Law Report: Insurers are entitled to solicitor's documents: Brown v Guardian Royal Exchange Assurance plc. Court of Appeal (Lord Justice Neill, Lord Justice Hoffmann and Lord Justice Waite), 25 January 1994

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The Independent Online
Documents arising from a claim for professional negligence in the possession of solicitors instructed under a professional indemnity policy to act for the insured solicitor facing the claim could, under the terms of the policy, be disclosed to the insurers in an action between the insurers and the insured solicitor.

The Court of Appeal allowed an appeal by the defendant insurers from a decision of Judge Anthony Diamond QC that documents between the plaintiff, Alastair Graham John Brown, and his solicitors, Reynolds Porter Chamberlain, were privileged and could not be disclosed to the insurers.

Mr Brown, a solicitor, was sued for negligence by a couple for whom he had acted in a conveyancing transaction.

Mr Brown was compulsorily insured under a professional indemnity insurance master policy. In accordance with the insurance policy, the brokers obtained the insurers' authority to instruct solicitors, Reynolds Porter Chamberlain, to act for Mr Brown.

After a conference with counsel, attended by the solicitors and Mr Brown, the insurers repudiated liability for any loss on the ground that Mr Brown might have been not merely negligent but dishonest.

Mr Brown started arbitration proceedings against the insurers claiming he was entitled to be indemnified.

The insurers pleaded that Mr Brown had been dishonest and asked for discovery of the solicitors' file during the period when they were acting for Mr Brown.

However, Mr Brown objected, claiming that the documents were protected by legal professional privilege.

Richard Seymour QC and John Brisby (Barlow Lyde & Gilbert) for the insurers; Gavin Lightman QC and Philip S Marshall (Eatons) for Mr Brown.

LORD JUSTICE HOFFMANN said that there was no dispute that the solicitors acted as Mr Brown's solicitors and that as against anyone but the insurers, the documents were privileged.

The terms on which the solicitors were engaged to act for Mr Brown were expressly spelled out in clause 8 of the policy, which provided that the insurers might require the solicitors' reports to be submitted directly to them.

That meant any communications which the solicitors received from Mr Brown or from third parties concerning the subject matter of the claim were to be disclosable to the insurers.

Such disclosure was necessary to enable the insurers to make an informed decision about whether to make an offer of settlement or payment into court or whether to defend the claim.

Clause 8 said that the insurers were entitled to reports as to everything which the solicitors had learned about the claim.

The solicitors could not have given the insurers an intelligible report on the prospects of the claim succeeding without at the same time expressing a view on whether Mr Brown had been fraudulent, negligent or neither.

The effect of the policy was that anything which Mr Brown said to the solicitors was to be treated as having been said to the insurers and Mr Brown must be taken to have known this.

Under the policy the insurers were entitled at any time to reports on whatever transpired during the subsistence of the retainer.