A recent Federal Court decision demonstrates the importance of putting adequate safeguards in place to prevent an insured from inadvertently waiving legal professional privilege when disclosing documents to its insurer as part of an insurance claim.

This article considers why the insured in this case was held to have waived privilege and suggests steps that both an insured and insurer might take to guard against such an outcome.

The Asahi case


In the case of Asahi Holdings (Australia) Pty Ltd v Pacific Equity Partners Pty Ltd Limited (No 2)[1],

Flavoured Beverages Group Holdings Limited (FBG) agreed to sell its shares to Independent Liquor (NZ) Limited (ILNZ), acting as the nominated purchaser for Asahi Holdings (Australia) Pty Ltd (Asahi).

It was a condition of the sale agreement that Asahi and ILNZ take out insurance to cover any loss they sustained as a result of any breaches of warranty by FBG (the policy).

Fortunately in one sense such cover was acquired because Asahi and ILNZ subsequently commenced proceedings against FBG, its directors and employees alleging that they had engaged in misleading and deceptive conduct and breached certain warranties as to FBG’s financial position.

The solicitors for Asahi and ILNZ had prepared a report which analysed the true financial position of FBG at the relevant time (the report). The purpose of the report was both to assist in providing legal advice and make the insurance claim under the policy. They disclosed a redacted version of the report to FBG and a copy to the insurer which was not redacted.

FBG sought an order requiring Asahi and ILNZ to disclose an unredacted version of the report on the basis that they had waived privilege in respect of the redacted content by providing a full version of the report to the insurer.


The parties conceded that the report was privileged. The issue was whether privilege was waived by the disclosure of the unredacted report to the insurer. If so, FBG were entitled to an unredacted version of the report.


The Court held that Asahi and ILNZ had waived privilege in respect of the redacted content in the report for a number of reasons, in particular:

  • The material provided was not obviously sensitive or privileged. It was not enough that some pages of the report were marked ‘Privileged and Confidential’.
  • Indemnity under the policy had not been confirmed by the insurer. Asahi and ILNZ had provided the report to a “potential adversary” who could use the report in open court should coverage under the policy be the subject of legal proceedings.
  • The duty of good faith does not compel an insurer to maintain confidentiality. An interpretation of the duty in this way would prevent an insurer from pursuing its legitimate purposes under a policy including using information provided by an insured to asses and/or resist a claim for cover.   

Implications for insurers and insureds

The Asahi case only applies to documents which are privileged. That is, documents which are created for the dominant purpose of providing legal advice or in anticipation of litigation. All other documents which are relevant to a matter in a litigated dispute or one that could well proceed to litigation are required to be disclosed.

Insurers are not necessarily under an obligation to keep an insureds privileged material confidential, particularly where coverage under the policy has not been confirmed and the parties do not share a common interest in maintaining the privilege.

In fact, insurers may often be interested in seeing the contents of privileged material but that does not mean that this privileged material needs to be disclosed by an insured simply because it is relevant to its insurance claim for cover.  All that an insured needs to do is bring itself within the insuring clause. If it can only do that by disclosure of key privileged material, then that is a decision for the insured to make. However, it is a decision that ought to be made with the knowledge of the consequences i.e. the potential waiver of privilege over the documents in any separate litigation or dispute. If an insured is able to bring itself within the insuring clause without disclosing confidential information, then it would be wise to do so.

Insurers providing some sort of warning about disclosing confidential information to them would absolve the insurer from any criticism and would at least be consistent with the insurer’s duty of utmost good faith to the insured.

With or without such warning, insureds (particularly commercial insureds who might be involved in a related dispute regarding the loss sustained under the policy) ought to think carefully about the documents that they or their solicitors provide to their insurer in support of their insurance claims.