Insurance Coverage: Court applies subject matter waiver rule to discovery request

The question before the court, on remand from the Appellate Court, is whether the subject matter waiver rule applies to the insureds’ claimed privileged communications between them and the defendant, Liberty Insurance Underwriters, Inc., during the course of a prior action and the present litigation. The Appellate Court charged the Superior Court with holding an “evidentiary hearing to determine whether to apply the subject matter waiver rule and, if the rule applies, to identify specifically which documents must be produced.”

The plaintiff invested in the insured’s company, which owned an insurance policy issued by the defendant providing liability coverage for the company and its directors and officers. In 2015, the plaintiff brought an action against the company and the insureds, asserting claims related to their investment in the company. The insured and the plaintiff entered into a stipulated agreement that the plaintiff would seek to enforce the judgment against Liberty only. The court rendered judgment in accordance with the parties’ agreement and the insureds assigned their rights under the insurance policy to the plaintiff.

The plaintiff then brought the underlying action against Liberty. During discovery, the plaintiff served on Liberty a request for production, seeking all communications between Liberty and the insureds’ counsel regarding the prior action against the insureds. Liberty informed the plaintiff that the insureds claimed that the documents were protected by attorney-client privilege. The court ordered Liberty to produce all communications that are statements of fact or relate to the issue of insurance coverage. The insureds reviewed all relevant communications and instructed Liberty on which to produce and which were to be withheld as privileged.

Counsel for Liberty informed the insureds that they would seek the court’s permission to produce and disclose all communications as Liberty is entitled to use these communications to defend itself in the underlying action. Rule 502(a) of the Federal Rules of Evidence provides, in summary, that “the voluntary disclosure of a privileged attorney-client communication constitutes a waiver of the privilege as to all other communications concerning the same subject matter when the trial court determines that the waiver was intentional and that fairness dictates that the disclosed and undisclosed communications be considered together.” Absent a finding that the subject matter waiver rule applies, only those communications actually revealed would have lost their privilege status.

The court finds that the insureds did disclose general merits related opinions of their counsel and thus concludes that disclosure of the entirety of the related communications is required by principals of fairness. The court explains that the insureds are not prejudiced because the plaintiff agreed not to satisfy the judgment from their assets and thus, disclosure of more extensive details beyond those already disclosed, creates no liability for them. The court orders the disclosure of the redactions identified as being within the scope of those that have already been produced pursuant to the subject matter waiver rule. Ghio v. Liberty Ins. Underwriters, Inc., HHDCVX07196104759S, 2023 WL 3477235 (Conn. Super. Ct. May 12, 2023).