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Longo v. American Policyholders'' Insurance Co.

Decided: September 30, 1981.

GERALD LONGO, PLAINTIFF,
v.
AMERICAN POLICYHOLDERS' INSURANCE COMPANY AND JAMES DUPREE, DEFENDANT



Baime, J.d.c. (temporarily assigned).

Baime

This case concerns the triadic relationship between and among insurer, insured and counsel recently discussed by our Supreme Court in Lieberman v. Employers Ins. Co. of Wausau , 84 N.J. 325 (1980). Plaintiff instituted this action against his insurer claiming that it acted in bad faith by exposing him to payment of substantial sums in excess of policy limits in an underlying personal injury suit. See Rova Farms Resort v. Investors Ins. Co. , 65 N.J. 474 (1974).

This is a motion by plaintiff to compel production of all correspondence between defendant and the attorney it assigned to represent plaintiff in the prior action. Defendant contends that these materials fall within the purview of the attorney-client privilege. At issue is whether an insurer may invoke the privilege to preclude pretrial disclosure of confidential communications between it and the attorney it selected to represent the insured.

The facts are not in dispute. Plaintiff was involved in an automobile accident in which another individual sustained severe bodily injuries. Suit was instituted against plaintiff. Defendant had issued to plaintiff a comprehensive general liability insurance policy which was in effect at the time of the accident. Under the policy, defendant was bound to pay damages with a limitation of $50,000 and to provide legal representation to its insured. Pursuant to the policy, defendant retained experienced trial counsel to represent plaintiff in the personal injury action. Plaintiff contends that defendant and the attorney corresponded frequently concerning the possibility of settling the claim. According to plaintiff, defendant initially refused to enter into negotiations pertaining to a possible settlement. Defendant ultimately offered to pay damages up to the policy limits on the date set for trial. It is alleged that this offer was refused because it was considered untimely. A settlement conference was conducted at which the claimant offered to dismiss the case for $75,000. Although the judge assigned to hear the matter recommended acceptance of the offer, defendant rejected it and the case proceeded to trial, resulting in a jury verdict of $175,000. This suit followed.

Certain prefatory comments are in order. As noted, defendant's objection to pretrial disclosure is grounded upon the attorney-client privilege. It has been said that the privilege constitutes "an accommodation of competing public interests." State v. Kociolek , 23 N.J. 400, 414 (1957). More specifically, the policy of promoting full disclosure of relevant evidence conflicts with the necessity of protecting a client's freedom to consult an attorney in confidence. In general, the attorney-client privilege constitutes a resolution of these competing social values by barring disclosure of confidential communications.

This much conceded, the privilege is at war with the principal purpose for which our courts exist and thus should be applied sparingly. Perhaps it bears repeating that the primary mission of our judicial system is to resolve disputes and to search

for the truth. No one currently disputes the value of full pretrial disclosure in that regard. See Jenkins v. Rainner , 69 N.J. 50, 56 (1976); Blumberg v. Dornbusch , 139 N.J. Super. 433, 437 (App.Div.1976); Rogotzki v. Schept , 91 N.J. Super. 135, 146 (App.Div.1966). It is axiomatic that justice is best served by affording litigants every reasonable avenue of inquiry before trial. Myers v. St. Francis Hospital , 91 N.J. Super. 377, 385 (App.Div.1966); Caparella v. Bennett , 85 N.J. Super. 567, 571 (App.Div.1964). Toward that end, our courts have emphatically eschewed gamesmanship and have liberally construed our discovery rules. Saia v. Bellizio , 103 N.J. Super. 465 (App.Div.1968), aff'd 53 N.J. 24 (1968); Gureghian v. Hackensack Hosp. , 109 N.J. Super. 143 (Law Div.1970). Our Supreme Court has observed that "[t]ruth and justice are inseparable" and that a false judgment is likely to ensue when relevant evidence is suppressed. See State v. Bisaccia , 58 N.J. 586, 589 (1971). Impediments to pretrial disclosure debase the judicial process by promoting surprise. To justify so serious an insult to the search for the truth, some compensating gains should be apparent.

It is within this context that the attorney-client privilege must be construed. The privilege had its genesis in the early common law and is presently codified in Evid.R. 26. See In re Richardson , 31 N.J. 391, 396 (1960); State v. Kociolek, supra , 23 N.J. at 415; State v. Toscano , 13 N.J. 418, 424 (1953). Although not originally embodied in either constitutional or statutory provisions, the privilege has been applied in all phases of civil and criminal proceedings, including pretrial discovery. See, e.g., Upjohn Co. v. United States , 449 U.S. 383, 101 S. Ct. 677, 66 L. Ed. 2d 584 (1981); Macey v. Rollins Environmental Services , 179 N.J. Super. 535 (App.Div.1981). The privilege is designed to promote "freedom of professional consultation." State v. Kociolek, supra 23 N.J. at 415. The essential policy "is grounded in the subjective considerations of the client's freedom from apprehension in consulting his legal advisor, assured by removing the risk of disclosure by the attorney even at the hands of the law." Ibid. Further, it has been said that the privilege is "an extension

of the client's personal privacy." State v. Sugar , 84 N.J. 1, 13 (1980). The privilege is thus predicated upon the belief inherent in our adversary system that justice is best served by fully informed advocates loyal to their client's interests.

As codified, the privilege confers protection against disclosure of confidential communications between attorney and client. Evid.R. 26. The necessary prerequisite to application of the privilege is the existence of an attorney-client relationship. See Hansen v. Janitschek , 31 N.J. 545, 547 (1960); Palateni v. Sarian , 15 N.J. Super. 34, 38 (App.Div.1951). Even where such a relationship exists, numerous exceptions have been carved out of the privilege by virtue of countervailing policy considerations. Among these exceptions is the situation in which several individuals retain the same attorney to act for them in common. Specifically, Evid.R. 26 provides that "[w]here two or more persons have employed a lawyer to act ...


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