Trial Court Judge Erred in Requiring Insurer to Produce Claim Files in Bad Faith Lawsuit

The South Dakota Supreme Court found that an insurer did not waive its attorney-client privilege and, thus, was not required to produce 200 unredacted workers’ compensation claim files in a bad faith lawsuit. The Supreme Court found that the trial court judge erred in allowing the evidence in by not conducting an in camera inspection of the files before finding that the insurer had implicitly waived its attorney-client privilege regard its claim files.

This case involved a policyholder that sued his employer and the workers’ compensation insurer, alleging bad faith handling of his workers’ compensation claim. The policyholder claimed that the insurer systematically handled workers’ compensation claims in bad faith pursuant to a program known as the “large loss initiative,” which gave greater attention to large claims. The policyholder sought unredacted copies of his workers’ compensation claim file, along with 199 other claim files. The policyholder argued that the insurer had implicitly waived its attorney-client privilege by injecting the advice of counsel into each file.

The insurer argued that there was no waiver of privilege and stated that the court must conduct an in camera review of the materials to determine whether the privilege had been waived. The trial court agreed with the policyholder, allowing the evidence in without conducting an in camera review. This court reversed, stating that the trial court must conduct an in camera review to determine whether the insurer waived attorney client privilege.

Andrews v. Ridco, Inc. Supreme Court of the State of South Dakota, April 29, 2015.

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