Policyholder Privilege (IL)

Documents Prepared by Policyholder Prior to Underlying Litigation Privileged

An Illinois appellate court, applying Illinois law, reversed the trial court’s order requiring the production of documents which the policyholder claimed were subject to privilege, and instructed the trial court to conduct an in camera review to assess the privilege claims.  The appellate court found that attorney-client privilege was available to shield the documents from production because the documents were not prepared in conjunction with the underlying litigation.

The discovery dispute between Motorola Solutions, Inc. (“Motorola”) and its insurers concerned the production in the coverage litigation of documents that Motorola claimed were subject to attorney-client privilege and the work product doctrine.  The insurers claimed that the documents were material to their late notice defense for coverage of the underlying litigation and were not shielded by privilege.  The underlying litigation involved several personal injury actions filed against Motorola which allege that Motorola was liable for injuries allegedly caused as a result of exposure to various chemicals in semiconductor manufacturing “clean rooms” in Motorola’s manufacturing facilities.

The discovery sought by the insurers included two categories of documents: (1) documents pertaining to plaintiff’s clean room safety program (“CRSP documents”), and (2) documents concerning the 2003 sale of Motorola’s semiconductor manufacturing business (“S-1 documents”). The CRSP documents were created in 1996 by, or at the direction of, Motorola’s outside counsel, because another company in the same manufacturing sector, IBM, was being sued for alleged injuries resulting from employees working in clean room facilities.  The S-1 documents were used by Motorola to support its statements on an S-1 form that were required to be filed with the SEC as a part of the 2003 sale.

The trial court ordered Motorola to turn over the documents, and Motorola refused.  The insurers filed a motion to compel production claiming that, under the Illinois Supreme Court decision in Waste Management, Inc. v. International Surplus Lines Insurance Co., 144 Ill. 2d 178 (1991), the documents were not protected from the insurers.  In Waste Management, the Illinois Supreme Court concluded that insurers are entitled to the production of documents that might otherwise be privileged, if they arise out of contractual obligations, like the duty to cooperate, or the common interest doctrine.  The appellate court found that Waste Management was factually distinguishable to the case before it because the insurers did not seek documents from the underlying litigation; instead, they sought documents that were created years prior to any litigation. According to the appellate court, there was no contractual obligation to provide the documents because the insurers did not explain how the requested documents would “assist in making settlements, in the conduct of suits and in enforcing any right of contribution or indemnity against any person or organization who may be liable to the insured” as required under the cooperation clause.  The appellate court also found that the common interest doctrine did not apply because the documents were created prior to when there was a common interest.  Thus, the appellate court held that the attorney-client privilege is available to shield any appropriate documents from discovery.  The dissenting judge would have upheld the trial court’s decision because she believed the majority “mischaracterizes the nature and relevance of the sought discovery.” Motorola Solutions, Inc. v. Zurich Ins. Co. 2017 IL App (1st) 161465 (June 30, 2017).