The Common Interest Rule – O’Boyle v. Borough of Longport

Most large, commercial insureds obtain coverage from a “market” of insurers because the amount of coverage being sought is too much for a single insurer to provide.  The coverage is often broken down into several “layers” of coverage.  Typically, there will be a “primary” layer, above which several excess layers may exist.  Each insurer agrees to write a certain percentage of the coverage provided in a particular layer and some insurers may participate in multiple layers.

When a claim is received, the insurers will work together as a single “market” to adjust the claim.  While working together, it is not uncommon for the insurers to retain their own counsel to address any coverage issues that may arise.  An issue that often arises is whether any materials created by an attorney are protected by the attorney-client privilege if they have been shared with other attorneys or other insurers that are not represented by the attorney.

Generally, when information is shared with third parties outside of the attorney-client relationship any privilege that information may have is lost.  However, an argument that is often raised is that the materials are protected from disclosure by the common-interest rule because all the parties that have received the materials share a common interest.

In O’Boyle v. Borough of Longport, 2014 WL 3557874 (N.J. July 21, 2014), the New Jersey Supreme Court addressed the parameters of the common-interest rule as a matter of first impression.  While not an insurance-related decision, the court’s holding should apply with equal force in the insurance context.

Given the significance of the issue before the court, amicus briefs were filed by the New Jersey State Bar Association, the New Jersey Defense Association, the Association of Criminal Defense Lawyers of New Jersey, the National Association of Criminal Defense Lawyers, and DRI-The Voice of the Defense Bar.

In O’Boyle, the plaintiff, Martin E. O’Boyle, made a request pursuant to the Open Public Records Act (“OPRA”) for copies of documents exchanged between the municipal attorney for the Borough of Longport and a private attorney.  Mr. O’Boyle had made numerous OPRA requests and filed several complaints against the Borough.

Mr. O’Brien filed two separate lawsuits against a former planning and zoning board member and two Borough residents.  The private attorney who had been retained by the defendants in the two actions approached the municipal attorney about cooperating in the then current and anticipated litigations filed by Mr. O’Boyle.  He put together a joint strategy memorandum and a collection of documents that he sent to the municipal attorney.  The documents ultimately were returned to the private attorney by the municipal attorney.

Mr. O’Boyle filed an OPRA request, seeking copies of the documents exchanged between the private attorney and the municipal attorney.  The Borough agreed to produce all but six of the documents, claiming that the six documents were privileged.  Mr. O’Boyle subsequently sued the Borough, seeking the production of the six documents.

The court began its analysis by setting forth some well established rules of law:

Confidential communications between a client and his attorney in the course of a professional relationship are privileged.   However, the privilege does not attach to a communication knowingly made within the hearing of any person whose presence nullifies the privilege.  In other words, the privilege protects only those communications expected or intended to be confidential.

The privilege is not restricted to legal advice.  The privilege also extends to consultations with third parties whose presence and advice are necessary to the legal representation.

Id. at *6.    The court then went on to note that over the years the attorney-client privilege has been broadened to cover various relationships “to permit an exchange of confidential attorney-client communications beyond the narrow confines of the attorney and client and a third party retained to assist in the defense while preserving the privileged character of the disclosed communication.”  Id. at *7.  The common-interest rule, which initially was adopted in connection with criminal matters, is an example of the broadening of the attorney-client privilege.

While the New Jersey Supreme Court has never had occasion to consider application of the rule, the Appellate Division did in LaPorta v. Gloucester County Board of Chosen Freeholders, 340 N.J. Super. 254, 774 A.2d 545 (App. Div. 2001).  There, the court held:

The common interest exception may be asserted with respect to communications among counsel for different parties if “(1) the disclosure is made due to actual or anticipated litigation; (2) for the purposes of furthering a common interest; and (3) the disclosure is made in a manner not inconsistent with maintaining confidentiality against adverse parties.”  It is not necessary for actual litigation to have commenced at the time of the transmittal of information for the privilege to be applicable.  Indeed, communications need only be among counsel for the clients.  Communications between counsel for a party and an individual representative of a party with a common interest are also protected.

LaPorta, 340 N.J. Super. at 262 (citations omitted).

The New Jersey Supreme Court adopted the common interest rule as articulated by the Appellate Division in LaPorta.  The court made it clear that the common interest rule applies both “in the context of sharing confidential communications between an attorney and client with third parties and in the context of sharing work product with third parties.”  O’Boyle, 2014 WL 3557874 at *10.  Citing LaPorte, the court summarized the rule as follows:

The common interest exception to waiver of confidential attorney-client communications or work product due to disclosure to third parties applies to communications between attorneys for different parties if the disclosure is made due to actual or anticipated litigation for the purposes of furthering a common interest, and the disclosure is made in a manner to preserve the confidentiality of the disclosed material and to prevent disclosure to third parties.  The disclosure may occur prior to the commencement of litigation.  Communications between counsel for one party and a representative of another party with a common interest will preserve the privileged nature of the disclosed information.  Moreover, the common interest need not be identical; a common purpose will suffice.

Id. at *15 (citations omitted).  The court went on to note:

Common purpose extends to sharing of trial preparation efforts between attorneys against a common adversary.  The attorneys need not be involved in the same litigated matter or anticipated matter.  Moreover, the rule should be broad enough to encompass the situation in which certain disclosures of privileged material are made to another attorney who shares a common purpose, for the limited purpose of considering whether he and his client should participate in a common interest arrangement.

Id.

Thus, based on the holding in O’Boyle, the common interest rule will protect communications among insurers and their counsel as long as the communications: (1) are made due to actual or anticipated litigation (2) for the purposes of furthering a common interest, and (3) the disclosure is made in a manner to preserve the confidentiality of the disclosed material and to prevent disclosure to third parties.  Of course, determining when litigation is anticipated may not always be clear cut.  In the context of the adjustment of a loss, litigation will arguably only be anticipated when significant coverage issues have arisen.  In addition, only truly privileged communications will be protected.  Communications concerning the day-to-day adjustment of a loss typically will not be protected.

 

© William D. Wilson and NJInsuranceBlog.com, 2014.  Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.  Excerpts and links may be used, provided that full and clear credit is given to William D. Wilson or NJInsuranceBlog.com with appropriate and specific direction to the original content.