They need to make sure that their processes for instructing legal and non-legal advisers provide the protection which insurers expect.
The ruling was directly related to tax advice but will also have impact on other professionals such as loss adjusters, forensic accountants and claims consultants who advise on issues in disputes and investigations.
Insurance companies rely on this advice so they need to know how it relates to legal professional privilege.
Legal professional privilege (LPP) keeps communication between a lawyer and their client confidential and it means that information cannot be disclosed even during the course of most trials, though sometimes an exception is made when fraud is involved.
The Prudential case tested whether this could be extended to cover legal advice provided by non-lawyers, in this case a tax adviser. The Supreme Court said that it could only be extended by a new law, not by a court's interpretation of the existing law.
How does this affect insurers?
Insurers should remember that communication between them and non-legal professionals are not protected by LPP, even if discussing a legal matter.
This means that insurers should consider the wider use of lawyers in certain processes, such as:
- the management of claims: insurers should review how and when they instruct their legal and non-legal advisers such as loss adjusters and claims managers.
- investigations by those who are insured: under certain liability policies, insurers may fund investigations commenced by the people they insure. The leading accountancy firms commonly offer this service but insurers, who may be asked to contribute to the costs, will want to ensure they are protected by privilege through the suitable instruction of legal counsel in relation to the investigation.
- fact-finding investigations: where fact-finding investigations are needed in relation to likely coverage litigation, litigation privilege may or may not attach to such an exercise depending whether the dominant purpose test required by litigation privilege is satisfied. To maximise protection through legal advice privilege, the coverage investigation should be led early on by lawyers, either internal or external, and any interviews should be conducted by lawyers. If a written or oral report is produced at the conclusion of the exercise, it should be written by a lawyer and interweave legal analysis and fact.
Practical points for maintaining privilege
Here are some ways to ensure that internal structures and systems preserve confidentiality and maintain privilege in relation to legal advice.
- If legal advice is required it is important to ensure lawyers, internal or external, are involved early on to maximise the protection afforded by privilege.
- It must be clear who the 'client' is - legal privilege will not apply to the whole team seeking legal advice. Only the client should prepare letters of instruction, briefing notes and meeting agendas/minutes for the purposes of seeking legal advice. Employees who are not the client should not prepare documents or written communications on the subject relevant to the legal advice.
- If a fact finding investigation is needed, ideally lawyers should be instructed to commission the investigation and report.
- If litigation privilege is sought, before an expert adviser is instructed to prepare a report, it is important to consider whether the purpose of the report is to obtain advice or evidence in relation to litigation. If the report is being made to cover various issues, one of which is in relation to litigation, a separate report should be prepared.