Court Opinion

ID: 9720077
Source: CourtListenerOpinion
Date Created: 2023-08-26 08:14:50.97931+00
Date Added: 2024-06-11T18:24:12.864907
License: Public Domain

SMITH, J.
I dissent.
The heart of petitioner’s argument is its claim that during the critical period, October 18 and 19, 1977, its attorney-client relationship with Ernest Arnold, Esq., was exclusive. Petitioner, the insurer, claims this exclusivity shields certain parts of the petitioner’s “file activity log” from discovery by the real party in interest, successor to the insured.
The trial court, on the other hand, held that this attorney-client relationship was tripartite including petitioner (Houston Insurance Company), Attorney Arnold, and the insured. There is substantial evidence to support this view.
The already known and discovered portions of insurer’s “file activity log” indicate: (1) employees of petitioner met and “agreed that coverage exist [sic] in this loss”; (2) insurer’s employee notation: “appears we may be involved and coverage of this loss exist.. .”; (3) a description of the injuries claimed; (4) assignment of case to Attorney Arnold; (5) ba*968sic facts of case discussed; and (6) petitioner’s potential portion, $33,000, of the $105,000 suggested settlement was noted and reserved. Further, petitioner discussed with insured’s initial attorney, Dwight Bishop, both the previously performed discovery and the settlement potential. Finally, petitioner requested of Bishop a copy of the entire litigation file.
Attorney Arnold admitted three separate conversations on October 19, 1977, with petitioner’s employee, De Guzman. Upon being deposed, Arnold stated that the conversations were chiefly about the defense of the claim and not about coverage. Arnold did remember De Guzman saying that there was a “coverage question.” Arnold remembered suggesting to De Guzman that a reservation of rights letter be sent.
Insured’s Attorney Bishop testified that on October 19, 1977, he was contacted by insurer’s employee De Guzman and informed that insurer had withdrawn its denial of coverage and had retained Attorney Arnold.
The above recitation of facts represents substantial evidence indicating a pattern of actions taken by both petitioner, Houston Insurance Company, and its counsel in furtherance of the common goal of the defense of insured.
This evidence was persuasive to the trial court.
The law is clear that “[w]here two or more clients have retained or consulted a lawyer upon a matter of common interest, none of them... may claim a [the attorney-client] privilege.. .as to a communication made in the course of that relationship when such communication is offered in a civil proceeding between one of such clients (or his successor in interest) and another of such clients.” (Evid. Code, § 962.)
This general rule of evidence is particularly compelling when applied to the relationship that springs from an insurance policy with its implied-in-law covenant of good faith and fair dealing. (Gruenberg v. Aetna Ins. Co. (1973) 9 Cal.3d 566, 574 [108 Cal.Rptr. 480, 510 P.2d 1032].) Typically the insurer is bound under the policy to employ an attorney to defend the insured. The insurer is, and appropriately so, in control of the claim. This control is part of the insurer’s business and precisely the service which the insured bargained for when the policy of insurance was purchased.
*969The lawyer hired is in a delicate position in this tripartite arrangement. He owes an obligation to each client in furtherance of the common goal to defend the claim. (American Mut. Liab. Ins. Co. v. Superior Court (1974) 38 Cal.App.3d 579, 592 [113 Cal.Rptr. 561]; Glacier Gen. Assurance Co. v. Superior Court (1979) 95 Cal.App.3d 836, 839 [157 Cal.Rptr. 435].) “Overall, however, the attorney’s primary duty is to the insured.” (Glacier Gen. Assurance Co. v. Superior Court, supra, at p. 839.)
This duty commences when there has been some action by, or in behalf of, the clients. Here, it is undisputed that petitioner, the insurer, was a client. Further, the trial court impliedly found substantial evidence establishing a fiduciary relationship between the insured and Attorney Arnold.
It is clear that petitioner, when talking to Attorney Arnold, was taking steps to defend the insured. This approach is substantiated by Arnold’s testimony that the “coverage” question was mentioned only briefly and exclusively with regard to a “reservation of rights” letter. The mere fact that a “reservation of rights” letter was being discussed on October 19 indicated that a defense was underway and that the coverage question was, at least for the moment, set aside by the petitioner insurance company.
Petitioner also argues that both clients must be present to remove the shield of the privilege. This argument is without merit since “[t]he language [of section 962] that no client 'may claim a privilege.. .as to a communication made in the course of that relationship... ’ (italics added) seem [sic] explicit and unambiguously to include all communications—bilateral as well as trilateral. If the Legislature had meant otherwise it could have easily said so. It is not for us to rewrite the statute.” (Glacier Gen. Assurance Co. v. Superior Court, supra, at p. 841.)
Moreover, to hold that both clients must be present would give the insurer a preferred position over the insured. Bilateral communications between the insurer and the attorney in this tripartite relationship are to be expected given the roles of the parties. It is also expected that the insured will be a nonparticipant and unaware of most of these communications. But that does not diminish the “primacy of the duty the lawyer owes to the insured.” (Glacier Gen. Assurance Co. v. Superior Court, supra, at p. 841; American Mut. Liab. Ins. Co. v. Superior Court, supra, at p. 592.)
*970In the present case the evidence indicates that the purpose of the insurer’s conversations with the attorney was to formulate and execute the common plan of defense of the insured. The insured may not have been physically or electronically present but he was one of the multiple clients represented by the lawyer in question. All participants were concerned with a common legal problem and the insured enjoyed a primary position buttressed by a covenant of fair dealing. All of these factors give the insured access to the communication in question. To hold otherwise would impede the least knowledgeable and sophisticated of the individuals in the tripartite relationship.
While there may not have been direct contact between insured and Attorney Arnold, there was ample contact between those representing the insured: Attorney Bishop, insurer, and Attorney Arnold. For a short period, the parties’ actions indicate a common plan of defense, which generated a tripartite attorney-client relationship.
An opposite holding would allow the insurer to commence discussions regarding a defense, take preliminary steps in this direction, calculate the exposure to its insured, and then withdraw its coverage, denying that the relationship ever existed as to the insured. All of these steps would be within the control of the insurer and beyond the insured. Such a holding would contravene both the insurer’s duty of good faith and fair dealing to the insured, and, the attorney’s primary duty to the insured.
As expressed in Glacier Gen. Assurance Co. v. Superior Court, supra, at pages 839 and 842, there may be subjects discussed by the lawyer and the insurer, for example, their general relationship or even the coverage question detached completely from the defense of the claim, that may be shielded by the attorney-client privilege. But here the trial court found that, at least during the albeit brief period of October 18 and 19, there existed a three-sided attorney-client relationship which would permit the insured (and its successor in interest) access to the “file activity log.”
I would therefore deny the petition.
A petition for a rehearing was denied September 5, 1980. Smith, J., was of the opinion that the petition should be granted. The petition of real party in interest for a hearing by the Supreme Court was denied October 15, 1980.