Key facts: Privilege over insurer s documents

Transcription

1 Privilege over insurer s documents Two recent decisions, one of the High Court of Ireland and the other of the High Court of England and Wales, examined the issue of litigation privilege. They have given some guidance as to when this privilege may be asserted and the factors considered by a court when this privilege is challenged. Key facts: To assert the privilege insurers should be careful to show that the documents were created in contemplation or reasonable apprehension of litigation The different aspects of the privilege that are considered in the two decisions are examined and matters that may need to be considered by insurers in their preliminary investigations are outlined. The Rhatigan Case In Rhatigan & Ors v Eagle Star Life Assurance Company of Ireland 1 the High Court considered the issue of when an insurer can claim privilege over documents produced in the course of its investigations into a potential claim. Background The Plaintiffs are the personal representatives of the late Noel Rhatigan ( the deceased ) and claimed to be entitled to payment in the sum of 2,000,000 on foot of a contract of insurance made between ACC Bank PLC and Eagle Star Life Assurance Company of Ireland Limited ( the Defendant ) on the life of the deceased and assigned to the Plaintiffs by ACC Bank. The deceased had been a director and shareholder in a company called Clydebay Holdings Limited which had obtained loan facilities from ACC Bank. It had been a condition of those loan facilities that a policy of life assurance in the sum of 2,000,000 on the life of the deceased be put in place as security ( the policy ). The policy was put in place on 12 May 2004, with a commencement date of 1 June According to the Statement of Claim issued by the Plaintiffs the deceased was diagnosed with cancer on 8 June He died on 30 August The policy was repudiated by the Defendant. This was challenged by the Plaintiffs, who have initiated High Court proceedings. In its Defence the Defendant asserted that the policy was void and/or voidable upon grounds of misrepresentation and non-disclosure of Insurers should give thought to the preparation of separate documents if there is any aspect of an attempt being made to assert the litigation privilege over a dual-purpose document For further information please contact Sarah Conroy Partner E: s.conroy@beale-law.com Ruadhan Kenny Trainee Solicitor E: r.kenny@beale-law.com. 1 [2013] IEHC 139

2 material facts regarding the deceased s medical history, his lifestyle and the history of illness in his family. Issue before the Court This matter came before the Court in January The Plaintiffs sought an Order requiring the Defendant to produce for inspection a number of documents over which it had claimed litigation privilege. The documents in question comprised an exchange of letters between the Defendant and one of its re-insurers between September 2004 and May 2006 and letters exchanged between the Defendant and another of its re-insurers between September 2004 and February The Plaintiffs disputed the claim to litigation privilege on the grounds that the documents in question could not have been created in contemplation of, or for the purpose of, litigation because they predated the point in time at which litigation could have been apprehended by, or in the contemplation of, the Defendant. The Plaintiffs position was that the first intimation of any litigation was a letter of 10 August 2006 and that all documents created before that date could not, therefore, be covered by litigation privilege. The Defendant s argument was that litigation had been contemplated since August Evidence was given that ACC Bank had contacted the Defendant by telephone on 26 August 2004 requesting a terminal illness claim form 2. The Defendant s evidence was that this aroused suspicion as the deceased had apparently been in good health less than three months earlier. The Defendant stated that from the very outset it envisaged repudiating the policy and declining the claim. As evidence of this it pointed out that it had requested a report from the deceased s general practitioner with a view to investigating non-disclosure of his medical history. It stated that an insurance company expects and contemplates litigation when it refuses to pay out on foot of a claim made on a policy of insurance. The Defendant further stated that the correspondence in question was with two re-insurers which jointly carried the vast majority of the risk of the insured sum. It was argued that, on that basis, the correspondence was equivalent to internal communication within an insurance company that is preparing to defend a claim which it does not accept to be valid. The Defendant said that the claim (made in August/September 2004) was not merely being investigated but it was being investigated with a view to repudiating the policy and declining the claim. 2 This form is used to claim payment of the life cover benefit in advance of death as provided for under the policy in question where a life insured has been diagnosed with a medical condition and the life expectancy is less than 12 months.

3 Decision of Mr Justice Cooke Cooke J stated that the issue raised by the Plaintiffs application concerned the point in time at which litigation privilege could be asserted as an entitlement. He stated that where litigation has actually been commenced there will be little difficulty for a Defendant that asserts privilege in respect of documents written after that date in connection with the litigation. He went on to state that the entitlement to claim privilege also extends to communications brought into existence prior to the actual commencement of litigation provided it is shown that litigation was contemplated or reasonably apprehended. In this regard he noted the adoption by O Hanlon J in Silverhill Duckling Limited v Minister for Agriculture 3 of the view expressed by the House of Lords in Waugh v British Railways Board 4. Cooke J also cited the judgment of McCracken J in Fyffes v DCC 5 and the observation that the principle of privilege in the preparation or conduct of litigation requires that a litigant must be in a position to communicate freely with their legal advisors and entitled to obtain expert evidence from third parties to assist, not only in the preparation of a case, but also in the assessment of whether there is a case to be made. Cooke J held that the Defendant was entitled to assert litigation privilege over the documents in question. He placed particular emphasis on the fact that the Defendant had repudiated a life insurance policy on the grounds of misrepresentation and nondisclosure. He stated that where the payment otherwise due under such a policy is a substantial sum a company in the Defendant s position will have to take into account the likelihood of the repudiation being contested by litigation. He went on to state that where the taking of the decision to repudiate is so likely to provoke litigation the steps taken by an insurer towards making such a decision must necessarily be characterised as steps taken in apprehension of litigation. In the present circumstances he stated that it followed that the same principle must extend to communications which come into existence in such circumstances between an insurer and its re-insurer, given that the re-insurer will be exposed to potential liability if inadequate steps or investigation are adopted or the wrong decision on repudiation is taken. 3 [1987] IR [1980] AC [2005] 1 IR 59

4 The Tchenguiz Case In Tchenguiz & Anor v Serious Fraud Office & Ors 6 the High Court of England and Wales found that the third party against whom disclosure (discovery) had been sought pursuant to CPR was not entitled to assert litigation privilege. Edar J held that the mere fact that a document is produced for the purpose of obtaining information or advice in connection with pending or apprehended litigation, or of helping with such litigation, is not sufficient to found a claim for litigation privilege. The party claiming litigation privilege must show that the document in question was produced for the dominant purpose of assisting with the pending or apprehended litigation. It was stated that the purpose test is one of dominance and not exclusivity, although the threshold for passing the test is relatively high. The critical question is the purpose for which the document was actually produced and not the use to which it was eventually or actually put. Edar J also addressed the issue of pending, contemplated or existing litigation. He said that the test for finding same was not a mere mathematical test but an assessment as to whether a specific litigation is a real likelihood. Neither a distinct possibility that a claim may be made at some point nor a general apprehension of future litigation is sufficient. Key facts: Insurers should be wary of seeking to assert litigation privilege over documents that have been created either for a dual purpose or of seeking to assert litigation privilege over documents created for some other purpose that are subsequently relied on in any litigation. Comment Although on the face of it both decisions appear to deal with the same points there are some subtle differences. The Court in Rhatigan focused on the mindset and experience of the insurers when the documents in question were created. It noted that the creation of these documents were a key step in the taking of a decision that would, most likely, lead to litigation. The timing of the creation of the documents was crucial, as the creation of those documents was a link in the chain of events that ultimately lead to the litigation coming into being. It would appear that the Defendant certainly had pending, contemplated or existing litigation (to use the wording of Tchenguiz) of a specific nature in mind when creating the documents. However, in Tchenguiz, the main focus of the English Court was on the purpose of the creation of the documents in question. Had this test been applied by the Irish Court it is arguable that the assertion of the litigation privilege would not have been upheld. The standard demanded in respect of dominant purpose certainly seemed to be higher than that required by the Irish Court. 6 [2013] EWHC 2297 (QB) (26 July 2013)

5 Matters for Consideration by Insurers Whilst this decision of Cooke J is certainly helpful to insurers it should also serve as a reminder of the risk that a Plaintiff might later seek disclosure of internal documents created early in an insurer s investigation into a claim. To assert the privilege insurers should be careful to show that the documents were created in contemplation or reasonable apprehension of litigation. Obviously the individual circumstances of each case will be crucial in establishing that this contemplation/reasonable apprehension existed and that there was a valid basis for it. The Tchenguiz decision shows that insurers should be wary of seeking to assert litigation privilege over documents that have been created either for a dual purpose (i.e. in contemplation of pending or apprehended litigation and some other purpose) or of seeking to assert litigation privilege over documents created for some other purpose (e.g. preparing a renewal quote) that are subsequently relied on in any litigation. Insurers should give thought to the preparation of separate documents if there is any prospect of an attempt being made to assert the litigation privilege over a dual-purpose document. September 2013 For further information please contact Sarah Conroy Partner E: s.conroy@beale-law.com Ruadhan Kenny Trainee Solicitor E: r.kenny@beale-law.com