AUSTIN, Texas—Communications between an employer and an attorney for the employer's workers compensation insurer do not enjoy attorney-client privilege protection, the Supreme Court of Texas ruled in a bad-faith case.

The case of In Re XL Specialty Insurance Co. and Cambridge Integrated Services Group Inc. stems from a work-related injury Jerome Wagner suffered while working for Cintas Corp., which obtained workers comp insurance from XL.

When Mr. Wagner sought workers comp benefits, an adjuster for Cambridge Integrated Services Group Inc., a third-party administrator unit of XL, denied the claim.

A Texas Division of Workers' Compensation hearing officer found that Mr. Wagner sustained a compensable injury and was entitled to medical and income benefits, court records show.

During that dispute, XL's outside counsel sent messages about the status and the evaluation of the proceedings to Cambridge and to Cintas.

After the work comp dispute was resolved, Mr. Wagner sued XL, Cambridge, and the claims adjuster for breach of good faith and fair dealing and insurance code violations.

During discovery, Mr. Wagner sought the communications that went between Cintas and the outside attorney during the workers comp benefits dispute case.

But XL and Cambridge argued that the attorney-client privilege protected those communications.

A trial court, however, held that the privilege did not apply.

An appeals court then denied a petition from XL and Cambridge seeking mandamus relief.

On appeal to the Supreme Court, XL argued that communications between the attorney and Cintas are protected by the attorney-client privilege, “and more generally, the insurer-insured relationship,” the opinion states.

“We have not recognized a general insurer-insured privilege,” the high court said. “Nevertheless, we agree that, under certain circumstances, communications between an insurer and its insured may be shielded from discovery by the attorney-client privilege.”

But XL failed to show in this particular case that its lawyer’s communications are among those protected by Texas rules, the high court said.

Therefore, the court denied the relief sought by the insurer.