In Bank Of America, N.A. v. Superior Court, 212 Cal.App.4th 1076 (2013), the Court of Appeal held a tripartite attorney-client relationship exists between an insured, its insurer, and counsel retained by the insurer to prosecute an action on behalf of the insured pursuant to a title insurance policy and that confidential communications among them are protected by a jointly held attorney-client privilege. In doing so, the Court rejected arguments that the tripartite relationship does not arise when counsel is retained to prosecute, rather than defend, a suit, or when an insurer retains counsel subject to a reservation of rights.
In this case, Fidelity was responsible for a lender’s title insurance policy issued to Bank of America. Fidelity retained the Gilbert law firm to prosecute a lawsuit on Bank of America’s behalf for equitable subrogation, injunctive relief, declaratory relief, and fraud against Pacific City Bank. Pacific City Bank served subpoenas requesting production of documents, including communications between the Gilbert law firm and Fidelity regarding the litigation. Bank of America moved to quash, asserting the attorney-client privilege and the attorney work product doctrine. The trial court denied the motions to quash, ruling that there was no attorney-client relationship between the Gilbert law firm and Fidelity because Gilbert was retained to prosecute, rather than defend, a lawsuit.
Bank of America filed a petition for writ of mandate. The Court of Appeal found the trial court abused its discretion in denying Bank of America’s motions to quash.
Specifically, the Court of Appeal found that Fidelity’s retention and payment of counsel to represent Bank of America in the underlying action established a tripartite attorney-client relationship and that confidential communications between Fidelity and counsel were therefore protected from disclosure by the attorney-client privilege.
The Court of Appeal rejected the trial court's distinction between counsel retained to prosecute a suit and counsel retained to defend a suit. Noting that the title insurance policy specifically contemplated the insurer not only defending claims against the insured but also prosecuting actions to prevent or reduce loss or damage to the insured, the Court of Appeal found “no logical reason why a tripartite attorney-client relationship should exist in one case but not the other.”
The Court of Appeal also rejected Pacific City Bank’s argument the tripartite attorney-client relationship does not exist when counsel is retained under a reservation of rights. The Court explained that not every reservation of rights creates a conflict entitling an insured to independent counsel. The Court noted that it did not appear that Bank of America was entitled to such counsel and that counsel did not appear to be acting as independent counsel. The Court further noted that even where independent counsel is in place, California Civil Code §2860 requires the insured and counsel to disclose information concerning the action to the insurer and that such disclosure is not a waiver of the attorney-client privilege.
In sum, this decision reaffirms that the attorney-client privilege and attorney work product doctrine protects communications between the insured, the insurer and counsel retained to represent the insured, in the context of title insurance.