The Colorado Supreme Court returned an appeal to a trial judge last week, telling her to redo her ruling allowing for the disclosure of potentially confidential documents after she acknowledged she used the wrong standard the first time.

In the underlying case, Hill Hotel Owner, LLC constructed a 189-room hotel in Boulder, which opened this year. In 2022, damage occurred to the concrete garage floor at the construction site. Hill Hotel and its insurer, Hanover Insurance Company, disagreed over the cause of the loss.

After Hanover denied coverage, Hill Hotel sued for breach of contract. In investigating the damage, Hanover had turned to a structural engineer, who believed contractor negligence was the issue. After Hill Hotel retained a law firm, Hanover hired another structural engineer, whose conclusions Hanover used to again deny the insurance claim.

In March, the parties notified Denver District Court Judge Jill D. Dorancy of a dispute over emails and other documents involving the two engineers. Hanover claimed they were shielded by attorney-client privilege, but Hill Hotel argued documents “generated by an insurer before its denial of coverage” were not protected because they were not prepared “in anticipation of litigation.”

Dorancy agreed and ordered Hanover to disclose communications the engineers made to Hanover’s lawyers.

On appeal to the Supreme Court, the parties and outside entities argued over when the communications of an insurance company’s counsel become privileged. However, the case took an unexpected turn when Dorancy filed her brief. She admitted the rationale she used in ordering disclosure — that the communications were not made “in anticipation of litigation” — was wrong.

“The District Court respectfully requests that this matter be remanded for it to apply the correct privilege test in the first instance,” wrote Assistant Solicitor General Talia Kraemer for Dorancy.

During oral arguments last month, some justices were concerned about issuing an opinion under the circumstances. They also wondered if they needed to do anything to clarify which standard Dorancy should apply, considering how far apart the parties’ positions were.

Ultimately, the Supreme Court issued an unsigned order on Oct. 29, directing Dorancy to reevaluate the privileged nature of the documents without elaboration.

The case is Hill Hotel Owner, LLC v. Hanover Insurance Company.