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Common Pleas Court Holds That Attorney-Client Privilege Protects Communications Between Co-Defendants Engaged in Joint Defense

A Philadelphia judge has ruled that the attorney-client privilege protects communications between parties in a civil case who are engaged in a joint defense effort. Executive Risk Indemnity, Inc. v. CIGNA Corp., 2006 Phil. Ct. Com. Pl. Lexis 328 (2006).

This case stemmed from a series of federal and state class actions concerning policies in approving and denying health care coverage. The cases were consolidated and placed under the auspices of a panel of federal judges in Southern Florida. The underlying litigation was resolved without trial. Executive Risk thereafter filed a declaratory judgment action seeking a determination that there is no coverage and Cigna counterclaimed seeking indemnification for defense and settlement costs incurred in the underlying actions.

In anticipation of Cigna's claim for coverage, the multiple excess insurers, including Executive Risk, entered into a joint defense agreement in March of 2002. In a meeting with some of the excess insurers, Cigna and a handful of first layer excess insurers agreed to mediation. Executive Risk was not consulted about the mediation and in September of 2004, it expressed its reservation about participating. When the mediation occurred in November of 2004, Executive Risk appeared and was asked to leave. Executive Risk thereafter filed a lawsuit against Cigna for breach of contract and bad faith. In the course of discovery, Cigna sought disclosure of documents evidencing communications between the excess insurance carriers concerning the denial of coverage for the underlying litigation. Executive Risk sought to protect the materials from disclosure based on the attorney-client privilege and the attorney work product doctrine which it alleged arose as a result of the joint defense agreement.

The matter was heard before Judge Bernstein of Philadelphia's Commerce Case management Program. In upholding the rule against disclosure as between the parties to the agreement, Judge Bernstein wrote, "The attorney-client privilege is not waived where the third party shares a common interest in developing a legal strategy against identical claims." In support of the decision, Judge Bernstein cited to the Superior Court's decision in Commonwealth v. Scarfo, 416 Pa. Super. 329, 611 A.2d 242 (1993), a criminal case, in which the court held that the prosecution could not become privy to the substance of conversations held during a joint-defense meeting of murder defendants, despite the fact that one of the defendants eventually agreed to testify for the Commonwealth. However, as a caveat, Judge Bernstein also held that any communication between the parties that occurred after September 2004, when Executive Risk signaled a divergence from other co-defendants by expressing reservations about taking part in mediation, was discoverable.

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