Berkley Custom Insurance Managers v. York Risk Services Group, Inc.

Background

York Risk Services Group, Inc. served as Berkley Custom Insurance Managers’ third-party administrator for three bodily injury claims. The claims involved coverage disputes arising from policies issued to AAA Windows, a general contractor on projects for the New York City Housing Authority. Berkley alleged that York breached its contract and was negligent by failing to investigate the claims promptly, causing Berkley to lose the ability to disclaim coverage and incur defense or indemnity obligations.

York requested documents and communications between Berkley and Wade Clark Mulcahy concerning the underlying claims, Berkley’s potential duties to defend and indemnify the New York City Housing Authority, and legal advice about York’s coverage disclaimers. York also subpoenaed Wade Clark for testimony and files involving the claims. Berkley and Wade Clark produced materials previously shared with York but withheld documents that York had not received and draft letters to third parties.

Attorney-client privilege and alleged waiver

Attorney-client privilege protects confidential communications between a lawyer and client made to obtain or provide legal advice. York argued that Berkley had waived the privilege by placing Wade Clark’s advice at issue. York claimed Berkley changed its coverage position based on Wade Clark’s allegedly mistaken advice and was using that advice to blame York for the resulting loss.

The court rejected that argument. Berkley had not asserted Wade Clark’s advice in its complaint and stipulated that it would not rely on that advice or other privileged communications to make its legal arguments. The court said the relevant questions were whether York breached its agreement or duty of care and whether those breaches caused Berkley’s defense costs or indemnity obligations—not what Wade Clark advised Berkley. The court therefore found no unfairness in requiring York to use its own witnesses and experts rather than privileged communications.

York separately argued that Berkley waived privilege by disclosing some advice to York before the lawsuit. The court explained that disclosures outside litigation generally waive privilege only for the communications or portions actually disclosed, although the waiver may extend beyond the precise words shared when a party quotes or paraphrases a privileged communication. York, however, sought all communications and documents concerning the same subjects as the advice previously disclosed. The court held that Berkley had not waived privilege over those entire subject matters. The opinion states that York may depose Wade Clark, but only about communications already disclosed to York.

Draft letters

York also argued that draft letters intended for possible distribution to third parties were not privileged. The court held that drafts may remain confidential when they reflect a client’s request for legal advice and were not distributed. Because each draft was attached to an email requesting Wade Clark’s legal advice about positions in the underlying litigation, the court found that the circumstances showed the drafts were not intended for publication.

Disposition

The court denied York’s motion to compel. It granted Berkley’s cross-motion to quash York’s subpoena to Wade Clark, except to the extent York sought testimony about documents and communications already disclosed to York. The court directed the Clerk of Court to close Docket Nos. 40 and 41.