Heidebrink v. Moriwaki

Goodloe, J.

(dissenting) — I would affirm the Court of Appeals decision finding the statement of the insured to his *403 insurance company is not protected by either the attorney-client privilege, RCW 5.60.060(2), or the work product immunity rule, CR 26(b)(3). The majority does not address the attorney-client privilege issue, limiting its discussion to the work product immunity rule issue. Because of my determination that neither applies, it is necessary to address both issues.

Attorney-Client Privilege

The attorney-client privilege provides:

An attorney or counselor shall not, without the consent of his client, be examined as to any communication made by the client to him, or his advice given thereon in the course of professional employment.

RCW 5.60.060(2).

Petitioner Moriwaki urges this court to extend the attorney-client privilege to statements made by the insured to the insurance company when the insurance policy requires the insurance company to defend and retain counsel and requires the insured to cooperate. Respondent Heidebrink argues that the privilege should not be extended and is not applicable.

This issue is one of first impression in the state. I reject Moriwaki's position that the ruling of Cully v. Northern Pac. Ry., 35 Wash. 241 , 77 P. 202 (1904) should apply here. In Cully , the court held that accident reports made by defendant's employees to defendant company were not obtainable by the plaintiff. No insurer was involved. The court's rationale that "' [communications to any person whose intervention is necessary to secure and facilitate the communication between attorney and client are privileged", Cully , at 247, is no longer persuasive in light of the evolution of the attorney-client privilege and the current rules for broad pretrial discovery. See Bushman v. New Holland Div. of Sperry Rand Corp., 83 Wn.2d 429, 434 , 518 P.2d 1078 (1974).

Although no attorney-client privilege case involving statements made by an insured exists in Washington, the *404 court has outlined the general parameters of the attorney-client privilege. The court recently stated that "the existence of an attorney-client relationship turns largely on the client's subjective belief that it exists." In re McGlothlen, 99 Wn.2d 515, 522 , 663 P.2d 1330 (1983). "Like most privileges, the attorney-client privilege has its basis in the confidential nature of the communication and seeks to foster a relationship deemed socially desirable." Coburn v. Seda, 101 Wn.2d 270, 274 , 677 P.2d 173 (1984).

The "central purpose" of the privilege "is to encourage free and open attorney-client communication by assuring the client that his communications will be neither directly nor indirectly disclosed to others." State v. Chervenell, 99 Wn.2d 309, 316 , 662 P.2d 836 (1983); see Coburn, at 274. However, because the privilege excludes otherwise material and relevant evidence, contrary to the philosophy of full disclosure, the privilege is not absolute but "must be strictly limited to the purpose for which it exists." Dike v. Dike, 75 Wn.2d 1, 11 , 448 P.2d 490 (1968); see Chervenell, at 316.

Courts in other jurisdictions have addressed application of the attorney-client privilege to statements made by the insured to his insurance company. The courts are split in their characterization of the purpose of the statements, and their characterization determines whether the statement is held privileged or not privileged. The Court of Appeals decision gives a balanced presentation of the two opposing views. Heidebrink v. Moriwaki, 38 Wn. App. 388, 390-94 , 685 P.2d 1109 (1984).

Jurisdictions holding the insured's statement is privileged take the position that because the insured through his insurance contract delegated the conduct of the defense to the insurance company and because the insured is not represented by counsel of his own choosing at the time the statement is made or later during the litigation, "the insured may properly assume that the communication is made to the insurer as an agent for the dominant purpose of transmitting it to an attorney for the protection of the *405 interests of the insured." People v. Ryan, 30 Ill. 2d 456, 461 , 197 N.E.2d 15 (1964); Bellman v. District Court, 187 Colo. 350, 352 , 531 P.2d 632 (1975). Bellman was subsequently modified by Kay Laboratories, Inc. v. District Court, 653 P.2d 721, 723 (Colo. 1982), which requires before the privilege will attach a relationship between the attorney and the insurer to specific claims having already arisen. Some jurisdictions provide protection to the insured's statement based solely on the insurance policy's provisions, without requiring an existing attorney-client relationship. Hollien v. Kaye, 194 Misc. 821, 825 , 87 N.Y.S.2d 782 (1949); State ex rel. Cain v. Barker, 540 S.W.2d 50, 56 (Mo. 1976) (and cases cited therein).

These jurisdictions that view the statement as privileged recognize the insurance company as a necessary intermediary between the insured and the attorney retained later or as an agent of the attorney retained later. As explained in Hollien ,

in case of accident, the owner of a motor vehicle is bound by the terms of his contract, to make a full and prompt report to his carrier. The assured should be encouraged to, rather than discouraged from, making a full and complete disclosure to his insurance carrier. Let us suppose that an assured does so and furnishes his statement to a lay representative of his carrier, before its general counsel has ever heard of the case and could not yet be said to be the attorney for the assured; or before some other attorney is engaged to represent the assured, and that hence, it might be held that the statement may not come either within the letter or the spirit of section 353 of the Civil Practice Act. Let us suppose further that the statement thus given by the assured to his carrier, in compliance with his contract, and on the assumption that he is furnishing the statement to the agency which he has paid to protect him, reveals the commission of acts which constitute the crime of culpable negligence. Should the assured be prevented from unbosoming himself of the true facts concerning an accident to the very entity, which, either through voluntary choice or under legal compulsion, he has paid to protect his interests in the event of an accident, through fear that his statement could be reached *406 by the person who will instigate against him either civil or criminal proceedings or both? Or should fear of self-incrimination or fear of a recovery beyond policy limits subjugate the assured to the point of concealing the true facts to the very one whom he has paid in advance to protect him in just such a contingency.

It seems to this court that it would be contrary to sound public policy to permit the discovery and inspection of statements of a defendant or a prospective defendant made to his own insurance carrier, whether made before or after suit is instituted or to its lay representatives, either before or after an attorney has been formally selected by the carrier to represent its assured.

Hollien , at 825; see Barker, at 56-57.

Jurisdictions holding the insured's statement is not privileged take the position that because the insurance company may use the statement to the insured's disadvantage then the statement is not the same as one made between attorney and client.

The insurance carrier is more than a mere agent transmitting the policyholder's statement to the attorney hired to defend the insured.

The insurance carrier has the right to review and consider the statement submitted by the insured for any legitimate purpose connected with the business of the company. Coverage, cooperation, and renewal are a few of the matters, in addition to consideration of the potential claim, for which the insurer may use the statement of the insured. The use of the statement for a purpose adverse to the interest of the insured is certainly inconsistent with the claim of privilege upon his behalf.

Butler v. Doyle, 112 Ariz. 522, 525 , 544 P.2d 204 (1975); see Jacobi v. Podevels, 23 Wis. 2d 152, 156 , 127 N.W.2d 73 (1964).

These jurisdictions are also influenced by the need for full disclosure of the truth. As explained by the Jacobi court:

One of the fundamental policies of our law, and one which dominates in the absence of a special policy arising in particular types of situations, is that the judicial system and rules of procedure should provide litigants with *407 full access to all reasonable means of determining the truth. Secrecy of communication between one person and his attorney is one of the exceptions. It is based upon recognition of the value of legal advice and assistance based upon full information of the facts and the corollary that full disclosure to counsel will often be unlikely if there is fear that others will be able to compel a breach of the confidence.

Dean Wigmore has written:

"Nevertheless, the privilege [attorney-client] remains an exception to the general duty to disclose. ... It is worth preserving for the sake of a general policy, but is nonetheless an obstacle to the investigation of the truth. It ought to be strictly confined within the narrowest possible limits consistent with the logic of its principle." 4

Jacobi, at 156-57.

Consistent with Dean Wigmore's evaluation is this court's determination that the attorney-client privilege must be strictly limited to the purpose for which it exists because the privilege is contrary to the philosophy of full disclosure of material and relevant evidence. Dike , at 11.

Because of the rationale for and limitations on the applicability of the attorney-client privilege, I believe the Court of Appeals reached the proper balance by not adopting in its entirety either position of the other jurisdictions, but rather focusing on "the intent of the client at the time the communication is made." Heidebrink , at 394. For the attorney-client privilege to apply, the client must believe that he is consulting a lawyer, either directly or through an agent, in his legal capacity and is seeking professional legal advice. State v. Dorman, 30 Wn. App. 351, 359 , 633 P.2d 1340 (1981), citing E. Cleary, McCormick on Evidence § 88 (2d ed. 1972).

Applying this criterion to the facts presented, I would hold that Moriwaki did not have this intent. Nothing in the record indicates that Moriwaki believed he was consulting an attorney or an attorney's agent for the purpose of *408 obtaining legal advice. Moriwaki merely spoke to a claims adjuster on the phone when the claims adjuster called him. Moriwaki had not initiated the contact and no litigation was pending. Also, at the time the statement was taken, the insurance company conceivably had interests other than protecting the rights of Moriwaki. The statement which was taken could be used by the insurance company for any business purpose, including a purpose that would have been adverse to Moriwaki's interests.

The attorney-client privilege should not be extended summarily to statements made by an insured to his insurance company. If the insured makes the statement with the intent that he is consulting a lawyer for legal advice and his statement cannot be used against his interests by the insurance company (because the company is only acting as an agent for the retained attorney), then the attorney-client privilege could be properly invoked. However, that situation is not presented in this case. I would affirm the Court of Appeals determination that Moriwaki's statement to the claims adjuster was not privileged.

Work Product Immunity Rule

CR 26(b) provides, in pertinent part:

(b) . . . Unless otherwise limited by order of the court in accordance with these rules, the scope of discovery is as follows:

(3) Trial Preparation: Materials . . . [A] party may obtain discovery of documents and tangible things otherwise discoverable . . . and prepared in anticipation of litigation or for trial by or for another party or by or for that other party's representative (including his attorney, consultant, surety, indemnitor, insurer, or agent) only upon a showing that the party seeking discovery has substantial need of the materials in the preparation of his case and that he is unable without undue hardship to obtain the substantial equivalent of the materials by other means. In ordering discovery of such materials when the required showing has been made, the court shall protect against disclosure of the mental impressions, conclusions, opinions, or legal theories of an attor *409 ney or other representative of a party concerning the litigation.

The threshold question that must be addressed to determine whether a statement made by the insured to the insurance company is protected by the rule is whether the document was "prepared in anticipation of litigation". CR 26(b)(3). If not prepared in anticipation of litigation, then the document is discoverable. If prepared in anticipation of litigation, then the document is not discoverable, unless the party seeking it can show substantial need and no substantial equivalent for the document.

Moriwaki argued and the trial court found that Mori-waki's statement was taken in anticipation of litigation and that there had not been a showing of substantial need and no substantial equivalent. Heidebrink argued and the Court of Appeals found that the statement was not taken in the anticipation of litigation but rather it was taken in the ordinary course of business. Thus, the Court of Appeals held the statement was discoverable. The majority reverses the Court of Appeals finding the statement is not discoverable.

I agree with the majority that there is no distinction between attorney and nonattorney work product. Majority opinion, at 396. A statement taken by an insurer is explicitly covered by the rule, subject to the requirement that the statement is being taken in anticipation of litigation. I also agree with the majority's decision to find inapplicable those cases determined before the amendment to CR 26(b)(3) and those cases involving statements or reports from persons other than the insured. Majority opinion, at 396-99. I agree with the majority that two cases from other jurisdictions are on point.

In Fireman's Fund Ins. Co. v. McAlpine, 120 R.I. 744 , 391 A.2d 84 (1978), the court found statements by insureds to their insurance companies were prepared in "anticipation of litigation" by adopting the following rationale:

In our litigious society, when an insured reports to his insurer that he has been involved in an incident involving *410 another person, the insurer can reasonably anticipate that some action will be taken by the other party. The seeds of prospective litigation have been sown, and the prudent party, anticipating this fact, will begin to prepare his case. Although a claim may be settled short of the instigation of legal action, there is an ever-present possibility of a claim's ending in litigation. The recognition of this possibility provides, in any given case, the impetus for the insurer to garner information regarding the circumstances of a claim.

(Citation omitted.) Fireman's Fund, at 753-54.

The opposite conclusion was reached in Henry Enters., Inc. v. Smith, 225 Kan. 615 , 592 P.2d 915 (1979), where the court found a statement by an insured to his insurance company was not prepared in anticipation of litigation and therefore was discoverable. The court stated:

We are not unmindful that, insofar as insurance companies, and particularly those in the casualty field, are concerned, litigation is a very real potential; it is ever on the horizon. But the fact remains that the investigation of potential claims is an integral part of the insuror's business. Investigations are made regularly and in the ordinary course of business. They are necessary if the companies are to make intelligent dispositions of claims. They are necessary also if a carrier is to perform adequately the duties and obligations towards its insureds which are imposed upon it by law. Also, most claims are settled, one way or another, without resort to the courts.

It is apparent to us, and we hold, that the initial investigation of a potential claim, made by an insurance company prior to the commencement of litigation, and not requested by or made under the guidance of counsel, is made in the ordinary course of business of the insurance company, and not "in anticipation of litigation or for trial" . . .

Henry Enters., at 623.

The majority states its belief that it is inappropriate to subscribe to either rationale entirely but then it does subscribe to one rationale. It finds that because of the insurance contract requirement for representation, the statements of the insured to the insurance company are *411 protected by CR 26(b)(3). Majority opinion, at 400. The majority then makes a very broad holding that "a statement made by an insured to an insurer following an automobile accident is protected from discovery under CR 26(b)(3)." Majority opinion, at 401. The majority to reach these conclusions has, without acknowledging it, adopted the rationale of the Fireman's Fund case.

It is incorrect to state that " [i]f the statement were made directly to the selected attorney, it would obviously have been made in anticipation of litigation." Majority opinion, at 400. The determination of whether a statement is made in anticipation of litigation involves more than the mere question of who is the recipient.

I believe it is incorrect to hold that the initial inquiry or involvement by an insurance company regarding the possibility of a potential claim involving one of its insureds is made in anticipation of litigation. The initial inquiry is a gathering of facts from which the insurance company determines whether there may be a claim and if so whether the claim is covered by the insurance contract. I would hold the initial inquiry is always made in the ordinary course of the insurer's business. Only after the initial discussion of the claim can the insured and the insurance company determine whether the incident is covered and whether litigation can be anticipated. If litigation is anticipated, subsequent statements made by the insured would be protected. This determination accords broad and liberal treatment to the discovery rules and achieves their goal of ensuring mutual knowledge of all relevant facts. Hickman v. Taylor, 329 U.S. 495, 501, 507 , 91 L. Ed. 451 , 67 S. Ct. 385 (1947).

Because of my determination that the involved statement made by Moriwaki to his insurance company could not have been made in anticipation of litigation, I do not reach the issue of whether Heidebrink has made the requisite showing of substantial need and no substantial equivalent for the information.

*412 Conclusion

I would hold that the statement by the insured to his insurance company in this case is not protected by either the attorney-client privilege or the work product immunity rule. I would order disclosure of the statement.

Brachtenbach and Dore, JJ., concur with Goodloe, J.

8 Wigmore, Evidence (McNaughton rev. 1961), p. 554, sec. 2291.