863 N.W.2d 540
S.D.2015Background
- Timothy Andrews sued Twin City Fire Ins. Co. (Twin City) and Ridco alleging bad-faith handling of his workers’ compensation claim and sought discovery of claim files, including Andrews’s file and 199 other claim files tied to Hartford’s “Large Loss Initiative.”
- Twin City produced claim notes but redacted attorney-client communications; the circuit court ordered production of unredacted files, concluding Twin City impliedly waived the privilege and denying a protective order.
- Twin City complied partially with earlier in camera review orders for Andrews’s file but the circuit court never made specific findings on waiver and refused Twin City’s offers to submit the 199 other files under seal for in camera review.
- Twin City appealed intermediate orders requiring fully unredacted production; the Supreme Court reviewed whether the attorney-client privilege was impliedly waived, whether an in camera review was required, and choice-of-law for out-of-state files.
- The Supreme Court reversed and remanded, holding the circuit court erred by applying a blanket waiver without findings and by failing to conduct necessary in camera review(s); it directed focused analysis of implied waiver, limited disclosure if any, and use of the most-significant-relationship choice-of-law for other files.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Twin City impliedly waived attorney-client privilege by relying on advice of counsel | Andrews: embedding/redacting privileged communications in claim logs injected counsel’s advice, so privilege waived | Twin City: denied bad faith but did not rely on advice of counsel; no affirmative act injecting privilege into litigation | Court: Reversed — plaintiff failed to show Twin City affirmatively injected advice of counsel; waiver not supported without findings |
| Whether the court could apply a blanket waiver without in camera review | Andrews: in camera review is preferred but not required; waiver may be found from effect on transparency | Twin City: court should inspect privileged material in camera before ruling | Court: Reversed — in camera review was required here (or at least findings after such review); court abused discretion by refusing Twin City’s offers and making no findings |
| Whether complete delegation of claim handling to outside counsel eliminates privilege | Andrews: attorneys acted as claim handlers under Initiative so communications not privileged | Twin City: did not unequivocally delegate claims function; privilege applies | Court: Reversed — circuit court relied on DM & E without findings; delegation inquiry requires in camera review and factual findings before stripping privilege |
| Choice of law for the 199 other claim files arising in other states | Andrews: single forum law should govern; focusing on fairness/transparency | Twin City: apply the law of the state where each file arose | Court: Remanded — apply Restatement most-significant-relationship test to select law for each relevant out-of-state file, then apply that state’s law to waiver question |
Key Cases Cited
- Bertelsen v. Allstate Ins. Co., 796 N.W.2d 685 (S.D. 2011) (sets Hearn-derived test for implied waiver and limits waiver to advice actually placed at issue)
- Dakota, Minn. & E. R.R. Corp. v. Acuity, 771 N.W.2d 623 (S.D. 2009) (court preferred in camera review; communications treated as non-privileged if counsel effectively served as claim adjuster)
- Upjohn Co. v. United States, 449 U.S. 383 (U.S. 1981) (describes purpose of attorney-client privilege to encourage full and frank communications)
- Allstate Ins. Co. v. Clancy, 936 N.E.2d 272 (Ind. Ct. App.) (distinguishes objective compliance with law from subjective advice-of-counsel defense)
- People v. Madera, 112 P.3d 688 (Colo. 2005) (waiver must be no broader than necessary to ensure fairness)