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Everest Indem. Ins. Co. v. Rea

Court of Appeals of Arizona, First Division

January 15, 2015

EVEREST INDEMNITY INSURANCE COMPANY, a Delaware corporation, Petitioner,
v.
THE HONORABLE JOHN REA, Judge of the SUPERIOR COURT OF THE STATE OF ARIZONA, in and for the County of MARICOPA, Respondent Judge, RUDOLFO BROS. PLASTERING, INC., an Arizona corporation; WESTERN AGRICULTURAL INSURANCE COMPANY, an Arizona corporation, Real Parties in Interest

Petition for Special Action from the Superior Court in Maricopa County. CV 2011-008576. The Honorable John Christian Rea, Judge.

Kunz Plitt Hyland & Demlong, Phoenix, By Steven Plitt, Joshua D. Rogers, Steven J. Gross, Counsel for Petitioner.

Holm Wright Hyde & Hays, PLC, Phoenix, By Kirk H. Hays, Jared M. Scarbrough, Counsel for Real Parties in Interest.

Presiding Judge John C. Gemmill delivered the opinion of the Court, in which Judge Peter B. Swann joined. Judge Patricia A. Orozco dissented.

OPINION

[236 Ariz. 504] John C. Gemmill, Judge:

Page 418

¶1 The issue presented in this special action is whether Petitioner Everest Indemnity Insurance Company has impliedly waived the attorney-client privilege by asserting subjective good faith as a defense in this bad faith case. For the reasons that follow, we accept special action jurisdiction and grant relief.

BACKGROUND

[¶2] Everest challenges the trial court's order requiring production of documents it contends are privileged communications between it and its counsel. Real Parties in Interest Rudolfo Brothers Plastering and Western Agricultural Insurance Company (collectively " Rudolfo" ) argue that Everest impliedly waived the attorney-client privilege by defending against their bad faith claim on the basis of subjective good faith.

[¶3] In the underlying case, Rudolfo claims that Everest committed bad faith by entering into a settlement agreement that exhausted the liability coverage of an Owner Controlled Insurance Program (OCIP) policy to the alleged detriment of certain insureds such as Rudolfo. Everest contends that the decision to settle was made in good faith based on its subjective beliefs concerning the relative merits of the various available courses of action.[1] Everest acknowledges that it communicated with counsel during the process of making that decision. The issue is whether Everest impliedly waived the attorney-client privilege regarding those communications by asserting its subjective belief in the good-faith nature of its actions and by consulting with counsel during that period of time.

[¶4] Acceptance of special action jurisdiction is highly discretionary. Because an erroneous order compelling disclosure cannot be remedied by appeal, we exercise jurisdiction here. See, e.g., Salvation Army v. Bryson, 229 Ariz. 204, 205, ¶ 1, 273 P.3d 656, 657 (App. 2012).

IMPLIED WAIVER OF ATTORNEY-CLIENT PRIVILEGE

[¶5] The attorney-client privilege may be deemed waived when application of the privilege would deny an opposing party access to necessary information to counter a claim or defense asserted by the other party. State Farm Mut. Auto. Ins. Co. v. Lee, 19 ...


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