In an Arizona bad faith case, the defendant liability insurance company argued that its settlement decisions were subjectively reasonable. In support of that argument, the liability carrier's adjuster who was handling the case" testified that although she could not recall a conversation exactly, she would of course normally talk to coverage counsel about counsel's evaluation of coverage. She further testified that the carrier's settlement decisions "were based on a determination that there was a 80 percent chance that defendant would be able to defeat coverage based on exclusions in [the liability] policy." Cosgrove v. National Fire & Marine Ins. Co., No. 2:14-cv-2229-HRH, 2016 WL 4578139, at *2 (D. Ariz. September 2, 2016). When the carrier's coverage counsel told that to the adjuster, the lawyer became a witness.
The carrier impliedly waived the attorney-client privilege by arguing that its settlement behavior was subjectively reasonable because of what its coverage counsel said, namely, that there was an 80% chance of a court ruling or a jury finding no coverage. In part pertinent to the issue of its settlement conduct, the court recognized the waiver of privilege under Arizona law:
In sum, the court finds that defendant's affirmative act of claiming that its conduct was subjectively reasonable has put its communications with the Graif firm [its coverage counsel] at issue and that this information may be vital to plaintiff's case. Thus, defendant has impliedly waived the attorney-client privilege as to its communications with the Graif firm to the extent those communications addressed the coverage issues in the underlying case on which defendant based its settlement decisions.
Cosgrove v. National Fire & Marine Ins. Co., No. 2:14-cv-2229-HRH, 2016 WL 4578139, at *5 (D. Ariz. September 2, 2016).
It is a curiosity that this decision under Arizona law by a Federal Court in Arizona was "DATED at Anchorage, Alaska, this 2nd day of September, 2016." Cosgrove v. National Fire & Marine Ins. Co., No. 2:14-cv-2229-HRH, 2016 WL 4578139, at *6 (D. Ariz. September 2, 2016).
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