigation is a question of fact to be determined by the trial court on the basis of the evidence before it.” The record revealed a calculated effort by the insurer to make clear its motivation in preparation of claims files. For instance, the carrier’s attorney had written a letter asking adjusters to take statements from insureds and other potential witnesses. The record also included an affidavit from a claims adjuster wherein he indicated that, in his experience, litigation is anticipated any time a claim is made involving incidents with insureds’ livestock. After determining that the trial judge had sufficient evidence to keep the claims file out of discovery, the Supreme Court of Utah reversed the court of appeals.


Guarding against production of a claims file not only takes creativity, but also companywide changes to policy and procedure. A trial court’s decision on discoverability of the claims file is interlocutory and generally not subject to immediate appeal. The effect of any damaging content on the outcome of the case may be addressed at trial in evidentiary motions or when the judgment or verdict is appealed. Therefore, many of the steps to protect claims files must be proactive.

The safest way to secure a claims file is to retain counsel on the date of the loss and use the attorney to conduct all investigation of the claim. But even then, the attorney-client privilege may not be recognized when the attorney acts as a claims adjuster (see 2,022 Ranch LLC v. Superior Court). Of course, claims personnel are wary of the increased costs associated with this route and, not surprisingly for risk managers, employ a risk utility balancing test to use non-attorney investigators and adjusters for as many initial tasks as possible.

While a large number of claims can be quickly investigated, resolved, and closed by the non-attorney adjuster, there is no doubt that the sooner counsel is involved, the easier it is to argue that work product and attorney-client privilege are attached. Of course, this takes a crystal ball-like intuition about which claims will lead to suit. No adjuster wants to hire outside counsel for the small claim that can be resolved with a gift card or free meal. However, every adjuster (and attorney) has a story about the seemingly minor claim that ended in a much larger and unexpected settlement or verdict. When possible, the sooner counsel is retained, the better.

One low-cost solution involves copying counsel on the pre-suit communications first reporting the loss. This approach works more for large clients with third-party administrators who may regularly use one attorney in a particular jurisdiction. This becomes a little more difficult with a carrier whose insureds might face litigation only once in the life of the policy. In those more difficult cases, counsel should be copied as early as possible. If constant communication with counsel is unnecessary, then staying in touch every now and then will at least pepper the claims notes with counsel involvement and help to protect much of the file under the attorney-client privilege or work product doctrine.

Even if considerable time passes before counsel is retained, there are other ways to prepare the claims file to mitigate the damage caused by a file that is compelled in discovery. Authors of claims notes should use caution when drafting summaries, conclusions, and theories. Under the rules of procedure in many jurisdictions, judges should serve as gatekeepers who protect these mental impressions. However, there is never any guarantee of this, and there is always the potential for disagreements on what constitutes such shielded material (see Fed.R.Civ.P. 26(b)(3)(B)). Fact and data-heavy claims notes are, therefore, safer since such information is likely to be discovered anyway.

The danger of a claims file’s potential discoverability is the chilling effect it employs on an examiner’s evaluation of a claim. Unfortunately, if an examiner focuses too intently on who may read the notes in the months or years to come, he may fail to record important elements in the claims analysis. As we all know, in a world where a single adjuster may have hundreds of pending claims, the more he can write down to refresh his memory later (meaning less that he has to recall from the recesses of his already strained mind), the better prepared he will be in evaluating claims.

While some jurisdictions have made great strides in recognizing this potential chilling effect on an adjuster’s work product, many courts continue to err on the side of liberal discovery. As long as this uncertainty remains, the best course of action for claims and litigation players is to be prepared.  

Ryan C. Holt maintains a general insurance defense practice with Sweeny, Wingate & Barrow. He has been a CLM Member since 2012 and can be reached at (803) 256-2233, rch@swblaw.com, www.swblaw.com,

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