NY Federal Magistrate finds that traditional method of brokers circulating U.S. attorney reports did not maintain their confidentiality.

A Federal New York District Court Chief Magistrate Judge for the Eastern District, Judge Roanne L. Mann, applying “federal common law,” granted Amtrak’s motion to compel discovery against Certain London Insurers, thus forcing the London Insurers to produce broker communications that had been withheld as attorney-client communications.

The case involves London market liability insurance policies issued to Amtrak from 1972 to 1986.  Amtrak sought coverage under these policies for environmental and asbestos exposures.  At issue before the Magistrate, was the London market practice wherein Amtrak’s broker engaged two London brokers to place its coverage.  According to London Insurers, in order to process claims efficiently, these brokers would serve “as a conduit of information among the insurers.”  As noted by the Magistrate, this “message delivery system” included attorney-client communications from the insurer’s U.S. attorneys.

London Insurers’ conceded that its position that these communications retained their privileged status despite being in the possession of Amtrak’s London brokers was “counterintuitive to an American court and to American law.”  However, they argued that it was “standard” and “necessary” given the unique London market structure.  The Magistrate rejected the argument and reasoned that an industry standard was not the test of whether a communication retained its privilege status.  She also found that a conclusory statement of “necessity” alone did not meet the insurers’ burden to show that the broker communications were protected by privilege, because other means of communication between the U.S. counsel and London Insurers were not ruled out.

The opinion cited no evidence that London Insurers’ U.S. counsel had engaged the brokers as separate agents to provide this communication service.  In fact, she found the lack of evidence as to the exact nature of the relationship “particularly troubling given the dual agency of the London brokers, who represented Amtrak during the negotiation over the purchase of the policies.”  In addition, the opinion notes that the record contained no evidence that the materials were stamped “confidential” or that other precautions were taken to protect their confidentiality.

On the basis of the foregoing, the Magistrate concluded that the London Insurers had failed to establish that attorney-client communications distributed through the London brokers were “intended to be, and were in fact, kept confidential” ordering the insurers to produce them.

The Magistrate also found that the London Insurers failed to meet their burden of demonstrating privilege with respect to the documents on its privilege log which were addressed to “Underwriters at Interest” and the like, because the log did not adequately identify the recipient such that Amtrak and the court could determine whether the recipients were clients entitled to privilege protections. In short, the Magistrate found that the failure to identify “specific recipients” caused the log to be fatally vague and ordered all such documents produced.  Certain Underwriters at Lloyd’s v. Nat’l R.R. Passenger Corp., No. 14-CV-4717 (E.D.N.Y.  Feb. 19, 2016).