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In re Schipp

October 5, 2006



General Motors issued three subpoenas duces tecum to obtain documents prepared by Ann Kennedy's insurance carrier during the investigation of the accident at issue in this action. Specifically, GM sought to discover a recorded statement of Kennedy taken on July 26, 2002; a summary of that recorded statement prepared on July 27, 2002; an investigation report of the insurance adjuster prepared on August 13, 2002; and witness statements obtained by Kennedy's insurance carrier. Kennedy has objected. GM has moved to compel. GM asks for an award of the reasonable expenses incurred in making this motion, including reasonable attorney's fees, pursuant to Rule 37(a)(4) of the Federal Rules of Civil Procedure.


Ann Kennedy was driving a 2001 Chevrolet Silverado on Interstate Highway 40 in Crittenden County, Arkansas, when her vehicle crossed the median and struck an oncoming 2000 Toyota Corolla driven by Jerome Neufelder. The collision caused either the Silverado or the Corolla to collide with a Plymouth Voyager van owned by Kenneth and Jocelyn Bracy. Kenneth and Jocelyn Bracy were injured. Neufelder was killed.


Kennedy gave a statement to her insurer on July 26, 2002, two days after the accident. She argues that this statement is protected by the attorney-client privilege. In diversity cases, federal courts follow state law on questions of privilege. Baker v. General Motors Corp., 209 F.3d 1051, 1053 (8th Cir. 2000); see also Fed. R. Evid. 501. Arkansas has not ruled on whether a communication between an insurer and its insured may be protected by the attorney-client privilege. Many states -- and what appears to be a majority -- have held, depending on varying factors, that such a communication may be protected by the privilege. See, e.g., State Farm Fire and Cas. Co. v. Superior Court, 265 Cal. Rptr. 372, 375 (Cal Ct. App. 1989); Bellman v. District Court, 531 P.2d 632, 634 (Colo. 1975) ("[W]e hold that the insurance investigator who took the petitioner's statement was, in effect, an agent of the attorneys for the purpose of acquiring and transmitting this information to them. As such, the communication falls within the attorney-client relationship and is therefore privileged."); Staton v. Allied Chain Link Fence Co., 418 So. 2d 404, 405-06 (Fla. Dist. Ct. App. 1982); Pietro v. Marriott Senior Living Servs. Inc., 810 N.E.2d 217, 226 (Ill. App. Ct. 2004) (citing People v. Ryan, 197 N.E.2d 15 (Ill. 1964)); Richey v. Chappell, 594 N.E.2d 443, 446-47 (Ind. 1992); Asbury v. Beerbower, 589 S.W.2d 216, 217 (Ky. 1979) ("When a person has had an automobile accident that may result in litigation he would normally confide in counsel. If, however, he is insured, he has paid an insurance company to exercise that choice for him. He should not be penalized for his prudence in that respect."); Cutchin v. State, 792 A.2d 359, 366 (Md. Ct. Spec. App. 2002); Grewell v. State Farm Mut. Auto. Ins. Co., 102 S.W.3d 33, 36-37 (Mo. 2003) (citing State ex rel. Cain v. Barker, 540 S.W.2d 50, 55 (Mo. 1976) ("[B]y the terms of the common liability insurance contract, the insured effectively delegates to the insurer the selection of an attorney and the conduct of the defense of any civil litigation. . . . We believe that the same salutary reasons for the privilege as exist when the communication is directly between the client and attorney . . . .")); Brakhage v. Graff, 206 N.W.2d 45, 47-48 (Neb. 1973); Pfender v. Torres, 765 A.2d 208, 213 (N.J. Super. Ct. App. Div. 2001); Kandel v. Tocher, 256 N.Y.S.2d 898, 902 (N.Y. App. Div. 1965) ("[A]utomobile liability insurance, just because it is litigation insurance, is an institutionalized substitute for the individualized attorney-client relationship in litigation or contemplated litigation. In appropriate and parallel contexts it is entitled to similar protection."); In re Klemann, 5 N.E.2d 492, 495 (Ohio 1936); Heidebrink v. Moriwaki, 706 P.2d 212, 217 (Wash. 1985) (holding that statements from an insured to his insurer are protected by the work-product doctrine); State ex rel. Med. Assurance of W. Va., Inc. v. Recht, 583 S.E.2d 80, 88 (W. Va. 2003); Thomas v. Harrison, 634 P.2d 328, 334 (Wyo. 1981) (holding that a statement to a medical-malpractice liability insurer was privileged).

The courts have looked at a number of factors to determine whether a statement given by an insured to his insurer is privileged. Those factors include: 1) whether the insurance contract obligates the insurance company to defend claims, Pietro, 810 N.E.2d at 226; Richey, 594 N.E.2d at 446; Grewell, 102 S.W.3d at 37; Brakhage, 206 N.W.2d at 48; 2) whether the relationship between the insurer and the attorney exists at the time of the communication between the insurer and the insured, Kay Labs., Inc. v. District Court, 653 P.2d 721, 723 (Colo. 1982); 3) whether the insurer is advised of the confidential information at the direction of an attorney, Pfender, 765 A.2d at 213; Recht, 583 S.E.2d at 88; and 4) whether the communication is made for the dominant purpose of litigation, Cutchin, 792 A.2d at 366; Pfender, 765 A.2d at 213.

A number of jurisdictions have held that statements between an insured and insurer are not privileged. See, e.g., Phillips v. Dallas Carriers Corp., 133 F.R.D. 475, 477-80 (predicting how North Carolina courts would decide this issue); Langdon v. Champion, 752 P.2d 999, 1002-04 (Alaska 1988) ("[T]he attorney-client privilege does not extend to statements made by an insured to his insurer . . . ."); Longs Drug Stores v. Howe, 657 P.2d 412, 415-16 (Ariz. 1983) ("[S]tatements taken from an insured by insurance investigators working on a case in anticipation of litigation are not communications to counsel and are not within the attorney-client privilege."); Conley v. Graybeal, 315 A.2d 609, 610 (Del. Super. Ct. 1974); DiCenzo v. Izawa, 723 P.2d 171, 176-77 (Haw. 1986) ("'The insurance carrier has the right to review and consider the statement submitted by the insured for any legitimate purpose connected with [its] business . . . . The use of the statement for a purpose adverse to the interest of the insured is certainly inconsistent with the claim of privilege on his behalf.'" (quoting Butler v. Doyle, 544 P.2d 204, 207 (Ariz. 1975))); Alseike v. Miller, 412 P.2d 1007, 1017 (Kan. 1966); Jacobi v. Podevels, 127 N.W.2d 73, 76 (Wis. 1964) (overruling previous Wisconsin case law).

Although the Supreme Court of Arkansas has not decided this issue, its decisions make clear two relevant aspects of the attorney-client privilege in Arkansas. First, "[t]he burden of showing that a privilege applies is upon the party asserting it." Kinkhead v. Union Nat'l Bank, 51 Ark. App. 4, 11, 907 S.W.2d 154, 158 (1995) (citing Shankle v. State, 309 Ark. 40, 827 S.W.2d 642 (1992)). Thus, the burden is on Kennedy to show that her statement is privileged. Second, "[t]he purpose of the attorney-client privilege is to promote 'full and frank communication' between attorneys and clients, and that, in turn, promotes the observance of law and administration of justice." Holt v. McCastlain, 357 Ark. 455, 464, 182 S.W.3d 112, 118 (2004). It should be noted that other states have cited the same purpose in recognizing a statement between an insured and an insurer as protected by the attorney-client privilege. See, e.g., Richey, 594 N.E.2d at 446 ("Uncertainty about whether the insured's statements are discoverable . . . undermines what should be a cooperative relationship among the insured, insurer and attorney. An insured's relationship to the insurance company requires full disclosure by the insured without fear that the statement may be later obtained by the claimant."); Kandel, 256 N.Y.S.2d at 902 ("It is of the greatest importance that an insured be encouraged to make complete and candid disclosure to his liability insurer.").

While no published opinion of the Arkansas appellate courts is on point, two cases suggest what the Supreme Court of Arkansas might hold. See generally Holt, 357 Ark. 455, 182 S.W.3d 112; Courteau v. St. Paul Fire & Marine Ins. Co., 307 Ark. 513, 821 S.W.2d 45 (1991). In Courteau, a hospital's insurance carrier hired an attorney to investigate the circumstances surrounding a potential claim. 307 Ark. at 514, 821 S.W.2d at 46. The attorney then "immediately requested statements from employees involved who were potential defendants." Id. The Supreme Court of Arkansas held that the hospital employees and physicians were "clients" of the hospital's attorney, and the communications between them were therefore privileged in spite of the fact that some of those communications were "relayed through corporate channels." 307 Ark. at 516, 821 S.W.2d at 47.

Perhaps more illuminating is Holt, where an automobile accident caused five deaths, the insurance carrier hired attorneys to represent the insured, and the attorneys in turn hired an expert to prepare an accident reconstruction report. 357 Ark. at 458, 182 S.W.3d at 114. A prosecuting attorney then issued a subpoena duces tecum to the accident reconstructionist to obtain a complete copy of the report. Id. at 459, 182 S.W.3d at 114. The court held, however, that the report, as well as all communications between the attorneys, the reconstructionist, and the insured, were "protected by attorney-client privilege . . . ." Id. at 458-64, 182 S.W.3d at 114-18. In reaching its conclusion, the court applied Arkansas Rule of Evidence 502, which states in pertinent part:

(a) Definitions. As used in this rule:

(2) A representative of the client is one having authority to obtain professional legal services, or to act on advice rendered pursuant thereto, on behalf of the client.

(4) A "representative of the lawyer" is one employed by the lawyer to assist the lawyer in the rendition of professional legal services.

(5) A communication is "confidential" if not intended to be disclosed to third persons other than those to whom disclosure is made in furtherance of the rendition of professional legal services to the client or those ...

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