Employers in Texas and Montana are expected to seek a legislative fix for state Supreme Court rulings that have restricted employers' access to legal information in some workers compensation cases.

Both states' high courts have held that attorney-client privilege is nullified when information is shared between an insurer's defense counsel and the insurer's policyholder.

As a result, insurers and third-party administrators are restricting legal information they provide to employers in workers comp litigation, according to memos by American International Group Inc., Travelers Cos. Inc., Broadspire Services Inc., ESIS Inc., Gallagher Bassett Services Inc. and others.

“In a word, the reaction has been frustration,” said Joe Tixier, executive vice president and general counsel for Itasca, Ill.-based Gallagher Bassett, about client response to the rulings.

Though the rulings apply only to Texas and Montana, insurers could consider limiting information elsewhere because similar legal arguments could be raised, said William Eustace, New York-based managing director of the national casualty practice at Marsh Inc.

“I would expect that you'll see more discretion surrounding the handling of opinions from counsel in the future in a lot of states, not just these two,” Mr. Eustace said

Workers comp policyholders are expected to seek legislative support in the next several months to reverse the attorney-client privilege rulings, said Joe Picone, Richmond, Va.-based chief claim officer of Willis North America Inc.

“Employers really have to bond together and get this changed,” Mr. Picone said. “Otherwise, they're going to be in the dark about their claims.”

%%BREAK%%

Cathy DeWitt, vice president of governmental affairs for the Texas Association of Businesses, said employers are hiring their own attorneys to communicate with insurer counsel. The association is lobbying for legislation that would allow direct communication without losing the attorney-client privilege.

“I think it's just more of a hiccup that should be addressed, but obviously it does increase the cost for employers,” Ms. DeWitt said.

The Montana case is American Zurich Insurance Co. v. Montana Thirteenth Judicial District Court et al. and the Texas case is In Re: XL Specialty Insurance Co. and Cambridge Integrated Services Group Inc. (see related story).

Experts note that neither affects self-insured employers, because those companies serve as the insurer that would be allowed privileged access to legal information.

However, for insured clients, insurers and TPAs have issued notices indicating that they would limit legal information on workers comp cases.

“With the exception of certain Montana-specific reports, ... employers insured under a workers compensation policy will not receive claim information from Travelers or any third-party administrator handling Travelers policies, beyond that which is necessary to assist an injured worker to return to work,” according to an undated memo from Travelers. “The information will be limited to applicable work restrictions, if any, or release to return-to-work status. All other claim information ... will not be provided.”

In an email last month to clients, broker Lockton Cos. L.LC. said that “access to (risk management information) systems is being restricted or eliminated” by workers comp insurers in light of the Texas and Montana rulings. “It is predicted that a majority of carriers and third-party administrators will begin to communicate similar positions on these matters.”