by Yvette Ostolaza and Margaret Hope Allen
Lawyers who typically practice outside of Texas or in federal court may become accustomed to the protection of the common interest and joint defense doctrines. In Texas, however, we have our own way of doing things, and that includes how we define privilege.
In 2012, the Texas Supreme Court changed traditional notions of common interest and joint defense privilege in Texas, relying on a very close reading of the Texas Evidence Rules. In re XL Specialty Insurance Company, 373 S.W.3d 46, 53 (Tex. 2012). The Court held that Rule 503(b)(1) only permits an “allied litigant” privilege, which requires that a communication must be:
- Between a client (or representative), or the client’s lawyer (or representative), to
- A lawyer (or the lawyer’s representative) for another party in a pending action, and
- Concerning a matter of “common interest therein.”
XL Specialty was defending a worker’s compensation claim against its insured, Cintas. The company’s outside counsel communicated with Cintas, and in a later lawsuit, the plaintiff sought these communications. The Court held the communications were not protected: “[the company] is the client, and the communications were between [the company’s] lawyer and [the insured], who is not represented by [the company’s] lawyer (or any other lawyer) and was not a party to the litigation or any other related pending action.”
The Court made clear that communications from one party’s lawyer, client, or the client’s representative must be to another party’s counsel in a pending litigation. This was a departure from more commonly adopted common interest and joint defense doctrines. It is far from clear whether a communication between a litigant’s counsel and a separate non-party would be protected under this particular doctrine.
That said, in 2015, the Dallas Court of Appeals potentially limited the breadth of XL Specialty, in In re Texas Health Resources, 472 S.W.3d 895 (Tex. App.—Dallas 2015, no pet.). The court distinguished XL Specialty and found that communications between (a) counsel for the insured and (b) the insurer controlling the defense of the litigation, were privileged. The Court reasoned that the insurer in Texas Health qualified as a “representative of the client” under Rule 503; this ruling stands in contrast to XL Specialty, where the insured could not be construed as the representative of the insurance company.
The case arose from the local Ebola scare at Presbyterian. One of the nurses who was infected with the virus sued Presbyterian’s parent company, Texas Health Resources (THR). The nurse sought discovery of a note written by a claims adjustor working on behalf of THR’s insurer. The note documented a conversation between the claims adjustor and in-house counsel at THR about the defense of claims under the employers’ liability portion of the THR workers’ compensation policy. The nurse’s legal counsel argued that the note was discoverable because it was written by a third party and was not between attorneys and clients. The Court rejected this argument.
The Court recognized that “[t]here is no general privilege between insurance companies and their insureds,” but noted that the “absence of a general insurer-insured privilege does not preclude the applicability of other recognized privileges that arise in the course of the insurer-insured relationship.” The Court then turned to Rule 503(b)(1), which protects communications between “the client or the client’s representative and the client’s lawyer or the lawyer’s representative.” Under Rule 503(a)(2), “[a] ‘client’s representative is: (A) a person who has the authority to obtain professional legal services for the client or to act for the client on the legal advice rendered; or (B) any other person who, to facilitate the rendition of professional legal services to the client, makes or receives a confidential communication while acting in the scope of employment for the client.” The Court held that “[I]f a person is authorized by the client to obtain legal services or act on legal advice on behalf of the client or to make or receive confidential communications with respect to legal services, that person is a client’s representative even if the person is not an employee of the client.”
The Court applied this framework to communications between an insured and insurer. It reasoned that insurance companies typically have the duty to conduct the defense of the insured under a liability policy, including the authority to select, employ, and pay the attorney. Such liability policies typically give the insurer complete and exclusive control of that defense, including the ability to obtain professional legal services on behalf of the insured. For that reason, under the proper circumstances, communications between an insurer and its insured’s counsel may be shielded from discovery.
The Court also distinguished XL Specialty on the ground that in workers’ compensation litigation, the claim is brought directly against the insurer, which is defending itself, rather than against the employer.
We can expect the contours of the allied-litigant privilege to continue to evolve in Texas. For now, the critical lesson from these cases is that communications are more likely to be privileged if:
1. There is a pending action where the client is sued;
2. The client’s lawyer (or the lawyer’s representative) is party to the communication;
3. The communication is to a representative of the client; and
4. The communication is about a common legal interest.