The Crime-Fraud Exception

Read the full article at https://lnkd.in/g6h65NZ and see the full video at https://lnkd.in/gfFYkhQ and at https://zalma.com/blog plus more than 3400 posts.

A waiver of the privilege also may result when the carrier is sued for bad faith and/or fraud. For example, California Evidence Code Section 956 provides: “there is no privilege under this article if the services of the lawyer were sought or obtained to enable or aid anyone to commit or plan to commit a crime or a fraud.” Even without a statute, the license to practice law, is not a license to commit a crime.

One federal court ruled that a bad faith claim not involving fraud is insufficient to trigger the exception. In Freedom Trust, the insured argued that the privilege had been waived because the insurer denied coverage in bad faith. The court recognized that the attorney “does not have to be aware of the fraud for the crime-fraud exception to apply” and that the fraud exception includes civil fraud. The court noted a split in authority nationally as to whether a bad faith claim triggers the crime-fraud exception.