The English High Court recently rejected, in Axa Seguros v Allianz,10 a claim of litigation privilege over expert reports and associated documents in circumstances where the reports had not yet been formally served in proceedings.

The claimant insurer, Axa Seguros, had applied to inspect engineers’ reports commissioned by the defendant reinsurers, along with associated documents. The defendants resisted the application on the basis of litigation privilege, arguing that the reports had been obtained and prepared for the dominant purpose of obtaining legal advice in connection with anticipated litigation.


The claimant (Axa) provided “all-risks” cover (the Policy) in respect of a road network in Mexico for Nacional de Obras y Servios SA de CV (Banobras), a state-owned bank, for the period 1 November 2000 to 31 December 2001. The claimant’s participation in the Policy was reinsured by various London Market reinsurers (the defendants).

Cover under the reinsurance policy was stated to apply to roads constructed to “Internationally acceptable standards” and the claimant was obliged, within a reasonable time of its inception, to arrange a survey to confirm the acceptability of the insured roads. The claimant duly arranged for a survey to be carried out, but the report submitted to the defendants was rejected for providing insufficient information.

In late September and early October 2001, Hurricane Juliette caused considerable damage to parts of the insured road network.

In the aftermath, Cunningham Lindsey were appointed as loss adjusters. They in turn appointed Grupo Mexicano to assist in the evaluation of the damage. Cunningham Lindsey’s first report stated that Grupo Mexicano had discovered subsidence on the relevant road surface which was attributable to the hurricane. Their report suggested the instruction of a further, independent civil engineering expert to look into the extent of the damage and the scope of remedial works.

In January 2002, the claims manager of the first defendant made a file note and sent an email to Cunningham Lindsey to the effect that reinsurers would be instructing their own civil engineering expert. That expert’s remit would be to ascertain whether the roads were constructed to internationally accepted standards, to advise on whether the figures for remedial works were reasonable and to determine the exact nature of the envisaged mitigation and improvement works. Following this, the engineering firm Halcrow was instructed by reinsurers. Halcrow produced a number of reports. Its December 2002 report expressed the view that the damage seen on part of the highway was not related to the hurricane, but was instead due to routine deterioration.

Meanwhile, Banobras notified a claim to Axa Seguros in June 2002, and in September 2002 that claim was referred to arbitration. An award in the sum of approximately US$14.8m was made against the insurers in January 2003. This was not paid out for some time, however, due to a dispute regarding the currency in which the award should be paid. As a result, Axa Seguros did not make a claim for indemnity under the reinsurance contract until September 2008. The defendants refused to pay this claim.

The Axa Seguros judgment arises out of the claimant’s application to inspect a number of the reports and associated documents produced by Halcrow before the litigation proceedings commenced. The defendants resisted the application on the basis of litigation privilege.

Litigation privilege

The onus for demonstrating privilege in a document is on the party claiming privilege. It is important, therefore, if litigation privilege is being claimed to be able to provide positive proof that the relevant document satisfies two prerequisites under English law:

Litigation must be reasonably in prospect

First, it must be clear that litigation is reasonably in prospect, if not already underway, and cannot be a mere possibility. The English courts have previously held that a “distinct possibility” or “general apprehension” of future litigation is not sufficient to satisfy this condition. The point at which a “distinct possibility” of litigation becomes a situation where litigation is “reasonably in prospect” is often difficult to ascertain in practice, but the judgment in Axa Seguros provides some useful guidance.

The Court agreed with the defendants that, objectively, litigation was reasonably in prospect at the time the Halcrow reports were commissioned by them.

At that date, a key concern was whether the claimant’s claim was covered under the reinsurance policy. The Court considered that litigation was a reasonable prospect if the Halcrow reports concluded that the roads were not constructed to internationally-accepted standards as required by the reinsurance policy. In that instance, the reinsurance claim would not be met and the matter could in all likelihood only be resolved by formal proceedings.

While the claimant had provided the defendants with a survey, the latter had expressly deemed the survey as unsatisfactory. As a result, the defendants had purported to reverse the burden of proof, which, if applicable, required the claimant to establish that the roads were of an acceptable standard. The claimant failed then to provide a further survey.

In this often difficult area, the judge’s response to one of the claimant’s arguments provides helpful guidance on what would be considered by a court to be a “reasonable prospect” of litigation:  

  • The claimant argued that when Halcrow was instructed, the defendants did not know whether the roads had been built to international standards, and uncertainty at that point could not lead to the conclusion that litigation was reasonably in prospect.
  • The judge pointed out in response that if a party has sufficient knowledge to reject a claim, i.e., if the defendants knew that the roads did not meet the required standard, that is tantamount to an “almost certain prospect” of litigation. But even if there is only an element of uncertainty, that might be sufficient for establishing a “reasonable prospect” of litigation. In this case, the claimant’s failure to produce the further survey was highly material. It meant that there was a reasonable prospect that the Halcrow reports would conclude that the original obligation was not fulfilled because the roads were not up to the requisite standards.
  • Further, even if the Halcrow reports did not reach any conclusion, the judge concluded that there remained a reasonable prospect of litigation because the claimant had still not established its claim.
  • The judge accepted the defendants’ position that the onus was in the meantime on the claimant to prove that the roads were constructed to internationally acceptable standards.

In terms of witness evidence, the Court held that such evidence was not conclusive but neither was it irrelevant to the questions that it was addressing. This is important to note, as evidence of the contemporaneous views of the insurer or reinsurer is likely at least to be taken into account in any future dispute.

The document must be made with the sole or dominant purpose of obtaining legal advice.

Second, although reinsurers succeeded in relation to the first issue, the Court also found that the Halcrow reports and documents had not been made with the sole or dominant purpose of obtaining legal advice about actual or anticipated litigation.

The Court concluded that these materials were produced for dual purposes, namely to establish first, whether the roads had been constructed to internationally acceptable standards and, second, to determine the extent of the damage caused (and then to verify the correctness of the quantum figures for remedial work). This was substantiated by descriptions in Cunningham Lindsey’s reports regarding the scope of Halcrow’s engagement.

In relation to the verification of the quantum of Banobras’ claim, it was noted in the judgment that the claimant and the defendants were in agreement, not adverse. In any event, the Court decided that neither of the two purposes outlined above was predominant; nor, in practice, could the reports and documents be readily divided into separate parts attributable to each separate purpose.

As a result, a claim of litigation privilege could not be sustained on these facts.


HOW? If you intend to claim privilege, it is for you to establish your right to it.

WHEN? The document must have been produced when there was a reasonable prospect of litigation and not a mere possibility.

WHY? The document must have been made with the sole or dominant purpose of obtaining legal advice about actual or anticipated litigation. 


The Axa Seguros judgment offers a warning flag when parties are considering the status of expert reports.

If a party wishes to preserve privilege over such reports it needs to consider above all whether there is a reasonable prospect of litigation and, if so, it should ensure that the relevant report and associated documents are prepared for the purpose of obtaining legal advice regarding actual or anticipated litigation. The report should therefore not deal with diverse subject matters, some of which — for instance, separate issues relating to remedial works, quantum — may not fall within the framework of legal advice.