David McLain | Higgins, Hopkins, McLain & Roswell
The Hill Hotel Owner LLC v. Hanover Insurance Company case has garnered attention due to its implications on the scope of attorney-client privilege in construction litigation. This blog post delves into the project’s background, the ensuing litigation, and the intricate work undertaken by attorneys and experts, highlighting the potential pitfalls associated with assumptions about privilege protections.
Background of the Project
Hill Hotel Owner LLC initiated a construction project in Boulder, Colorado, which included building a basement-level parking garage with an 18” thick concrete slab floor. The project utilized “void form,” a cardboard underlayment intended to create a gap between the foundation and the underlying soil. Unfortunately, the void form became wet and collapsed under the weight of the fresh concrete, causing considerable damage, and necessitating millions of dollars in remediation costs.
Insurance Claim and Denial
Seeking to cover the remediation costs, Hill Hotel Owner LLC filed a claim with Hanover Insurance Company under its builder’s risk policy. Builder’s risk policies generally cover physical loss or damage during construction but often exclude damages resulting from faulty workmanship or negligence. Following an investigation, Hanover denied the claim, attributing the damage to contractor negligence, which was not covered under the policy.
Litigation and Discovery Disputes
Dissatisfied with Hanover’s denial, Hill Hotel Owner LLC filed a lawsuit against the insurer, alleging bad faith in handling the claim. This litigation spotlighted several disputes regarding the applicability of attorney-client privilege and work-product protection to communications involving Hanover’s attorneys and third-party experts.
Role of Attorneys and Experts
Hanover engaged Kelly Huff, a structural engineer from S-E-A Limited, to assess the damage. Ms. Huff’s findings, which pointed to contractor negligence, were critical in Hanover’s decision to deny the claim. Anticipating potential subrogation, Hanover’s outside counsel consulted Ms. Huff to integrate her technical insights into their legal strategy. Additionally, Hanover consulted Peter Marxhausen, another structural engineer, to review Ms. Huff’s findings and provide further guidance.
These interactions and communications between Hanover’s attorneys and the engineers became the central issue in the privilege dispute. Hill Hotel Owner argued that these communications were not protected under attorney-client privilege or work-product doctrine, asserting that they were part of routine business activities and not made in anticipation of litigation.
The Trial Court’s Ruling
The trial court ruled against Hanover, determining that the communications involving Ms. Huff and Mr. Marxhausen were not protected by attorney-client privilege or work-product doctrine. The court concluded that these communications were not prepared in anticipation of litigation. This ruling raised substantial concerns among legal professionals, as it appeared to narrow the traditional understanding of privilege protections.
Appeal to the Colorado Supreme Court
Recognizing the broader implications of the trial court’s decision, Hanover Insurance Company appealed to the Colorado Supreme Court. The Supreme Court’s decision to review the case underscores the critical nature of the issues at stake, particularly regarding the scope of attorney-client privilege in pre-litigation contexts.
Several amicus curiae briefs were filed, underscoring the case’s importance and its potential impact on legal practices. The Colorado Trial Lawyers Association (“CTLA”) and United Policyholders submitted briefs supporting Hill Hotel Owner. They argued that the trial court’s ruling aligns with a broader understanding of privilege and is essential to ensuring transparency and fairness in insurance claims handling.
Alliance Construction Solutions, Inc. v. Department of Corrections
To understand the broader context of attorney-client privilege, it is useful to consider the Colorado Supreme Court’s decision in Alliance Construction Solutions, Inc. v. Department of Corrections. In this case, the Colorado Supreme Court addressed whether communications between a governmental entity’s attorney and its independent contractor were protected by attorney-client privilege.
In that matter, the Department of Corrections (“DOC”) contracted with Alliance Construction Solutions for the construction of the Trinidad Correctional Facility. DOC also engaged CRSS Constructors, Inc. (“CRSS”) as an independent contractor to serve as the project manager. Alliance was later terminated, leading to a wrongful termination lawsuit. During discovery, Alliance sought communications between DOC’s legal counsel and CRSS, arguing that they were not privileged.
The Colorado Supreme Court held that communications between a governmental entity’s attorney and its independent contractor are protected by attorney-client privilege if:
- The information-giver is an employee, agent, or independent contractor with a significant relationship to the entity and the transaction that is the subject of the entity’s need for legal services.
- The communication was made for the purpose of seeking or providing legal assistance.
- The subject matter of the communication was within the scope of duties provided to the entity by the employee, agent, or independent contractor.
- The communication was treated as confidential and only disseminated to those people with a specific need to know its contents.
In that case, the Court concluded that CRSS, and specifically its employee Dana Dietz, had a significant relationship with DOC, and the communications were protected under attorney-client privilege.
Potential Pitfalls and Considerations
The Hill Hotel Owner case illustrates crucial pitfalls for attorneys engaging experts. It is crucial to understand that merely involving legal counsel and experts does not automatically shield communications from discovery. The context and purpose of these communications are vital in determining privilege applicability.
Awaiting Supreme Court Guidance
The Colorado Supreme Court’s forthcoming decision is eagerly anticipated, as it will provide critical guidance on the boundaries of attorney-client privilege and work-product protection in Colorado. The ruling will likely have far-reaching implications, influencing how attorneys and clients manage communications and the involvement of experts in pre-litigation and litigation contexts.
Conclusion
The Hill Hotel Owner LLC v. Hanover Insurance Company case serves as a pivotal moment in Colorado’s legal landscape, emphasizing the complexities of attorney-client privilege in construction litigation. It underscores the necessity for careful consideration of the context and purpose of communications involving legal counsel and experts. As we await the Colorado Supreme Court’s decision, legal practitioners must remain vigilant and informed about the evolving standards and protections of privileged communications.
When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.