It has been more than two years since Washington’s Supreme Court issued its opinion in Cedell v. Farmers Ins. Co. of Washington, 176 Wash.2d 686, 295 P.3d 239 (2013), radically changing the attorney-client privilege for insurers in Washington.
In Cedell, the court held that there is a presumption of no attorney-client privilege in “first party insurance claims by insured’s claiming bad faith in the handling and processing of claims, other than UIM claims.” Id. at 700. The insurer “may assert an attorney-client privilege upon a showing in camera that the attorney was providing counsel to the insurer and not engaged in a quasi-fiduciary function.” Id. However, the insured may still be entitled to “pierce the attorney-client privilege” by asserting the crime fraud exception. Id.
While the Cedell opinion has been cited by a number of federal courts in Washington, its application still may not be clear. As one district court observed, “the opinion creates rather than alleviates confusion about what must be produced, and under what circumstances.” Philadelphia Indem. Ins. Co. v. Olympia Early Learning Ctr., 2013 WL 3338503, at *3 (W.D. Wash. July 2, 2013). Nevertheless, a federal district court in Idaho adopted Cedell, Stewart Title Guar. Co. v. Credit Suisse, Cayman Islands Branch, 2013 WL 1385264 (D. Idaho Apr. 3, 2013), leading many across the country to wonder whether their states are next.
In Hawai’i, this question has been answered, at least for now. In Anastasi v. Fid. Nat. Title Ins. Co., 134 Haw. 400, 341 P.3d 1200, 1216-17 (Ct. App. 2014) cert. granted, 2015 WL 3384471 (Haw. May 22, 2015), an insured asked the Intermediate Court of Appeals of Hawai’i to adopt Cedell. The court specifically declined the invitation, observing that the statutory provision setting out the attorney-client privilege in Washington “is fairly limited,” whereas in Hawai’i it has been “codified in much more detail.” Id. at 416-17. The Court concluded that “[t]he rule adopted in Cedell is inconsistent with the privilege as codified in Hawai‘i.” Id. at 417.
Now that the Supreme Court of Hawai’i has accepted review in Anastasi, the Cedell decision could potentially be addressed by Hawai’i’s highest court. This is not guaranteed, however, as the holdings of Anastasi were not limited to the application of the attorney-client privilege. Both the insured and the insurer petitioned for review, the Court of Appeals having vacated the grant of summary judgment in the insurer’s favor. That being said, if Cedell is addressed, Hawai’i will not be the only state listening.