Wolf Block Argues Letters to Insurance Co. Are Privileged

June 27, 2012 | The Legal Intelligencer

Gina Passarella

Correspondence between Wolf Block's outside counsel and the defunct firm's insurance carrier about the merits of a legal malpractice suit against the firm is "core" attorney work product that should not be turned over to the plaintiff, an attorney for Wolf Block argued before the Pennsylvania Superior Court on Tuesday.

Nicholas Centrella of Conrad O'Brien said Philadelphia Court of Common Pleas Judge Allan L. Tereshko was wrong in finding that the privilege attached to those communications had been waived.

"The communication by its very nature was made to a third party outside of the attorney-client relationship and any claim of protection must necessarily be considered to have been waived," Tereshko said in his February opinion in Potamkin v. Wolf Block . "The communication to the insurer by the insured carries no protection from being used by the insurer against the insured and as a result the confidentiality necessary to protect the communication is absent."

Centrella argued that he represents only the law firm and was not hired by the insurer, but pointed out that he has a duty to his client under its insurance policy to inform the carrier about the case. A ruling making those communications discoverable would have an "explosion effect" on the profession in that it would chill communications between insureds and insurers.

"If it is the law, we're going to have a fundamental sea shift" in business law in Pennsylvania, Centrella told the three-judge panel hearing arguments in the case.

In support of his ruling granting plaintiff Alan Potamkin's discovery request, Tereshko had cited a 1983 case from Allegheny County Court of Common Pleas Senior Judge R. Stanton Wettick Jr., Serago v. East Suburban Hospital , that found there is no attorney-client relationship between the insurance company and the insured.

"Always lurking in the relationship between the insured and the insurance carrier is the question of insurance coverage and there is no prohibition against the insurance carrier using any of the information acquired from the insured as a basis for denying coverage," Wettick said in Serago . "Consequently, the confidential relationship essential for extending the attorney-client privilege to communications between the insured and the insurance company is missing."

Joseph R. Podraza Jr. and Richard Sprague of Sprague & Sprague represented Potamkin at oral argument. Potamkin sued Wolf Block over the 1983 prenuptial agreement it helped draft between him and his wife, Claudia Forman. The two were going through a divorce in Florida when Potamkin became unhappy with some of the financial rulings the divorce court had made. Potamkin argues that the prenuptial agreement didn't take into account any potential future changes in Florida law or necessary waivers that should have been included, according to the complaint. The agreement was drafted before Florida adopted an equitable distribution law.

While the divorce case has since been settled, Podraza said Potamkin's potential damages against Wolf Block are somewhere between $30 million and $85 million. That was the first time a number has been placed on the potential damages in this case.

Podraza said Wolf Block didn't do enough to ensure the communications between it and its insurer were protected, and now Potamkin is rightfully allowed to get unredacted copies of that correspondence.

"There is no insurance privilege," Podraza said. "There is an attorney-client privilege."

That can be extended to third-party privilege with the insurer if the insurer promises to defend the claim or if the insured refrains from giving the insurer certain information. Podraza said that was not done in this case. He said that in four separate affidavits from Wolf Block representatives, it was never expressly stated that the lawyers solely represent Wolf Block. In fact, he pointed out, the affidavits said the attorneys represented Wolf Block and work with the carrier. The firm sent the insurer information "at their own peril," he said.

Podraza further pointed out that his client filed a motion to quash the interlocutory appeal on the basis that it was brought solely to delay the case. On rebuttal, Centrella took issue with that point and others.

He read from an affidavit of Wolf Block's former general counsel, Patrick Matusky, that stated Conrad O'Brien was hired "solely" for the protection of Wolf Block. Centrella reiterated, however, that he had a duty under the policy to work with the insurance carrier.

"I didn't make this up to delay trial," Centrella said, adding he still has been unable to get Potamkin's deposition.

Discovery in the case has been ongoing despite the interlocutory appeal and Podraza said trial could happen quickly once the Superior Court rules.

Along with the attorney-client privilege issue, Wolf Block also appealed Tereshko's ruling that the law firm had to turn over 30 years' worth of prenuptial agreements it drafted for other clients along with years' worth of data on its family law work. As part of those discovery requests, Potamkin asked for copies of the prenuptial agreements for other clients with the names redacted.

Wolf Block argued that would require the firm to turn over privileged, private client information. It would also require the firm to go through tens of thousands of boxes to look through 30 years' worth of data.

Tereshko had ruled there were no privilege concerns because the agreements would be redacted. As to the extensive search, Tereshko said Wolf Block chose its document management system and can't use it as a basis to avoid discovery requests.

Centrella said Monday that the information, aside from being privileged, is not relevant. He said an agreement drafted in 1993 under Pennsylvania law has nothing to do with a 1983 agreement drafted under Florida law.

Podraza said he doesn't want confidential information. He said he wants to see how the firm drafted other agreements. He said they could show the firm either didn't have a strong family law practice altogether or the trusts and estates lawyer who drafted Potamkin's agreement fell below the typical standard of care the firm's family law lawyers employed.

Judges Susan Peikes Gantman and Jack A. Panella and Senior Judge James J. Fitzgerald III sat on the panel. The only questions asked weren't directly related to the issues on appeal, but dealt with the merits of the case. Gantman asked whether Wolf Block had an ongoing relationship with Potamkin after drafting the prenuptial agreement and whether the firm had an obligation to tell Potamkin of potential changes to Florida law. Fitzgerald asked whether the agreement had a clause requiring the firm to continue to ensure the agreement comported with current law. Centrella said it didn't.