An adjuster’s claim file often becomes a focal point in litigation. It can contain witness statements, internal evaluations, communications with experts, and detailed notes of claims handling. These materials provide insight into the insurer’s strategy and reasoning—information that plaintiffs’ counsel routinely seek through discovery. Courts, particularly in South Carolina, have shown limited tolerance for broad or unsupported privilege claims, compelling insurers and defense counsel to carefully structure how claims are documented and communicated.
Two key doctrines—attorney–client privilege and work-product protection—offer potential safeguards. However, South Carolina courts interpret both narrowly, emphasizing factual context and timing over form or intent.
Attorney–Client Privilege in South Carolina
South Carolina law construes the attorney–client privilege strictly, protecting only genuine legal confidences communicated within the attorney–client relationship. The state’s Supreme Court has reaffirmed this narrow approach, noting that the privilege must be “strictly confined within the narrowest possible limits.” State v. Owens, 424 S.E.2d 473 (S.C. 1992); State v. Doster, 284 S.E.2d 218 (S.C. 1981).
Trial courts have consistently applied this rule to insurance litigation. In multiple discovery orders, judges have held that an insurance adjuster’s file is not privileged because the adjuster is neither the attorney nor the client within the protected relationship. The inclusion of third parties in communications—such as adjusters, claim representatives, or other company employees—typically defeats any claim of confidentiality between counsel and client.
For example, in Marshall v. Marshall, 320 S.E.2d 44 (S.C. Ct. App. 1984), the presence of a third party during a privileged conversation was found to eliminate the protection entirely. Following this reasoning, South Carolina trial courts have repeatedly ordered the production of adjuster files, emphasizing that communications between an insured and an insurer, or between an adjuster and others, are generally discoverable unless they were made directly to counsel for the purpose of obtaining legal advice.
Orders issued by the Honorable Thomas W. Cooper, Jr. (2001) and the Honorable Deadra L. Jefferson (2002) both required insurers to produce adjuster files in discovery, finding no prejudice to defendants and noting that discovery’s core purpose is to allow both sides access to the facts needed to resolve the matter fairly. In both cases, the courts rejected the argument that the mere presence of counsel or internal labeling could create privilege.
Key takeaway: In South Carolina, communications between an insurer, its adjusters, and insureds are rarely privileged unless they clearly meet the strict standard of being confidential legal advice exchanged directly with counsel.
Work-Product Doctrine in South Carolina
The work-product doctrine provides broader, but still limited, protection. Originating from Hickman v. Taylor, 329 U.S. 495 (1947), it shields materials prepared “in anticipation of litigation” from discovery. South Carolina follows this principle but insists on a factual showing that the materials were created because of an identifiable likelihood of litigation—not merely as part of the insurer’s ordinary business practices.
The South Carolina Supreme Court, in Tobaccoville USA, Inc. v. McMaster, 387 S.C. 287, 692 S.E.2d 526 (2010), reaffirmed that to qualify for protection, the primary motivation behind creating the document must be preparation for potential litigation. Routine investigation of claims, even when litigation is possible, does not meet this threshold. Courts have repeatedly held that the mere prospect of litigation, or the existence of a letter of representation, is insufficient to cloak the entire claims file in privilege.
Judges in multiple South Carolina circuits have consistently followed this reasoning. Orders by Judges Cooper (2001, 2006), Jefferson (2002), and others through 2021 (including Judges Murphy, Goodstein, McLeod, and Addy) confirm that pre-litigation materials generated before settlement negotiations fail or before an attorney is formally assigned are generally discoverable. These rulings highlight that:
- An insurer’s ordinary evaluation and investigative work is not protected.
- The privilege applies only when litigation is substantially probable and materials are created primarily to assist in that litigation.
- Assigning defense counsel, rejecting a settlement demand, or receiving a formal threat of suit may signal the transition from routine handling to litigation preparation.
In short, the work-product doctrine may include adjuster materials only when they were developed under counsel’s supervision or in direct response to imminent litigation. South Carolina courts have explicitly rejected the notion that the entire claims file is automatically privileged simply because a dispute might lead to court proceedings.
Practical Application for Claims Professionals
Given South Carolina’s restrictive approach, insurers and defense counsel should:
- Recognize early warning signs of litigation. The retention of counsel by a claimant, a rejected demand, or explicit threats of suit mark the shift from business function to legal function.
- Involve defense counsel promptly. Once litigation is reasonably anticipated, ensure that any further investigative activity is directed by counsel and clearly documented as such.
- Separate files and roles. Maintain clear divisions between ordinary claims administration and attorney-directed litigation preparation.
- Avoid over-reliance on labels. Marking a document “confidential” or “privileged” does not make it so; the document’s purpose and context determine its protection.
- Maintain documentation discipline. Record dates of attorney assignment, settlement rejections, and litigation indicators to demonstrate when the file transitioned into anticipation of litigation.
Conclusion
Under South Carolina law, the protections of attorney–client privilege and work-product doctrine apply narrowly and only in well-defined circumstances. Adjuster files are routinely found discoverable unless the insurer can demonstrate that specific documents were created under counsel’s direction and primarily in preparation for imminent litigation.
For insurers and defense attorneys operating in South Carolina, the practical lesson is clear: treat privilege as a condition that must be earned through disciplined documentation and timing, not as a blanket applied after the fact. Establishing clear procedures for when and how claims transition into litigation posture remains the most effective means of preserving confidentiality and minimizing exposure in discovery.
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