In 2007 the qualifying insurer Quinn decided that it would be a good idea to insure a two-partner fi rm called South Bank Solicitors. Two months earlier the Law Society had investigated one of the partners for dishonesty and the other for various accounting irregularities. That decision ultimately led to the biggest shake up in the solicitors’ insurance world for a long time.
In July this year the Court of Appeal handed down its judgment1 in Quinn’s attempt to access South Bank Solicitors’ client fi les in order to obtain material on which to avoid cover. The Court of Appeal’s distaste for Quinn’s case falls off almost every page of its judgment. It was undoubtedly the wrong case in which to seek to circumscribe the effect of legal advice privilege and the Court of Appeal held that solicitors could not disclose privileged information to their insurers for the purpose of notifying circumstances and/or pre-inception disclosure.
The initial outcry over the decision has now subsided, and most insurers and fi rms are finding ways of overcoming the problems. Many, perhaps prescient, fi rms already had provisions in their standard terms of business which permitted them to disclose privileged and confi dential information to their insurers. Many others have now amended their terms of business. It is difficult to see what serious challenge there could be to that, not least given that the SRA’s own requirements in the Solicitors’ Code of Conduct 2007 tells solicitors that they must notify circumstances to their insurer (under rule 20.09(2)). Some commentators have suggested that it may be wrong to seek to waive a client’s fundamental human right in this way but in fact there are other examples of the common law permitting waiver in different circumstances. In many cases, solicitors and insurers have managed to get by using anonomysed notifi cations and, although this is not without diffi culties, in particular for insurers, it will continue to be a solution in many cases.
Sir Andrew Morritt’s own solution (in Quinn) of seeking the clients’ consent will remain unpalatable to many insurers and solicitors because it may tend to bring on claims where none would otherwise have been brought. There is, of course, an obligation to notify a client of circumstances which may give rise to a claim (under rule 20.09(1) of the Solicitors’ Code of Conduct 2007) and asking for consent to notify the insurer at the same time will not increase the risk of a claim in that case. However, that rule has been widely taken to apply to existing clients only. The position in the draft Outcomes- Focused Regulation Code of Code is less clear. In the October 2010 draft, “client” includes former clients “where the context permits”. If this is correct, it could have an effect on the way in which many fi rms grapple with the Quinn problem, to say nothing of the effect it may have on the number of claims brought by former clients.
If you would like to read our longer Alert on the Court of Appeal decision in Quinn, click here.