Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_12-cv-00795/USCOURTS-azd-2_12-cv-00795-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1441 Petition for Removal- Breach of Contract

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WO 

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA

Katherine Coronel, et al.,

Plaintiffs, 

v. 

GEICO Insurance Agency Incorporated, 

Defendant.

No. CV12-0795 PHX DGC

ORDER 

 The Court held a telephone conference with the parties on October 24, 2012, and 

directed that they file memoranda addressing whether Defendant has waived the attorneyclient privilege by its position in this litigation. Doc. 23. The Court has reviewed the 

parties’ memoranda. Docs. 26, 27. 

 This issue appears to be controlled by the Arizona Supreme Court’s decision in 

State Farm Mutual Automobile Ins. Co. v. Lee, 13 P.3d 1169 (Ariz. 2000). Lee held that 

State Farm waived the attorney-client privilege with respect to specific attorney-client 

communications by asserting that, after conducting an investigation, its employees 

possessed a subjective good-faith belief in the legal correctness of the position State Farm 

was taking. It was the subjective belief of State Farm employees, asserted as a defense to 

bad faith, that triggered the waiver: “in cases such as this in which the litigant claiming 

the privilege relies on and advances as a claim or defense a subjective and allegedly 

reasonable evaluation of the law – but an evaluation that necessarily incorporates what 

the litigant learned from its lawyer – the communication is discoverable and admissible.” 

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Id. at 1175, ¶ 15 (emphasis omitted). The Supreme Court provided this explanation: 

 By asserting the subjective evaluation and understanding of its 

personnel about the state of the law on stacking, State Farm has 

affirmatively injected the legal knowledge of its claims managers into the 

litigation and put the extent, and thus the sources, of this legal knowledge at 

issue. State Farm’s claims managers cannot testify that they investigated 

the state of the law and concluded and believed they were acting within the 

law but deny Plaintiffs the ability to explore the basis for this belief and to 

determine whether it might have known its actions did not conform to the 

law. 

Id. at 1182, ¶ 34. 

 Plaintiffs have not established that Defendant GEICO is taking a position in this 

case that waives the privilege under Lee. Plaintiffs first state that “If GEICO is relying on 

advice of counsel as a defense for its position that New York law applied, then any 

advice that it received from its counsel is discoverable.” Doc. 27 at 3 (emphasis added). 

Defendant GEICO responds that it will not rely on advice of counsel as a defense in this 

case. Doc. 26 at 3. This statement by GEICO does not end the inquiry, however, 

because State Farm likewise did not assert an advice-of-counsel defense in Lee, 13 P.3d 

at 1172, ¶ 5 (“State Farm denied it intended to show good faith by advancing a defense of 

reliance on advice of counsel”), and yet was deemed to have waived the privilege by 

asserting that its employees acted with subjective good faith. 

 Plaintiffs also assert that “insofar as GEICO’s investigation of the UM claims in 

this case incorporated advice of counsel, because GEICO contends that it acted in good 

faith, that advice is discoverable in this case.” Id. (emphasis added). Plaintiffs do not 

show, however, that GEICO actually asserts the subjective good faith of its employees. 

Plaintiffs merely state that “insofar” as GEICO is taking that position, the privilege has 

been waived. Firmer evidence is needed before the Court will conclude that the privilege 

has been waived by GEICO’s taking the same position that State Farm took in Lee. 

 Nor can the Court conclude that GEICO has waived the privilege merely by 

denying the allegation of bad faith. Lee makes clear that an insurer can avoid a waiver of 

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the privilege by asserting the objective (as opposed to subjective) reasonableness of its 

conduct. See 13 P.3d at 1173, ¶ 8 (“If State Farm had merely denied bad faith and 

defended on an objective basis, without advancing its agents’ subjective understanding of 

the law, we would have a different case.”). Because Plaintiffs have not shown that 

GEICO intends to assert the subjective good faith of its employees, formed after 

investigating the legal issues in this case, the Court will deny Plaintiffs’ request to find a 

waiver of privileged communications. 

 The Court makes two additional observations. First, although Plaintiffs have not 

at this point shown that GEICO is asserting the subjective good-faith belief of its 

employees concerning the application of New York law to Plaintiffs’ claims, if GEICO 

does intend to argue that it did not act in bad faith because its employees genuinely 

believed that the claim could not be made under New York law, any legal advice those 

employees received concerning New York law or its application to this claim will be 

discoverable for the reasons stated in Lee. Second, in such an event, Plaintiffs will not be 

entitled to discover all privileged communications as they suggest. Doc. 27 at 3-4. 

Plaintiffs will be entitled to discover only those attorney-client communications related to 

the New-York-law position taken by GEICO in this case. See Lee, 13 P.3d at 1182 n.8. 

Dated this 8th day of November, 2012. 

 

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