Donna Griscti v. Non-Marine Underwriters, Mbrs. of Lloyd's, 2001 ONFSCDRS 146

Neutral Citation: 2001 ONFSCDRS 146

FSCO A01-000471

BETWEEN:

DONNA GRISCTI

Applicant

and

NON-MARINE UNDERWRITERS, MBRS. OF LLOYD'S

Insurer

DECISION ON PRODUCTION ISSUES

Before: William J. Renahan

Heard: By written submissions received at the offices of the Financial Services Commission of Ontario in Toronto by September 13, 2001.

Appearances: Gordon Good for Donna Griscti Julie Debrusin for Non-Marine Underwriters, Mbrs. of Lloyd's

Issues:

The Applicant, Donna Griscti, was injured in a motor vehicle accident on October 24, 1996. She applied for and received statutory accident benefits from Non-Marine Underwriters, Mbrs. of Lloyd's ("Lloyd's"), payable under the Schedule.¹ Lloyd's terminated weekly income replacement benefits on December 5, 1996. The parties were unable to resolve their disputes through mediation, and Ms. Griscti applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

At the pre-hearing discussion of this case held on July 24, 2001, Lloyd's refused to produce certain documents requested by Ms. Griscti. I asked for and received written submissions on those issues.

The issues are whether Lloyd's is required to produce to Ms. Griscti the following:

copies of all adjusters' notes in connection with this matter, including those maintained electronically;
any policy manuals in the possession, power or control of Lloyd's instructing adjusters on how to handle this claim;
any documentation dealing with reserves; and
any legal opinion obtained by Lloyd's in connection with adjusting this claim.

Result:

Lloyd's shall produce to Ms. Griscti, subject to any privilege, a copy of all adjusters' notes up to the date Ms. Griscti filed her application for mediation.
Lloyd's need not produce policy manuals, documentation dealing with reserves or any legal opinions.

ANALYSIS:

The guiding principle in exercising the discretion to make a production order is relevance and reasonableness. "The degree of relevance is weighed against other factors such as the sensitivity of the information."² I look at the issues for hearing and the allegations of the parties to determine whether the production requests are relevant to those issues and reasonable and then consider any reason why Lloyd's need not produce relevant and reasonable documents. The issues for hearing include whether Ms. Griscti is entitled to income replacement benefits and the amount of those benefits and housekeeping expenses. If Ms. Griscti provides Lloyd's with particulars, other issues for the hearing are whether Ms. Griscti is entitled to medical and rehabilitation benefits for physiotherapy and pain management counselling. Ms. Griscti also claims a special award pursuant to subsection 282(10) of the Insurance Act.

In a schedule to her Application for Arbitration, Ms. Griscti claimed that Lloyd's failed to comply with sections 39.1 and 50.1 of the Schedule by failing to mail or deliver a benefit payable within 14 days after receiving the application for the benefit. She claims that Lloyd's has not complied with section 67 of the Schedule. Among other things, section 67 provides for the payment of housekeeping expenses. Ms. Griscti claims that Lloyd's had not requested a medical certificate under section 37 or a certificate for attendant care benefits under section 48 or a referral to a DAC. She claims that Lloyd's has not responded to new medical evidence or given it fair and full consideration.

One difficulty with the allegations is that the Applicant still has to provide particulars of her claims for physiotherapy and pain management expenses because the particulars of those claims were not clear at the pre-hearing on July 9, 2001. The allegation that Lloyd's has unreasonably withheld these benefits has to be considered in light of this fact. Further, the significance of the allegation that Lloyd's has not complied with section 48 is not clear when Ms. Griscti is not making a claim for attendant care benefits. Another difficulty is that the allegations of non-compliance with the Schedule amount more to legal conclusions rather than allegations of fact to support those conclusions. Another difficulty is that Ms. Griscti alleges that Lloyd's did not request certain certificates or assessments without making any submissions on the significance of these allegations. However, Ms. Griscti does make the general allegation that Lloyd's has not responded to new medical evidence.

Reserves:

The Dictionary of Insurance³ defines a "reserve" as:

Funds which are set aside by an insurance company for the purpose of meeting obligations as they fall due. Such obligations would include liabilities for unearned premiums and the estimated costs of unpaid claims.

Ms. Debrusin, counsel for Lloyd's, submitted that estimated costs of unpaid claims might also include defence costs.

In Samoila v. Prudential of American General Insurance Company (Canada), 2000 CanLII 22690 (ON SC), [2000] O.J. No. 2746, July 14, 2000, the insured sought, among other things, the production of evidence of reserve information. Samoila was an action by an insured against his insurer for damages for bad faith for the interruption of some four years in payments. Brockenshire J. noted that in the United States, claims for payment on the policy and for damages against the insurer for bad faith are bifurcated so that matters which would be treated as confidential in the first part of the case could be before the court in the second part. Bifurcation was not an issue in Samoila because the action was solely for damages for bad faith. Brockenshire J. ordered production of particulars of reserve numbers and defence costs because it was relevant to the amount of a possible punitive damage award.

Arbitrators have ordered an insurer to produce documentary evidence on reserve information in two decisions.⁴ Neither of those decisions provide for the protection of confidentiality which Brockenshire J. identified in Samoila, however, in both cases it is still open to the hearing arbitrator to exclude the evidence from the hearing or to bifurcate the hearing if the evidence is admitted.

In Contos v. Kingsway General Insurance Company,⁵ Master Dash opined that he would order the production of reserve information in only the clearest of cases, "as it is equivalent to asking a party or its representative what it believes its case is worth."

Reserve information is similar, although clearly not the same as, settlement information in the sense that it is the insurer's estimate of what the case is worth for reserve purposes just as a settlement offer is an estimate of what the case is worth for settlement purposes. I find the policy against the admissibility of settlement discussions helpful in this case. As noted in the Law of Evidence in Canada, Courts have protected settlement discussions from disclosure for a number of reasons. One reason is to encourage parties to resolve their private disputes without recourse to litigation.

In the absence of such protection, few parties would initiate settlement negotiations for fear that any concession they would be prepared to offer could be used to their detriment if no settlement agreement was forthcoming.⁶

Samoila recognizes that reserve information is generally confidential. I believe the reason reserve information should remain confidential is similar to the public policy considerations which protect confidential settlement discussions from disclosure. An insurance company measures and assumes risk for a premium and pays losses from those premiums. Part of that business involves estimating the cost of claims. Estimating the cost of claims contributes to settlement and settlement is a policy worth promoting. As well, calculating reserves contributes to the efficiency of the business. In my view, reserve information is confidential and should generally be protected from disclosure to promote settlement and business efficiency.

As in Samoila, it is open to an arbitrator to bifurcate the hearing if he or she determines that Lloyd's should produce reserve information because it was relevant to the issue of entitlement or amount of a special award. The decision to bifurcate may involve consideration of such issues as the amount of benefits withheld and other evidence relevant to the issue of the insurer's conduct.

I see no point in ordering the production of confidential information which is not admissible at the main hearing but which may be admissible at a second bifucarated hearing to determine entitlement or amount of a potential special award. Accordingly, Lloyd's need not produce reserve information at this time.

Legal opinions:

Generally, communications between a solicitor and client are privileged and not subject to disclosure.

The interest which underlies the protection accorded communications between a client and a solicitor from disclosure is the interest of all citizens to have full and ready access to legal advice. If an individual cannot confide in a solicitor knowing that what is said will not be revealed, it will be difficult, if not impossible, for that individual to obtain proper candid legal advice.⁷

In Samoila, Brockenshire J. ordered production of legal opinions obtained by the insurer relating to the denial of coverage because they were relevant to the bad faith claim and because the insurer had waived the solicitor and client privilege attached to those communications. The factual basis for that determination was that the insurer had accused its insured of fraud and the insurer's claims person admitted on examination for discovery that the insurer would first seek the opinion of counsel before accusing its insured of fraud. I have no information that a legal opinion is relevant in this case or that Lloyd's waived its right to solicitor and client privilege to any legal opinion.

Adjusters' notes:

Adjusters' notes are relevant to Ms. Griscti's allegations that Lloyd's did not comply with its statutory duties. Generally, arbitrators have not ordered production of adjusters' notes beyond the date of the application for mediation because the nature of the notes change on that date. Prior to mediation, the insurer makes notes for the purpose of investigation and adjustment of the claim. After mediation, the insurer makes notes for the dominant purpose of defence and litigation. After mediation, litigation privilege generally attaches to the adjusters' notes.

Litigation privilege is based upon the need for a protected area to facilitate investigation and preparation of a case for trial by the adversarial advocate.⁸

In my view, the involvement of Ms. Griscti's lawyer prior to mediation does not change the date in this case. I find that Ms. Griscti retained her lawyer to assist her with the presentation of her claim and protect her rights.

Accordingly, subject to any other privilege, Lloyd's shall produce the adjusters' notes up to the date Ms. Griscti filed her application for mediation.

Policy manuals:

Brockenshire J. determined that policy manuals were relevant in the bad faith action in Samoila to the issue of the state of mind of the insurer. In this case, I am not satisfied that Lloyd's state of mind is relevant at this point. An arbitrator will determine whether Lloyd's unreasonably withheld or delayed payment of benefits by examining its conduct. Its conduct is examined through the actions of its employees in the handling of this claim. As pointed out by Arbitrator Blackman in Campeau, arbitrators have ordered production of policy manuals that deal with discreet issues such as the cost of examinations or treatment plans. If an arbitrator determines that Lloyd's has unreasonably withheld or delayed payments, Lloyd's state of mind may be relevant to the amount of a special award and an arbitrator may determine that specific policy manuals may be relevant and should be produced. I am not satisfied that Lloyd's policy manuals are relevant to the issues in this hearing at this time.

EXPENSES:

Expenses of this preliminary issue hearing are in the discretion of the hearing arbitrator.

October 5, 2001

William J. Renahan Arbitrator

Date