In Everest Indemnity Insurance Company v. Rea, copy attached, the Arizona Court of Appeals held that an insurer does not waive the attorney-client privilege by asserting the defense of subjective good faith in a bad faith case unless it asserts that it depended on the advice of counsel in forming its subjective beliefs. To impliedly waive the attorney-client privilege, the Court noted, "a party must make an affirmative claim that its conduct was based on its understanding of the advice of counsel." The Court found that "it is not sufficient that the party consult with counsel and receive advice."
Judge Orozco dissented taking issue with the conclusion that Everest had not put the advice of its counsel at issue because Everest consulted counsel during the settlement negotiations and was represented by its counsel during the negotiations. She reasoned that "[c]ounsel’s participation, along with Everest’s assertion of subjective good faith, is an affirmative interjection of counsel’s role in formulating and acting upon Everest’s subjective good faith in this litigation."
