Quinn’s insured, a two partner solicitors’ practice, South Bank Solicitors (SBS), was subject to an intervention by the Law Society, which took custody of all SBS’s client files. SBS was subsequently subject to claims arising out of conveyancing transactions, which were notified to Quinn. Quinn declined an indemnity to one of the partners on the grounds of dishonesty and wished to review all SBS’s documents in the Law Society’s possession, to ascertain whether the second partner had been dishonest (such that Quinn could decline cover).

The Law Society refused access to client papers where those clients had not yet made claims, on the grounds that to have given such disclosure would have breached client confidentiality. Quinn brought proceedings against the Law Society seeking access to those papers. It claimed it was entitled to receive the papers by virtue of the co-operation clause in the policy which required SBS to furnish Quinn with any documentation it required in respect of “circumstances” and/or Quinn’s obligation, pursuant to the Qualifying Insurer’s Agreement, to advise the Law Society of suspected fraud by an insured. Quinn lost at first instance and appealed.

Decision

The appeal was dismissed. The Court of Appeal held that the terms of the policy were irrelevant as neither the Law Society nor SBS’s clients were parties to it. Nothing in the policy could of itself override SBS’s duty of confidentiality to its clients. Where a client had made a claim he was taken to have waived privilege and confidentiality. Where a claim had not been made, there was no such implied waiver. The Court also held that Quinn’s obligations as a qualifying insurer did not compel the Law Society to disclose the papers.

Comment

Insurers’ investigations into suspected fraud of an insured following an intervention may be severely hampered following this decision.

Further, and perhaps more significantly, insured solicitors arguably cannot disclose confidential client papers or information to insurers when notifying circumstances without breaching client confidentiality, no matter what the policy’s requirements. The insured will therefore need either to seek the client’s permission to disclose the information/documentation or make an anonymised notification.

Neither approach is without its difficulties. In respect of the latter, there is clearly scope for insurers to argue that circumstances have not been adequately notified (although insureds may rely on Quinn in arguing that such notifications are fair and reasonable). However, the minimum terms (which prevent an insurer from avoiding cover on the grounds of non-disclosure or late notice) mean that, in practice, questions of whether matters were properly notified are of limited significance.