## Facts

- An automobile liability insurer retained a law firm to defend its insured in two wrongful-death/negligence suits; judgments exceeded policy limits.
- The insured’s administrator later sued the insurer for bad faith and negligence for failing to settle within policy limits.
- In the bad-faith action, the plaintiff sought discovery of all letters, reports, and communications exchanged between the insurer and the defense firm concerning the prior cases.
- The insurer resisted discovery solely on attorney–client privilege grounds, asserting every requested item was privileged.
- The trial court found defense counsel represented both the insured and the insurer in the underlying suits and ordered production by requiring the insurer to deposit the documents with the clerk for inspection and copying.
- The insurer took an interlocutory appeal from the discovery order.

## Issues

1. Whether communications between an insurer and defense counsel retained to defend the insured are privileged against the insured in a later bad-faith/negligence action, when counsel represented both insurer and insured in the underlying litigation.

## Decision

- The Iowa Supreme Court affirmed the discovery order.
- The court held the requested insurer–counsel communications concerning the prior litigation were not privileged as against the insured under the circumstances.
- The insurer was required to produce the correspondence, reports, and communications exchanged with defense counsel about the earlier cases.

## Legal Principles

- Attorney–client privilege protects confidential communications from disclosure to outsiders, not from disclosure between joint clients represented by the same lawyer in the same matter.
- When an attorney represents two clients with a common interest, neither client may invoke privilege to withhold communications made in the course of that joint representation from the other, even if they later become adversaries.
- An insurer cannot block discovery by claiming privilege where the record shows common representation and there is no showing that the communications were part of a separate, exclusively insurer–attorney relationship outside the joint defense of the insured.

## Conclusion

Because defense counsel represented both insurer and insured in the underlying tort suits and the insurer showed no separate, exclusive attorney–client relationship for the disputed communications, the insurer could not assert privilege against the insured, and production of the requested materials was properly ordered.


Henke v. Iowa Home Mut. Cas. Co., 87 N.W.2d 920 (Iowa 1958)