Protecting your privilege: a refresher on legal professional privilege for insurers

In brief - Legal professional privilege has some special considerations for insurers

This article examines the dominant purpose test, legal advice privilege, litigation privilege, joint privilege, common interest privilege and waiver of privilege in the insurance context with reference to relevant cases.

What is legal professional privilege?

Legal professional privilege (LPP) protects from disclosure to third parties, the Court and regulators confidential communications between a client and their lawyers or the contents of a confidential document (prepared by the client, lawyer or another person), for the dominant purpose of:

the lawyer (or lawyers) providing legal advice to the client – known as legal advice privilege, or the client being provided with professional legal services relating to an existing or anticipated proceeding, either in Australia or overseas, in which the client is or may be, or was or might have been, a party - known as litigation privilege. What is covered by legal professional privilege?

The protection extends to all types of communications, whether oral or written, hard copy or electronic. It includes emails, photographs, taped telephone calls, electronic diary entries and voicemails.

LPP is a fundamental touchstone of all legal systems derived from the English common law. As the Law Council of Australia (the peak national representative body of the Australian legal profession) states on its website:

The proper administration of justice requires that clients are able to communicate freely and frankly with their lawyer, without fear of disclosing any information relevant to the legal advice they are seeking.

In Australia, LPP is statute-based, in the State and Federal Evidence Acts (in New South Wales, the Evidence Act 1995 (NSW)). LPP also arises under the common law.

Key elements required for LPP

The critical elements required for LPP in Australia are:

confidentiality the document or communication was created for the "dominant purpose" of legal advice, or providing legal services in respect of anticipated or existing Court proceedings, and it must be a communication with a lawyer. This can include an in-house lawyer as long as they are sufficiently independent of the employer such that the in-house lawyer's personal loyalties, duties or interests do not influence the advice given: Waterford v Commonwealth (1987) 163 CLR 54, Seven Network Ltd v News Ltd [2005] FCA 142. The all-important dominant purpose test

The "dominant purpose" test is critical and will be a question of fact in each case.

Specific issues arise for insurers, particularly when instructing external experts, as evidenced by the recent case in the Supreme Court of Victoria, Samenic Ltd (formerly Hoyts Cinemas Ltd) v APM Group (Aust) Pty Ltd [2011] VSC 194.

In Samenic, a fire occurred in a cinema. The insurer retained external solicitors on behalf of both the insurer and the insured (the owner of the cinema) and retained loss adjusters, who were initially retained by the claims department of the insurer and then formally retained by the insurer's external lawyers.

The loss adjusters retained a forensic consultant specialising in fire and explosion investigations to investigate...