U.S. District Court Rules That Attorney-Client Privilege Applied in Insurance Coverage Lawsuit

Baxter International was sued in a second wave of multidistrict litigation filed by hemophiliacs who alleged that they contracted HIV or Hepatitis C from contaminated blood products. Baxter paid $15 million to settle the lawsuits and then filed its own lawsuit against Axa Versicherung and a German insurance company for indemnification.

During discovery, Axa demanded that the lawyers handling the insurance coverage matter for Baxter turn over its memos and e-mails that it delivered to it. Baxter blacked out or redacted the lawyer’s analysis of insurance coverage issues in the production material it did produce. In other words, Baxter decided to edit the discovery it produced, saying that Axa was not entitled to the legal analysis found in some of the e-mails and memos.

Axa’s motion to compel relied on the Illinois Supreme Court opinion in Waste Management v. International Surplus Lines Insurance Co., 144 Ill.2d 178 (1991), which ruled that attorney-client privilege did not apply to the insured’s communications with its counsel about the underlying tort litigation.

Axa also argued that Baxter stripped off its attorney-client privilege by sharing its lawyer’s coverage opinions with the attorney  who defended Baxter in the second wave of the federal litigation. Axa argued that Baxter waived its attorney-client privilege when its insurance coverage attorneys shared information with Baxter’s trial attorney in the multidistrict lawsuit.

Baxter asserted that it redacted from its insurance coverage attorney’s memos because of the protection afforded by the Illinois attorney-client privilege. Axa relied on the Waste Management case, in which the lawyer’s memos and related e-mails must be produced without redaction.

In this case, the Illinois Supreme Court’s decisions support the attorney-client privilege because (1) the insureds’ contractual duty to cooperate with their insurers, contained in their insurance policies, rendered any expectation of privilege unreasonable with respect to the communications; (2) the insureds and the insurers had a common interest in defeating or settling the underlying litigation and the communications were “of a kind reasonably calculated to protect or to further those common interests.”
The court here distinguished “between nonprivileged communications regarding the underlying litigation, and privileged communications regarding the coverage issues that could arise in a subsequent declaratory judgment action.”  Illinois Emcasco v. Nationwide Mutual Insurance Co., 393 Ill.App.3d 782, 913 N.E.2d 1102 (2009).

The U.S. Court in Chicago found that the targeted nature of Baxter’s redactions supports its contention that it was trying to distinguish between coverage analyses in other matters. This court’s review of the redacted text indicates that Baxter was successful in that effort. Therefore, the Illinois Appellate Court and this court have found that the attorney-client privilege for coverage analysis survives even when the insured’s defense counsel provided this analysis. For these reasons, the U.S. District Court finds that the Waste Management  case does not mandate the production of the insurance lawyer’s memos and cover e-mails.

Baxter International v. Axa Versicherung, No. 11-cv-9131.

Kreisman Law Offices has been handling multidistrict litigation cases involving dietary supplements, pharmaceutical defects and hip and knee implant cases for individuals and families who have been injured or killed by the negligence of another for more than 40 years, in and around Chicago, Cook County and surrounding communities, including Blue Island, Harvey, Lockport, Niles, Northbrook, Northfield, Palatine, Western Springs, St. Charles, Round Lake Beach, Lisle, Hinsdale, Des Plaines, Chicago (Edgebrook, East Garfield Park, DePaul University Area, Canaryville, Old Town Triangle, Pulaski Park, Printer’s Row, Ravenswood Gardens, Mayfair, Little Italy, Lithuanian Plaza), Elk Grove Village and Forest Park, Ill.

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