Ontario (Human Rights Comm.) v. North American Life Assurance Co. (No. 4), 1992 CanLII 14235

Ontario (Human Rights Comm.) v. North American Life Assurance Co. (No. 4)

1992-07-28

Ontario Board of Inquiry

Gary Thornton Complainant

v.

North American Life Assurance Company Respondent

Date of Complaint: February 15, 1990 Date of Decision: July 28, 1992 Before: Ontario Board of Inquiry, W. Gunther Plaut Comm. Decision No.: 441E

Appearances by: Anne M. Molloy and Gerry Heddema, Counsel for the Complainant Naomi Overend, Counsel for the Commission Mary Eberts and Jenifer Aitken, Counsel for the Respondent North American Life Assurance Co.

PRODUCTION OF DOCUMENTS — CONFIDENTIAL RECORDS — internal company records — BOARDS OF INQUIRY/TRIBUNALS — authority to order production of documents

Summary: The Board of Inquiry rejects a motion made by the complainant Gary Thornton requesting that the respondent produce documents on which it has relied to produce a summary of its experience with long-term disability plans.

The Board finds that the complainant's request is speculative, and would cause further delay, since the request comes very late in a proceeding which has already lasted for ten months.

The Board of Inquiry acknowledges that the summary of the experience with long-term disability plans produced by North American Life Assurance Company is not original documentation. The Board will determine what weight to give it.

The motion is denied.

[Ed. Note: See also preliminary decisions at 1991 CanLII 13125 (ON HRT), 16 C.H.R.R. D/162, 1992 CanLII 14243 (ON HRT), 17 C.H.R.R. D/472 and 1992 CanLII 14226 (ON HRT), 17 C.H.R.R. D/476 and final decision at 1992 CanLII 14239 (ON HRT), 17 C.H.R.R. D/481.]

Cases Cited

Bezeau v. Ontario Institute for Studies in Education (1982), 1982 CanLII 4870 (ON HRT), 3 C.H.R.R. D/874 (Ont. Bd.Inq.): 19, 26

Ed Millar Sales & Rentals v. Caterpillar Tractor (1991), 1991 CanLII 5885 (AB QB), 122 A.R. 391 (Alta. Q.B.): 31

Home Office v. Harman, [1982] 1 All E.R. 532: 41

Joseph v. College of Nurses of Ontario (No. 1) (1982), 1982 CanLII 4876 (ON HRT), 3 C.H.R.R. D/854 (Ont. Bd.Inq.): 25

Reichmann v. Toronto Life, 41 C.P.C. (2d) 73: 20, 41

Senior v. Holdsworth, [1975] 2 All E.R. 1009: 31

U.S.W.A. v. Shaw-Almex Industries (1984), 6 C.L.R.B.R. (N.S.) 335: 19

Zurich Insurance Co. v. Ontario (Human Rights Comm.) (1992), 1992 CanLII 67 (SCC), 16 C.H.R.R. D/255 (S.C.C.): 35

Legislation Cited

Ontario

Human Rights Code, R.S.O. 1990, c. H-19

s. 5: 1

s. 25: 16

s. 25(3): 3

s. 25(3)(a): 33

s. 33: 28

s. 40: 30

Statutory Powers Procedure Act, R.S.O. 1990, c. 22

s. 12: 25, 28

s. 12(1)(b): 14

BACKGROUND

1Complainant Gary Thornton was employed by Clarendon Foundation which contracted with North American Life and/or First North American ("respondent") to provide insurance benefits for its employees (Clarendon was subsequently added as a co-respondent in the case [see 1991 CanLII 13125 (ON HRT), 16 C.H.R.R. D/162]). Complainant alleges that his rights under the Ontario Human Rights Code (the "Code") have been infringed because he was denied him [sic] long-term disability benefits ("LTD") to which he thinks he was entitled. He claims that the respondent's insurance contract denied him equal treatment with respect to employment without discrimination because of handicap, as provided by s. 5 of the Code.

2The contract in question is a group insurance plan which Clarendon made available to its employees. At issue has been an exclusion clause in the insurance contract written by the respondent which reads (clause 2.5; Exhibit 2):

If an employee has incurred medical expenses, or received care or treatment by a Physician during the 90 day period prior to the date his insurance becomes effective, no Income Benefit will be payable for any disability resulting from the same related cause until . . . [certain further conditions are fulfilled].

3As a defence, respondent relies on s. 25(3) of the Code [R.S.O. 1990, c. H-19, which states that the right to equal treatment with respect to employment is not infringed if

. . . a reasonable and bona fide distinction, exclusion or preference is made in an employee disability or life insurance plan or benefit because of a pre-existing handicap that substantially increases the risk.

THE MOTION

4Complainant's motion, with which this interim decision deals, concerns the production of certain documents which are in the possession of the respondent. The latter opposes the motion.

5The motion arises from the fact that witnesses for the respondent had claimed that clause 2.5, supra, was needed in the contract in order to screen out persons who might bring to their employment pre-existing medical conditions ("PEC") which would trigger LTD, and that without the exclusion clause the company would be exposed to unacceptably high risks. Witnesses further stated that employers who assume costs of the benefit plan would be unwilling or unable to continue offering the plan if the premiums were too high, and premiums would have to go up if the clause at issue were to be scrapped, for this would remove a necessary safeguard whose absence would lead to abuse. There would also be the possibility that the insurer would find it necessary to abandon this line of insurance business altogether, and thus the employees might be left without any LTD coverage.

6To be sure, not all insurance contracts contain the PEC clause. In companies with more than 100 employees the clause is generally omitted, but Clarendon Foundation for whom the complainant worked had fewer than twenty-five employees and in such cases the clause is habitually included in the contract (other testimony confirmed that such distinctions are industry-wide). For insurers fear that in small settings the risks are not widely enough spread and besides, employers or employees may "pre-select" the insurance company and plan to have them pay LTD benefits for medical conditions which were pre-existent. In larger companies, so testimony went, these dangers are held to a minimum and pre-selection and other risks are more widely spread, and therefore the PEC clause need not to be [sic] included in the plan.

7Respondent called witnesses who testified to the need of the PEC clause, setting it into the context of group insurance in general, citing the need for risk distribution and competitive premiums as required elements in the business.

8In particular, Michael Byrne, Senior Vice-President Group Pension Division for North American Life, summarized the experience of the respondent company in the LTD business, stating that between 1985 and 1990 respondent had experienced losses in this area, except for a gain in 1988. (A subsequent witness, Peter Hutchison, Senior Vice-President and Chief Actuary of the company, corrected the gain/loss summary to read that 1987 too was a year of gains in this area.)

9There had been not enough time to fully cross-examine Mr. Byrne, and in any case, Mr. Hutchison's expertise was deemed to better suit the need for further clarification. Counsel for the respondent agreed that it would be the responsible thing to allow complainant's counsel to pursue this line of inquiry, that is, to explore whether LTD insurance was generally a losing business and was included in the general insurance package only in order to allow the insurer to be competitive. (Transcript of hearing for April 23, 1992, p. 185 f.)

10The contested motion was made subsequent to the testimony by Mr. Hutchison, on voir dire, on June 9, 1992. The witness had produced a ten-page summary containing respondent's experience with LTD, set into a comparative frame. It showed losses for 1985, 1986, 1989, and 1990, and gains for 1987 and 1988 — a loss/gain ratio for these six years of 2:1.

11Cross-examination established that the figures were drawn not from published yearly summaries of the company but from internal sources. Asked whether he would produce such materials in order to make it possible for complainant counsel to cross-examine him, he stated that the information requested was "proprietary," that it would be of interest to the company's competitors and, if made public through these hearings, would put respondent "at a competitive disadvantage." (Transcript for June 9, pp. 85 ff.)

12When I suggested that perhaps this problem could be overcome by holding that portion of the hearings in camera, respondent counsel (after obtaining instructions) stated that respondent would not agree to produce the records in question. Counsel for complainant then moved that I order these materials to be produced for inspection, for without them no proper cross-examination of Mr. Hutchison would be possible — and, after all, the defence of respondent depended precisely on proving that its poor experience with LTD group coverage would make the elimination of PEC clauses for small companies prohibitive. Such proof might conceivably fulfill the requirements of the defence provided by s. 25 of the Code.

13Clearly an impasse in the proceedings was at hand. I thereupon asked the parties to provide me with written arguments on this issue, while meanwhile the hearings would go forward. The submissions were ready for my consideration on July 17.

ARGUMENTS IN SUPPORT OF THE MOTION

141. The Statutory Powers Procedure Act, R.S.O. 1990, c. 22 ("SPPA"), s. 12(1)(b) is the basis for this Board's right to order the production of relevant documents:

12(1) A tribunal may require any person, including a party, by summons . . .

(b) to produce in evidence at a hearing documents and things as specified by the tribunal, relevant to the subject matter of the proceedings and admissible at a hearing.

152. Additional information is needed beyond what has been introduced so far, in order to test the evidence of Messrs. Byrne and Hutchison. The consolidated statements of the company are not useful in assessing the impact on the respondent's business if the PEC clause were eliminated (citing the evidence of Mr. Hutchison to this effect; Transcript for June 9, 109–13, 116–17 and passim). Therefore this Board is asked to order the production of the following:

a. the financial statements of both North American Life and First North American which would make such assessment possible;

b. the relevant quarterly line of business statements;

c. the monthly underwriting gain/loss statements;

d. the respondent's investment income;

e. respondent's general claims experience (i.e., underwriting gain/loss);

f. the 1988 AIDS reserve calculation as reflected in the actuarial files of the respondent, and the method of computing these reserves;

g. the specific reserve for the complainant's LTD and the way it was arrived at, i.e., on what basis the calculations were made.

163. Since all of these materials are required the Board should order them to be produced. They will show whether in fact the respondent was justifiably seeking the protection of s. 25 of the Code. If the LTD business has a good track record rather than the opposite as the witnesses have claimed, then the PEC clause appears to be merely another means of increasing the profitability of the company. Section 25 of the Code would in such a case be inapplicable as a defence.

174. The issue of proprietary information and potential damage to the respondent's business interests is irrelevant, since the law also provides safeguards for such purposes (e.g., hearings in camera).

185. The documents sought are relevant in that they go to the heart of matters before this Board.

196. As to the legal precedent affirming the right of administrative tribunals to order production of relevant materials during a hearing, all the complainant needs to demonstrate is that the documents sought are arguably relevant. Among the authorities cited was United Steelworkers of America and Shaw-Almex (1984), 6 C.L.R.B.R. (N.S.) 335, where it was held (at 335) that "the Board has the authority to require a party to deliver documents requested in a subpoena duces tecum." In Bezeau v. O.I.S.E. (1982), 1982 CanLII 4870 (ON HRT), 3 C.H.R.R. D/874, Chairperson E. Ratushny allowed a similar motion and dealt specifically with the question of the respondent's claim to privilege (at paras. 7799 [p. 878] et seq.).

207. When it comes to proprietary information, such privilege cannot outweigh the public interest to which the case at issue is important. Counsel cited the judgment in Reichmann v. Toronto Life, 41 C.P.C. (2d) 73 at 88–89, where Anderson J. wrote:

Whether a balancing of the probable advantage flowing from production [of the documents] against the obvious hardship to the plaintiffs is a proper process in arriving at my decision has caused me much concern. I have concluded, not without reluctance, that it is not. Disclosure of much that would otherwise remain private is one of the inevitable unhappy incidents of litigation.

ARGUMENTS OPPOSING THE MOTION

211. The information sought is very extensive. North American Life comprises about thirty companies which are involved in a wide variety of businesses, such as oil and gas, or management operations.

222. The summary produced by Mr. Hutchison is the result of painstaking analysis and the best that can be arrived at. It contains the key elements that management would use in decision making. The monthly statements of North American Life will not add information to what the summary of Mr. Hutchison already reveals.

233. The results reported by Mr. Hutchison are not unique to the respondent company. They are industry-wide: LTD group insurance is generally a losing proposition, a judgment made by independent witnesses Charles Black and John Wolsey. The latter prepared a statement which said (entered as Exhibit 73):

Historically it has been harder to make a profit on long-term disability insurance than on these other types of health coverage, or on life insurance. The long-term disability market is a very competitive one, and the profit margins in the business have been driven so low that some smaller companies have left the group market entirely.

The witness was not cross-examined on this information.

244. It is doubtful that the safeguards the Board could impose on access to the requested disclosures will prove to be sufficient. In the end, North American Life will be exposed to unwarranted financial losses.

255. As to the law upon which the motion is based, s. 12 of the SPPA does not provide for a broad form of discovery.

Rather, this section applies only to documents which will actually be produced in evidence at the hearing and should be used to require specific documents to be produced in evidence . . . The mere assertion that the document may have some bearing is not enough. (Submission, paras. 34–37, citing, inter alia, Joseph v. North York General Hospital (No. 1) (1982), 1982 CanLII 4876 (ON HRT), 3 C.H.R.R. D/854 at D/856, paras. 75–78; Senior v. Holdsworth, [1976] Q.B. 23 at 35.)

266. In assessing the probative value of the information sought, the Board should assess also what material is already before it and available. Such information was not available in Bezeau, supra, where the Board had no other information upon which to base his decision.

277. As to the reserve set up for Gary Thornton, witness Michael Byrne described the process and revealed that $120,000 had been set aside. He was not cross-examined on this matter.

288. Section 12 of the SPPA should not be used as a substitute for pre-hearing discovery. The Commission had every opportunity to look at the records of the respondent, by use of a search warrant if necessary, as provided by s. 33 of the Code. If the analysis of these records would have proven helpful to its case the Commission would have been able to have it produced as evidence. The motion, as a belated attempt to engage in discovery, is inappropriate and not envisaged by s. 12 of the SPPA.

299. If this Board were to approve the motion there would be further delay in the hearing, seeing that the records requested are voluminous. It is equally time-consuming for the complainant and the Commission to review them and conduct what amounts to an audit of North American Life's accounting practices. (Submission, para. 50.)

3010. This Board should not to order [sic] in camera hearings. Inasmuch as the Code, in s. 40, requires that all hearings be recorded, such records will have a way of finding their way into the hands of competitors. For instance, if the judgment were appealed, this would entail inspection of the complete transcripts.

31In sum, the statement by Lord Denning in Senior v. Holdsworth, [1975] 2 All E.R. 1009 at 1016 (cited in Ed Millar Sales & Rentals v. Caterpillar Tractor(1991), 1991 CanLII 5885 (AB QB), 122 A.R. 391 (Alta. Q.B.) at 394–95) applies to the motion:

The mere assertion that the film may have some bearing will not be enough. If the judge considers that the request is irrelevant, or fishing, or speculative, or oppressive, he should refuse it.

ANALYSIS AND DECISION

32The motion proceeds from the basis that this Board has the power to issue the requested order, as provided by the SPPA, s. 12(1)(b), supra. The only conditions that need to be present are that

a. the materials desired to be produced are relevant to the subject matter of the proceeding, and

b. admissible at a hearing.

33I have no doubt that both conditions are fulfilled in the instant case. The documents in the possession of the defendant might show that instead of losses in the LTD group line of business the experience of the company is in fact generally positive, which would raise the question whether the PEC clauses satisfied the bona fides required by s. 25(3)(a) of the Code, and further, whether the excluded handicap "substantially increases the risk" which is assumed by the insurer, a requirement listed in the same section of the Code.

34The empowering section of the SPPA states that a tribunal may require the production of materials; it leaves it to the tribunal to issue a summons or to refrain from doing so. The tribunal must therefore decide, all other conditions being fulfilled, whether exercising its power serves the ends of justice. This is the very essence of juridical discretion.

35In this instance, the guidelines which I have at my disposal for arriving at a decision are relatively few. A recent decision of the Supreme Court of Canada (Bates v. Zurich Insurance Co. [indexed as Zurich Insurance Co. v. Ontario (Human Rights Commission) (25 June 1992), file no. 21737 (S.C.C.) [now reported 1992 CanLII 67 (SCC), 16 C.H.R.R. D/255]) deals with s. 21 (now 22) of the Code, which permits discriminatory restrictions in insurance contacts if they are based on "reasonable and bona fide grounds." Statistical data have their place in the insurance industry, but they do not in and of themselves override human rights considerations, and a proper balance must be struck. Mr. Justice Sopinka (at p. 25 [D/270, para. 36]) declares:

To allow discrimination simply on the basis of statistical averages would only serve to perpetuate traditional stereotypes with all of their invidious prejudices.

36However, the decision of the Court does not speak to the motion before this Board. Here, both parties agree that the financial information requested is relevant, though one party wishes to have it produced by order of this Board and the other party objects.

37I cannot rule out the possibility that a search of the respondent's records might produce data different from those presented to this Board. However, complainant's counsel has not asserted that in fact that is the case, and that certain documents will indeed prove the point. Instead, counsel wants to look at a mass of records in order to ascertain whether conclusions can be drawn that are different from those presented by Mr. Hutchison.

38This is clearly an exercise in speculative discovery. The Commission was aware of the direction of respondent's reliance on s. 25 of the Code, and if there was a time when the company's records were to be evaluated, it was in the investigatory stage, when the Commission had the power to seek access to all relevant materials.

39To be sure, the Code must be interpreted in such a manner as to give weight to its overriding objective, which is the prevention or at least diminution of discrimination. This is the public interest which is always present when a human rights hearing takes place.

40But the public interest has still another side. It is also in the public interest, and natural justice requires, that the proceeding be fair and as expeditious as possible.

41The hearing must be fair to both parties. Agreeing to the motion might benefit the complainant, but at the same time would certainly place a considerable burden on the respondent. Thus I am, on the one hand, faced with the same problem as Anderson J. in Reichmann, supra, and on the other, with the caution expressed by Lord Keith of Kinkel in Home Office v. Harman, [1982] 1 All E.R. 532 at 540:

The process should not be allowed to place on the litigant any harsher or more oppressive burden than is strictly required for the purpose of securing that justice is done.

In this respect, it would be difficult to arrive at a judgment in the instant case on the basis of fairness alone.

42The hearing must be as expeditious as possible. The motion, aside from its speculative thrust, comes very late in the proceeding, which itself has already lasted for ten months (the original complaint having been filed as early as February 15, 1990).

43Agreeing to the motion would necessitate further and unpredictable delays. Not only would the records have to be assembled, they would also have to be analyzed and, in effect, re-audited. I find this further retardment unwarranted and therefore cannot agree to the motion, which makes it unnecessary for me to rule on the issue of proprietary information.

44Counsel for the complainant and the Commission are not deprived of the opportunity to cross-examine Mr. Hutchison or further query Mr. Byrne, though such examinations will have to [be] based on what is presently available.

45Furthermore, I am aware that the summaries presented by Mr. Hutchison have not provided this Board with any original documentation. Once the examination is over, I will have to determine how much weight I wish to ascribe to the testimony based upon these figures. This is a judgment which will form part of my final decision in the case.

ORDER

46The motion is dismissed.