No Attorney-Client Privilege Waiver in Face of Bad Faith Claims
In a matter of first impression, the vital attorney-client privilege was challenged in the context of a bad faith action. The insured and its assignee, a homeowners association that had settled with the insured over alleged construction defects, sued an excess commercial liability insurer based on claims of bad faith, breach of contract and unjust enrichment. The trial court ordered the insurer to produce allegedly privileged documents for an in camera inspection. Responding to the carrier’s challenge of that order, the South Carolina Supreme Court held that in a tort action against an insurer for bad faith refusal to provide coverage, a denial of bad faith and/or the assertion of good faith in the answer does not, standing alone, place a privileged communication “at issue” resulting in the insurer’s waiver of the attorney-client privilege.