Policyholder Waives Attorney Client Privilege Seeking Brandt Attorneys’ Fees

Earlier this year, the first district of the California Court of Appeal issued its decision in Byers v. Superior Court of Contra Costa County (2024) 101 Cal. App. 5^th 1003 holding that an insured impliedly waives the attorney-client privilege as to the attorney fee documents when it seeks fees under Brandt v. Superior Court (1985) 37 Cal.3d 813. 

Under Brandt, an insured may recover attorneys’ fees and prelitigation expenses incurred in the insured’s attempt to obtain coverage owed to it under an insurance policy. To recover Brandt fees, the insured is required to prove: (1) the amount to which the insured was entitled to recover under policy; (2) the insurer unreasonably withheld payment; (3) the amount the insured paid or incurred for legal fees and expenses in establishing its right to contract benefits; and (4) the reasonableness of the incurred fees and expenses. Byers, supra, 101 Cal. App. 5^th at 752, quoting Jordan v. Allstate Ins. Co. (2007) 148 Cal. App. 4^th 1062, 1079. 

At issue before the Byers Court was whether the trial court erred in granting the insurer-defendant’s motion to compel production of documents that sought “each and every fee agreement with YOUR attorneys in the instant litigation” and “each and every billing record, fee statement, invoice, receipt and proof of payment from YOUR attorneys in the instant litigation.” The trial court held that the insurer had a right to discovery regarding the insured-homeowners’ attorneys’ fees because they had waived the attorney-client privilege for that aspect of their claim. The insured-homeowners appealed the decision, arguing for a bifurcated procedure that would create a limited-waiver of attorney-client privilege for attorneys’ fees and costs for the purpose of deciding Brandt fees only after a jury first determined the insurer’s bad faith liability. 

The Court of Appeal rejected the insured-homeowners’ argument and affirmed the trial court’s order, stating that the insured-homeowners had “put at issue the attorney fees they incurred in an effort to seek coverage under their insurance policy, and disclosure of documents supporting their claim for such fees is necessary to fairly adjudicate the issue of damages.” Id. at 755. In so finding, the Court held that the insured-homeowners were required to produce responsive documents during discovery, before any finding of the insurer’s bad faith liability. Notwithstanding its ruling, the Court was clear to state that the attorney-client waiver applied solely to attorneys’ fees and costs incurred to prove coverage under the insurance policy. Therefore, the insured was entitled to redact any attorneys’ fees that were not recoverable as Brandt fees, i.e., fees incurred to pursue claims other than to prove coverage under the policy.

The Byers ruling firmly establishes that an insurer is entitled to propound discovery concerning an insured’s attorneys’ fees and costs incurred in proving coverage under the insurance contract in a bad faith case. In a bad faith case, insurers should routinely propound discovery aimed at billing records, invoices, and other documents reflecting the amount of time and the nature of the work performed in proving coverage in order to ascertain the legitimate fees and challenge the reasonableness of the Brandt fees. Failure of an insured to produce this non-privileged information in discovery could result in a dispositive motion or motion to exclude an insured’s claim for Brandt fees at the time of trial.