Communication via brokers held not to be privileged

Sandra Sithole

A US court has ruled that communications between lawyers and insurers which passed through a London broker are not privileged. This is because entrusting lawyer advices to a third party, such as a third party broker, amounts to a waiver of privilege since those communications are no longer confidential.

The London brokers acted as nothing more than an intermediary or clearing house for the policies and claims information.

The matter related to a series of liability insurance policies issued to the defendant national railroad passenger service Amtrak more than three decades ago which obliged the plaintiff insurers to reimburse Amtrak for costs incurred in connection with environmental waste and asbestos exposure allegedly found on Amtrak’s property.

The issue was whether attorney-client communications regarding the claims were protected from disclosure even though, due to the unique structure of the London insurance market at the time, those communications were shared with third parties being the London brokers.

According to the court the fact that a particular method of distributing or retaining documents is standard in an industry does not determine whether the method of distribution conforms to the law of attorney-client privilege.

Privilege can be claimed for direct communications between the attorney and the insurer.

The court held that by sharing the communication with the brokers, the insurer disabled itself from claiming that the communications were intended to be confidential and waived the privilege.

The principles are the same in South African law. Privilege can be claimed for direct communications between the attorney and the insurer. If the broker is acting for the insured or for various parties other than the specific client of the attorney, any communication made by the attorney to the insurer via the broker will result in that communication losing its confidentiality.

(Certain Underwriters of Lloyds v National Railroad Passenger Corporation et al)

First published by: Financial Institutions Legal Snapshot