A Video Explaining the Use of the Crime-Fraud Exception in Bad Faith Cases

The Crime-Fraud Exception to the Attorney-Client Privilege and the Work Product Protection

The Crime-Fraud Exception

A waiver of the privilege also may result when the carrier is sued for bad faith and/or fraud. For example, California Evidence Code Section 956 provides: “there is no privilege under this article if the services of the lawyer were sought or obtained to enable or aid anyone to commit or plan to commit a crime or a fraud.” Even without a statute, the license to practice law, is not a license to commit a crime.

One federal court ruled that a bad faith claim not involving fraud is insufficient to trigger the exception. In Freedom Trust v. Chubb Group of Insurance Cos., 38 F.Supp.2d 1170 (C.D. Cal. 1999) the insured argued that the privilege had been waived because the insurer denied coverage in bad faith. The court recognized that the attorney “does not have to be aware of the fraud for the crime-fraud exception to apply” and that the fraud exception includes civil fraud. The court noted a split in authority nationally as to whether a bad faith claim triggers the crime-fraud exception.

The crime-fraud exception applies only where there is probable cause to believe that the particular communication with counsel or attorney work product was intended in some way to facilitate or to conceal the criminal activity. [Blumenthal v. Kimber Mfg., 265 Conn. 1, 18 (2003)] The crime-fraud exception to the attorney-client privilege, therefore, is a limited one, and the burden of proof is on the party seeking to pierce the privilege. The exception applies only after a determination by the trial court 'that there is probable cause to believe that a crime or fraud has been attempted or committed and that the communication was in furtherance thereof.

© 2020 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

https://zalma.com/zalmas-insurance-fraud-letter-2/ Read last two issues of ZIFL here.

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Listen to the Podcast: Zalma on Insurance https://anchor.fm/dashboard/episodes Zalma on Insurance

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Go to the Insurance Claims Library –https://zalma.com/blog/insurance-claims-library/

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