MODEL CONTRACT

PRIVILEGE NON-WAIVER AGREEMENT

USE NOTES: The policyholder and the plaintiff has agreed to cooperate and desire to communicate confidential information that they choose to withhold from the insurer through discovery. Several paragraphs suggest alternative language. Adapt the contract below by using the Legend. Before sending the text below, delete everything above this line.

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PRIVILEGE NON-WAIVER AGREEMENT

RECITALS

1.	Parties

This Non-Waiver Agreement (Agreement) is between &Client& (&Client&), &IndependentCounsel& (&IndependentCounsel&), &Plaintiff& (&Plaintiff&), &PlaintiffCounsel& (&PlaintiffCounsel&) and &CoverageCounsel& (&CoverageCounsel&) (collectively the Parties). &IndependentCounsel&), &PlaintiffCounsel& and &CoverageCounsel& may each be referred to as "Law Firm". &Client& and &IndependentCounsel& may each be referred to as "Client".

2.	Liability Dispute

&Plaintiff& sued the &Client& in an action entitled &Plaintiff& v. &Client& (Liability Action). The &Client& is represented by &IndependentCounsel& (&IndependentCounsel&). &Plaintiff& is represented by &PlaintiffCounsel& (&PlaintiffCounsel&). &Client& and &Plaintiff& are adverse to each other in the Liability Dispute.

3.	Coverage Dispute

The &Client& warrants that it is a policyholder of each of the policies described in paragraphs A and B immediately below.

A.	&InsCo& (&InsCo&1) issued a policy of liability insurance bearing Policy no. __ to &Client& with limits of liability of $__ by which it agreed to pay those sums that &Client& becomes legally obligated to pay as damages because of physical injury to tangible property, including all resulting loss of use of that property and loss of use of tangible property that is not physically injured and agreed that it has the duty to defend the &Client& against any lawsuit seeking those damages.

Alt.	B.	&InsCo& (&InsCo&2) issued a policy of liability insurance bearing Policy no. &Blank& to the &Client& with limits of liability of $__ by which &InsCo& agreed to pay on behalf of the &Client& amounts that the &Client& becomes legally obligated to pay as the result of claims made against it for any error, act, omission, neglect, or breach of duty by the &Client&. &InsCo&1 and &InsCo&2 are sometimes referred to as Insurers.

4.	Notice of Suit

On &Date&, &Client& notified &InsCo& of the Liability Action and requested that it defend and indemnify &Client&. &InsCo& agreed to defend &Client&, but then withdrew its defense. Thereafter, a Second Amended Complaint was filed in the Liability Action. On &Date&, &Client& notified &InsCo& of the amended pleading and requested that it defend and indemnify &Client&. On &Date&, &Client& notified of Liability Action and requested that it defend and indemnify &Client&. On &Date&, &Client& notified of Liability Action and requested that it defend and indemnify &Client&.

5.	Failure to Investigate

After notice, the Insurers did not conduct a thorough investigation. The Insurers did not contact or interview &Client&, &IndependentCounsel&, &Plaintiff&, &PlaintiffCounsel&, or any witnesses.

6.	Coverage Denial

The Insurers denied coverage and failed to faithfully defend or indemnify &Client& in the Liability Action.

Alt.	6.	Agreement to Defend

The Insurers agreed to defend &Client& in the Liability Action, but failed to faithfully defend or indemnify &Client& in the Liability Action.

7.	Failure to Pay for Defense

&Client& retained &IndependentCounsel& to defend &Client& in the Liability Action. &Client& transmitted to the Insurers &IndependentCounsel&'s invoices for defense fees and costs. Each invoice constituted a first party claim. The Insurers failed to timely pay invoices in the amounts required by law.

8.	Settlement Opportunity

On &Date&, &Plaintiff& offered to settle the Liability Action with &Client& on terms set forth in Exhibit 2 attached hereto, for a sum that is less than the Insurers' policy limits. &Client& notified the Insurers of this settlement offer and requested that the Insurers accept the offer of settlement on terms set forth in Exhibit 3 attached hereto. The parties believe and notified the Insurers that this offer was fair and reasonable when made because &Client& was faced with a substantial likelihood of a recovery by &Plaintiff& in excess of the applicable limits of the Insurers' insurance policy based on the damage claimed by &Plaintiff& and the evidence regarding &Client&'s legal responsibility for causing such damage. "The law favors settlements." (Potter v. Pacific Coast Lumber Co. (1951) 37 Cal.2d 592, 602.)

9.	The Insurers' Refusal to Settle

The Insurers rejected &Plaintiff&'s settlement offer because they denied coverage under the policy.

10.	&Client&'s Inability to Pay Settlement

&Client& was not financially capable of accepting &Plaintiff&'s settlement offer in part because &Client& had incurred or paid &IndependentCounsel&'s defense invoices which the Insurers failed to reimburse. Also, certain provisions of the Insurers' policies seem to require &Client& to adjudicate liability and damages.

11.	Procedural Agreements

Because of budget cuts in the judicial system, &Client& and &Plaintiff& agreed to try the Liability Action by a general reference and further agreed to certain procedural efficiencies. &Client& notified the Insurers of the Parties' stipulation. on terms set forth in Exhibit 4 attached hereto.

12.	Coverage Action

&Client& sued the Insurers in an action entitled &Client& vs. &InsCo&. (Coverage Action).

13.	&Client&'s Liability and &Plaintiff&'s Damages

&Client& was concerned that &Client& may be found to be legally obligated to pay damages to &Plaintiff& because of breach of duties it owes to &Plaintiff& and because of physical injury to tangible property and loss of use thereof caused by an accident and exposure to harmful conditions in a substantial sum.

Alt.	14.	Settlement

&Client& agreed to enter into a settlement agreement with &Plaintiff& rather than incur additional expense and risk a judgment in excess of the settlement amount. (Not recommended)

Alt.	14A.	Arbitration

&Client& agreed to enter into a settlement agreement with &Plaintiff& to arbitrate the Liability Action.

Alt.	14B.	Trial by General Reference

&Client& agreed to enter into a settlement agreement with &Plaintiff& to resolve the Liability Action by a trial by general reference.

15.	Notice of Resolution

&Client& notified the Insurers of the resolution of the Liability Action and requested that the Insurers pay the (settlement or judgment). The Insurers refused to pay the (settlement or judgment).

16.	Assignment and Covenant

&Client& and &Plaintiff& have agreed to cooperate with each other to protect their mutual interests and to assign certain rights and to assume certain obligations to each other. &Client& "need not indulge in financial masochism. . . . [h]aving executed an assignment . . . may relax into neutrality or even smile benevolently upon the [&Plaintiff&'s] efforts to collect from the Insurers. (Critz v. Farmers Ins. Group (1964) 230 Cal.App.2d 788, 801.).

17.	Notification to the Insurers

&Client& notified the Insurers that: 1) &Plaintiff& sued &Client& in the Liability Action; 2) &Plaintiff& offered to settle the Liability Action with &Client&; 3) &Client& was concerned about &Client&'s exposure to to pay damages to &Plaintiff& in a substantial amount; 4) &Plaintiff& and &Client& intended to resolve their liability dispute; and 5) &Client& incurred defense fees and costs through &IndependentCounsel& and transmitted invoices to the Insurers. "[I]f an insurer denies coverage to the insured, the insured's contractual obligation to notify the insurer ceases." (Samson v. Transamerica Ins. Co. (1981) 30 Cal.3d 220, 238.)

18.	Coverage Action

&Client& sued the Insurers in an action entitled &Client& vs. Insurers. (Coverage Action). Upon execution of the Agreement, &Plaintiff& may join and a plaintiff in the Coverage Action. &Client& and &Plaintiff& are represented by &CoverageCounsel&.

19.	Malpractice Action

On &Date&, &Client& sued &DependentCounsel& in an action entitled &Client& vs. &DependentCounsel& bearing Case No. ___ for legal malpractice, breach of fiduciary duty, declaratory relief, and disgorgement of attorneys fees and costs &DependentCounsel& accepted from the Insurers in violation of Rule 3-310(F) (Malpractice Action).

20.	Potential Conflicts of Interest

&Client& and &Plaintiff& understand and acknowledge that: 1) their interests conflict in the Liability Action and that they share some common interests in the Coverage Action and the Malpractice Action; 2) their relationships with other Parties to this Agreement will change upon execution of this Agreement; 3) each has had the opportunity to consult with independent counsel who are not a Party to this Agreement; 4) potential conflicts of interest that may divide &Client& and &Plaintiff& regarding the sharing of Confidential Information and the execution of the Agreement; and 5) each must give informed written consent to execute this Agreement. &Client& and &Plaintiff& desire to: 1) protect the confidentiality of privileged information; and 2) share Confidential Information to protect the common interests in the Coverage Action and the Malpractice Action.

21.	Common Interests

Although the &Client& and &Plaintiff& are adverse to one another in the Liability Action, they are not adverse to each other in the Coverage Dispute. They have common interests in securing insurance coverage for the Liability Dispute and intend to cooperate with each other to achieve their shared goals, namely a joint response and joint prosecution or defense in any coverage litigation, the reduction of the financial burden on the &Client& and &Plaintiff&, the shifting of liability to the insurers, and the minimization of legal fees and expenses. To promote these common interests, the &Client& and &Plaintiff& wish to cooperate with each other as memorialized in this Agreement.

22.	Confidential Information

The Parties intend to share certain privileged communications which are protected by the attorney-client privilege and/or the work product doctrine to protect the Parties' common interests in the Coverage Dispute. The Parties do not intend to waive the evidentiary protection of the attorney-client privilege nor the work product doctrine by disclosure of information or work to one another, pursuant to the common interest doctrine.1 The phrase "Confidential Information" refers to each and every item of confidential information - otherwise privileged or protected by the attorney-client privilege or the attorney work products doctrine - which has been or is hereafter communicated among or between the Parties, or any of them, by reason of the determination by a Law Firm that such disclosure is reasonably necessary to accomplish the representation of each Law Firm's Client with regard to the Coverage Dispute.

AGREEMENT

1.	Privileged Disclosure

Pursuant to the terms of this Agreement and solely for purposes of protecting their common interests, &IndependentCounsel&, &PlaintiffCounsel&, and &CoverageCounsel& may elect to disclose Confidential Information to one another, or a Law Firm may consent to the disclosure by its Client to other Parties. All Confidential Information disclosed in such communications shall be disclosed only as reasonably necessary to promote their Common Interests, shall not be disclosed to third parties, and notwithstanding such limited disclosure shall remain privileged whether under the attorney-client privilege, the work produce doctrine, California Evidence Code §912(d), or other applicable law. The Parties acknowledge and agree that a court of competent jurisdiction may order that this Agreement and Confidential Information be disclosed to the court in camera.

2.	Non-Disclosure to Others

No one receiving a disclosure of Confidential Information pursuant to this Agreement shall use any of that information either during the term of this Agreement or thereafter for any purpose other than as permitted by this Agreement, or disclose such Confidential Information to any third party, without the prior express consent of the holder of the privilege as to such Confidential Information.

3.	Voluntary Disclosure

Any disclosure of Confidential Information by a Party to one of the other Parties shall be voluntarily and shall depend solely on a determination by the disclosing Law Firm that the disclosure is reasonably necessary to advance the common interests of its Client. Nothing in this Agreement shall require any Party to disclose any confidential or privileged information to the other Law Firm or Client.

4.	Holder of Privilege

The restriction on disclosure of Confidential Information to third parties imposed by this Agreement shall apply only to confidential information obtained by &IndependentCounsel&, the &Client&, &PlaintiffCounsel&, &Plaintiff&, or &CoverageCounsel&. As to any privileged information disclosed by a Party to another Party, the holder of the privilege of such information has and shall continue to retain the exclusive right to waive the privilege as to such information.

5.	Limited Duties

By entering into this Agreement neither &IndependentCounsel& nor &PlaintiffCounsel& undertakes any duty to the Client of the other Law Firm of competent representation, undivided loyalty, or disclosure. The Parties do accept a duty to other Parties of confidentiality.

6.	Termination

Each Party's right to continue participation in this Agreement automatically shall be terminated upon the occurrence of any of the following events:

• Either Client elects to terminate participation, such election to be effective upon written notice to Law Firm for the other Client;

• The Coverage Dispute is finally resolved;

• Either Law Firm terminates its representation of its Client with respect to the Coverage Dispute;

• An actual conflict of interest arises between either Client regarding the Coverage Dispute; or

• Either Client asserts a claim against the other (except the Liability Action), and the claim substantially relates to the Coverage Dispute.

7.	Return of Confidential Information

Upon termination of this Agreement, the rights of each Law Firm and the Clients to participate in the Confidential effort immediately shall cease and:

• Each Law Firm and its Client shall return to Law Firm for the other Client the originals and all copies of all written Confidential Information received pursuant to this Agreement; and

• Each Law Firm and its Client shall continue to be precluded from disclosing any and all Confidential Information received under this Agreement to any third party as though the Confidential effort remained in effect.

8.	Conflict of Interest Waiver

&Client& and &Plaintiff& have read and understand Rules of Professional Conduct, Rule 3-310 and acknowledge that &CoverageCounsel& has made written disclosure to them of the relevant circumstances and of the actual and reasonably foreseeable adverse consequences to each by their joint representation by &CoverageCounsel&. &Client& has been advised by &IndependentCounsel& and &Plaintiff& has been advised by &PlaintiffCounsel& regarding Rule 3-310, the Coverage Action, the Malpractice Action and this Agreement. &Client& and &Plaintiff& acknowledge that each has had the opportunity to consult with independent counsel who have no interest in this Agreement regarding the subject matter of this Agreement. &Client& and &Plaintiff& give their informed written consent and agree to waive potential conflicts of interest that may divide &Client& and &Plaintiff& regarding the joint retention of &CoverageCounsel& and the execution of the Agreement. &Client& and &Plaintiff& give their informed written consent and agree to execute this Agreement to which &IndependentCounsel&, &PlaintiffCounsel&, and &CoverageCounsel& are also Parties.

9.	Miscellaneous

A.	Truthful Testimony

The Parties agree to give truthful testimony upon reasonable notice without the necessity of service of legal process, e.g., a subpoena in deposition, at trial, upon any court hearing or legal proceeding in each Action.

B.	Additional Documents

The Parties agree to sign all papers and to execute and deliver such other additional documents as may be required to effectuate each of the terms of this Agreement. This Agreement is not the only agreement among these Parties.

C.	Costs

Except as otherwise provided, each Party shall bear his or its own respective costs and attorneys' fees incurred in connection with preparation and execution of this Agreement.

D.	Binding Effect

This Agreement and all the terms, conditions and obligations contained herein are binding upon and inure to the benefit of the heirs, executors, administrators, personal representatives, successors in interest and assigns of each Party.

E.	Warranty of Authority

Each Party executing this agreement directly or in a representative capacity represents and warrants that he or it has the authority and is empowered to do so.

F.	Attorneys Fees and Costs

The Parties agree to pay their own costs, expenses, and attorneys' fees incurred in connection with negotiation and execution of this Agreement. Should any Party hereto institute any legal action or proceeding to enforce any provision of this agreement or for damages by reason of any alleged breach of any provision of this agreement, the prevailing Party shall be entitled to receive from the losing Party all of its costs and expenses, including, without limitation, reasonable attorney fees, court costs, and disbursements actually and reasonably incurred in connection with said proceeding.

G.	Time Is of the Essence - Condition

Time is of the essence in this Agreement. This Agreement is conditioned upon acceptance of these terms by all parties in writing no later than &Date& and completion of all obligations by the dates specified in this Agreement and Related Documents. The signatures of each Party to this Agreement shall constitute his or its signature, where required, to each of the Related Documents.

H.	Construction

This Agreement shall be construed without regard to who drafted same, and shall be construed as though all hereto participated equally in the drafting of the Agreement. The Parties agree that any rule pertaining to the construction of contracts to the effect that ambiguities are to be resolved against the drafting party shall not apply to the interpretation of this Agreement.

I.	California Law

This Agreement, including matters of construction, validity and performance, shall be interpreted, governed by and construed in accordance with the laws of the State of California. If any provision of this agreement is invalid or contravenes California law, such provision shall be deemed not to be a part of this Agreement and shall not affect the validity or enforceability of the remaining provisions. Any action arising out of this Agreement shall be brought in the Superior Court for the State of California, County of Los Angeles.

J.	Specific Performance

No adequate remedy is available at law for breach of this Agreement. In addition to any other remedy available, performance of this Agreement shall be specifically ordered, and a breach of this Agreement may be enjoined by the affected holder of a privilege.

K.	Counterparts

This agreement may be executed in multiple counterparts, each of which shall be deemed to be an original and all of which together shall constitute one document. A facsimile, scan or PDF copy of an originally executed counterpart signature shall be afforded the same validity as the originally executed counterpart.

L.	Headings

The paragraph headings contained in this Agreement are for convenience only and shall not be considered for any purpose in construing this Agreement.

M.	Number and Gender

As used in this Agreement, the singular shall include the plural, and the masculine shall include the feminine and neuter gender.

N.	Amendment

This Agreement may not be modified, amended, supplemented, or terminated, and no provision of this Agreement shall be waived, except by a writing executed by all of the Parties to this Agreement.

O.	Notices and Demands

Any notice or demand hereunder shall be made in writing mailed by certified mail, return receipt requested, or hand delivered, to the Parties addressed as follows:

&Client&

care of

&IndependentCounsel&

&Plaintiff&

care of

&PlaintiffCounsel&

P.	Effective Date

This Agreement is executed at Los Angeles, California and shall be effective on the following date.

Date: ______________

&PlaintiffCounsel&

______________________________	______________________________

&Plaintiff&	By:

&Client&	&IndependentCounsel&

______________________________	______________________________

By:	By:

&CoverageCounsel&

______________________________

By: