Financial Services Commission

Commission des services financiers de l’Ontario

Neutral Citation: 2002 ONFSCDRS 14

Appeal P01-00044

OFFICE OF THE DIRECTOR OF ARBITRATIONS

CAA INSURANCE COMPANY (ONTARIO)

Appellant

and

RAJINDER SANDHU

Respondent

Before:

Stewart M. McMahon, Director’s Delegate

Counsel:

Lee Samis (for CAA)

Ron E. Folkes (for Rajinder Sandhu)

APPEAL ORDER

Under section 283 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

The appeal is dismissed.
The Appellant shall pay the Respondent his expenses of the appeal.

January 18, 2002

Stewart M. McMahon Director’s Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

This appeal concerns the right of an insurer that is a party to a proceeding at the Financial Services Commission of Ontario (“FSCO”), to compel its insured to produce documents from a related tort action.

II. BACKGROUND

Mr. Sandhu was injured in a motor vehicle accident on March 7, 1995. He applied for and received statutory accident benefits payable pursuant to the SABS-1994.¹ CAA Insurance Company (Ontario) (“CAA”) subsequently terminated his weekly benefits, prompting Mr. Sandhu to commence this arbitration proceeding. Mr. Sandhu also advanced a tort claim against the owner and operator of the other vehicle involved in the accident. The tort claim has been resolved. Pursuant to s.267.1 of the Insurance Act,² the claim was limited to non-pecuniary damages.

During the pre-hearing conference in the FSCO proceeding, CAA asked Mr. Sandhu to produce a copy of the tort file. Mr. Sandhu resisted, resulting in a preliminary decision by the pre-hearing arbitrator.³

At the preliminary hearing stage, the matter was argued on the basis that the deemed undertaking not to use documents obtained on discovery for a collateral purpose, set out in Rule 30.1 of the Rules of Civil Procedure applied. The arbitrator disposed of the matter on the basis that CAA failed to convince her that it should be granted relief from the undertaking pursuant to Rule 30.1.01(8).

The arbitrator did not differentiate between the types of documents that would likely be found in the tort file. Counsel for CAA submitted that in the absence of an affidavit of documents he cannot know with certainty what is included in the tort file. However, he set out, in CAA’s appeal submissions, a list of the documents he would expect to find in such a file. I adopt this list. For the purposes of my analysis, it is useful to group the documents into four categories.

records from primary sources such as Mr. Sandhu’s treatment providers and employer
medical reports generated for the purposes of the litigation
transcripts of the examination for discovery of Mr. Sandhu conducted pursuant to Rule 31
surveillance reports

Mr. Sandhu’s counsel advised that he has already produced all his client’s relevant medical records pursuant to FSCO’s ordinary disclosure rules, and that he has produced all the medical reports he commissioned in either the tort action, or the FSCO proceeding. Counsel also advised that Mr. Sandhu’s employment records have already been provided to the accountants retained by CAA. Counsel for CAA did not suggest there was any reason to believe Mr. Sandhu has withheld any of his employment records, or his treatment providers clinical notes and records. However, Mr. Sandhu refused to say whether the tort file contains any defence medicals. Counsel advised that he was taking the position that if any such reports exist, they speak only to the issue of pain and suffering, and as such, are not relevant to these proceedings. In the event that there is a finding that such a report is relevant, he relies on the deemed undertaking rule.

Mr. Sandhu does admit there is a partial transcript of the examination for discovery, but as with the defence medicals, he argues that it is not relevant or producible.

Mr. Sandhu’s counsel advised that no surveillance was disclosed to him by the defendant to the tort action.

III. ARGUMENT AND ANALYSIS

In essence, the deemed undertaking rule is a recognition that pre-trial discovery processes are an invasion of the individual’s privacy rights. While this intrusion is necessary to ensure a fair trial, litigants should not be at risk of having their private information used for some purpose other than that for which it is disclosed.

Although the prohibition against the use of documents obtained on discovery, for some collateral purpose, was well established in Britain, it was not until the release of the Ontario Court of Appeal’s decision in Goodman v. Rossi (1995), 1995 CanLII 1888 (ON CA), 24 O.R.(3d) 359, that the prohibition became settled law in Ontario.

The following passage from Matthews and Malek’s Discovery (1992), cited by Morden A.C.J.O. in Goodman v. Rossi, is frequently quoted as a statement of the rationale and purpose of the rule,

The primary rationale for the imposition of the implied undertaking is the protection of privacy. Discovery is an invasion of the right of the individual to keep his own documents to himself. It is a matter of public interest to safeguard that right. The purpose of the undertaking is to protect, so far as is consistent with the proper conduct of the action, the confidentiality of a party’s documents. It is in general wrong that one who is compelled by law to produce documents for the purpose of particular proceedings should be in peril of having those documents used by the other party for some purpose other than the purpose of the particular legal proceedings and, in particular, that they should be made available to third parties who might use them to the detriment of the party who has produced them on discovery. A further rationale is the promotion of full discovery, as without such an undertaking the fear of collateral use may in some cases operate as a disincentive to proper discovery. The interests of proper administration of justice require that there should be no disincentive to full and frank discovery.

In Goodman v. Rossi, the Associate Chief Justice urged the Rules committee to codify the rule, which it did in 1996 with the adoption of Rule 30.1.01

In opposition to this privacy right, is the goal of full disclosure in the collateral proceeding. In recognition of the tension between these two competing interests, the common law rule allows the court to afford relief from the undertaking. Similarly, Rule 30.1.01 provides that the court may grant relief from the undertaking. It also stipulates that the evidence may be used in certain circumstances, without prior approval. The most notable example is the use of the evidence from one proceeding, to impeach the testimony of the opposing party in another proceeding.

In Crest Homes plc v. Marks, [1987] 2 All E.R. 1074, Lord Oliver said the court will not release or modify the implied undertaking save in special circumstances and where the release or modification will not occasion injustice to the person giving discovery. In Goodman v. Rossi, Morden A.C.J.O. stated the he was “prepared to consider the applicable test as being more liberal than that stated in Crest Homes--as one tolerating some injustice to the discovered party if it is outweighed by a greater injustice to the discovering party if he or she could not make use of the discovered documents.”

The judiciary’s consideration of the rule in overlapping tort and disability claims

Ontario Courts have released a number of decisions involving the application of the rule to cases involving overlapping tort actions and claims for some form of disability benefits.

In the 1993, decision Rivait v. Gaudry (1993), 1993 CanLII 5438 (ON CTGD), 15 O.R. (3d) 159, Brockenshire J. invoked the common law rule when an insurer used a medical report from a tort action to justify a stoppage of “no-fault” benefits. The decision was reversed on appeal by the Divisional Court (1994), 1994 CanLII 10528 (ON CTGD), 18 O.R. (3d) 548, which ruled that because disability was an issue in both proceedings, employing the report to justify the termination of a no-fault disability benefit, was not an improper or collateral use.

A couple of months later, McDermind J. ordered the plaintiff in a tort action to produce copies of defence medicals from a related “no-fault” action, on the basis that any implied undertaking rule had to give way to full disclosure. See Lamb v. Hyde, [1994] O.J. No. 2535.

These decisions pre-date the Court of Appeal’s decision in Goodman v. Rossi, and the language of the decisions suggest the judges had some doubts about the existence or scope of an implied undertaking rule.

After the codification of the rule, the Divisional Court revisited the issue in London Life Insurance Co. v. Konney (1998), 1998 CanLII 18849 (ON CTGD), 41 O.R. (3d) 706. In a fact situation quite similar to Rivait v. Gaudry, the Court reversed itself, and applied the rule to prohibit an LTD insurer from terminating benefits on the basis of a medical report obtained in a related tort action. The Court acknowledged that invoking the rule countenanced concealment of relevant evidence, but concluded that the insured’s privacy rights should be protected. The court went on to note that within the context of the LTD action, the insurer was free to invoke its contractual rights to obtain the medical information necessary to protect its interests.

In two very recent decisions, the Superior Court invoked the rule to reject a tort defendant’s request to compel production of a report prepared at the behest of the plaintiff’s statutory accident benefits carrier, or LTD insurer. See Reimer v. Christmas, [2001] O.J. No. 1124, and Tanner v. Clark, [2001] O.J. No. 2126.

All of these decisions focus on the insured’s privacy rights and the absence of any apparent prejudice to the insurer or defendant, who was entitled to conduct their own medical examinations. In contrast to the decisions that pre-dated Goodman v. Rossi, these more recent decisions place a much higher premium on the litigant’s right to restrict the use of documents to the action in which they are produced. Although the decisions do not contain any detailed discussion of the burden to be met by a party seeking to use the documents for a collateral purpose, they would seem to reflect respect for Morden’s A.C.J.O warning that “the accepted grounds for granting relief...should not be so broadly based that the integrity of the rule is routinely infringed.”

Tort and disability claims are often pursued in separate actions. Combining the actions, as is often done, will eliminate any issue of collateral usage, but if the two actions are pursued independently, these decisions suggest that insurers will not routinely be able to compel production of documents.⁴

The only recent case considering the rule, that authorized the collateral use of such documentation is the decision of Master Dash in Antongiovanni v. Antongiovanni, [2001] O.J. No. 4659. The plaintiff to the tort action agreed to produce copies of his statutory accident benefits file and the LTD file, but refused to produce the discovery transcripts from the two latter actions. Master Dash referred to the exception to the general rule provided for in Rule 30.1.01(6), which allows the use of collateral evidence to impeach the testimony of a witness in another proceeding. He ordered production of the transcript, but limited its use to cross-examination, noting that it could not be used for any other purpose, such as supporting a demand for further documents.

FSCO’s consideration of the rule

(i) Can an arbitrator grant relief from an implied undertaking?

The rule has been considered by a number of FSCO’s arbitrators. The first two decisions I shall refer to suggest that arbitrators do not have the power to grant relief from the deemed undertaking provided for in Rule 30.1.01. In Hornick and State Farm Mutual Automobile Insurance Company (FSCO A00-000337, November 30, 2000), and, Gocan and State Farm Mutual Automobile Insurance Company (FSCO A01-000799, December 31, 2001), respectively, Arbitrators Leitch and Alves, concluded that because the undertaking is given to the Court, only the Court can grant the relief provided for in ss.30.1.01(8). Both arbitrators suggested that if the insurer wanted access to the insured’s tort records, they should apply to the Superior Court. However, this in turn raises another issue. If the Superior Court grants relief from the undertaking, does that necessarily mean that the document is compellable as part of FSCO’s pre-hearing disclosure process, or that it may automatically be tendered as evidence at an arbitration hearing? To my mind the answer is no. In effect, the judge is doing no more than determining that the use of the document is not offensive to the Court’s process. FSCO’s arbitrators remain charged with controlling their own process, and may still conclude that it would be inappropriate to allow the insurer to use the document.

In both these cases, the arbitrator focussed on the enforcement mechanism of the rule Cthe implied undertakingC that is designed to ensure that a party who is already in possession of documents by virtue of their participation in the other proceeding, does not use the documents for some collateral purpose. However, in most of the cases considered by FSCO’s arbitrators, including this one, the insurer was not a party to the civil action and is not in possession of the documents in question.⁵ Nor has it given any form of undertaking with respect to the use of the documents. To the contrary, it is asking for the documents with the stated intention of using them for a collateral purpose. In these circumstances, it seems an unnecessary fiction to refer to an implied undertaking.

To my mind, it is more appropriate to treat the matter for what it is, namely a request made in the context of the FSCO proceeding, for any order requiring the insured to produce documents from a related civil action. This request involves the exercise of the arbitrator’s authority to control her own process, by ruling on the production of documents that would not ordinarily be compellable as part of FSCO’s pre-hearing discovery process. The exercise of this discretion will necessarily entail a consideration of the principles that form the basis for the prohibition against the use of evidence for some collateral purpose.

In these circumstances, considering the matter without reference to an implied undertaking does not undermine the rule. The principle behind the rule is the prohibition against collateral use, the undertaking is simply a legal construct that allows the court to punish someone who has used documents for some unauthorized purpose and, by extension, operates as a deterrent. In circumstances such this case, where the insurer is not in possession of the documents, neither punishment for misuse, or deterrence is an issue. The inappropriate use of such documents can be controlled by dismissing the motion to compel production. Conversely, where the arbitrator concludes that the insurer should be able to use the document, they need only order its production.

Conceiving of the issue as an exercise of discretion to order production, which is within the arbitrator’s power, rather than a request to grant relief from an undertaking, avoids the difficulties inherent in deciding if an arbitrator can relieve against an undertaking given to the Court.

(ii) In what circumstances should production be compelled?

The balance of the cases at FSCO have proceeded on the basis that there was an implied undertaking, but that the arbitrator had the authority to grant relief. From this starting point, the arbitrators weighed the prejudice to the insured person if he was compelled to produce the documents, as against the prejudice to the insurer if access to the document was denied.

In contrast to the Court’s decisions in London Life v. Konney, Reimer v. Christmas, and Tanner v. Clark, the first three decisions issued by FSCO, authorized the use of documents from a civil action, in a statutory accident benefits proceeding. In each of these cases, the arbitrator concluded that there was little evidence of prejudice to the insured, but that it would be unfair to the insurer if it were denied access to the documentation.

In Reid and Royal and SunAlliance Insurance Company of Canada, (FSCO A99-000959, January 19, 2000), Arbitrator Blackman authorized the use of medical reports prepared in a civil action. When considering how broadly to interpret the arbitrator’s ruling, it is important to keep in mind the rather unusual circumstances of the case. Both the civil action, and the FSCO proceeding, involved a dispute between the same parties over statutory accident benefits arising out of the same accident.

In Chin and Coseco Insurance, (footnote 5), Arbitrator Allen ordered the insured to produce a copy of the discovery transcript from a related tort action so that the insurer could use it to test the credibility of the insured on cross-examination. The arbitrator relied in part on the exception provided in Rule 30.1.01(6) which permits the use of evidence obtained in one proceeding to impeach the testimony of a witness in another proceeding. With respect, I come to the opposite conclusion. For reasons I will set out in more detail shortly, I think that it distorts the arbitration process and prejudices the insured if the insurer has access to a discovery transcript, but the insured person does not.

In Mizzi and York Fire and Casualty Insurance Company, (FSCO A01-000176, November 9, 2001), Arbitrator Sone ordered the insured to produce copies of medical reports prepared at the behest of the insurer, in two civil actions arising out of previous motor vehicle accidents. Notwithstanding that the insured was prepared to produce all other parts of the files from the previous actions, the arbitrator concluded that the insurer’s medicals should be produced because they might contain evidence on the causation issue not available from any other source.

In contrast to these decisions, are the decisions of Arbitrator Wacyk in the case under appeal and J.V. and State Farm Mutual Automobile Insurance Company, (FSCO A00-001002, November 27, 2001). In each of these cases the arbitrator ruled that the insurer was not entitled to an order compelling its insured to produce documents from the related tort action.

The language of Arbitrator Wacyk’s decisions suggest that she was more concerned than her colleagues, with the effect importing evidence from a civil action could have on the arbitration process. In the case under appeal she expressed it in the following terms:

Furthermore, the Insurance Act and the Dispute Resolution Practise Code address the information to which parties proceeding before the Commission are entitled. A liberal interpretation of the exemptions to the implied undertaking rule would allow parties to gain access indirectly to information they are not entitled to directly in proceedings before the Commission.

On the question of ordering the production of defence medicals, Arbitrator Wacyk notes in both decisions that this has the undesirable goal of allowing the insurer to double up on its medical reports, increasing the risk that the arbitration becomes a battle of numbers.

With respect to discovery transcripts, she notes in J.V. and State Farm, that FSCO’s process does not include an oral pre-hearing discovery, and that an order compelling the insured to produce a transcript from a related tort action, allows the insurer to do indirectly what the legislature has chosen not to allow it to do directly.

Arbitrator Wacyk ties this concern for the integrity of FSCO’s process to the burnden the insurer must meet, stating in the case under appeal:

In my view, there is a presumption that the privacy of litigants will be protected unless the party seeking disclosure can demonstrate that, in those particular circumstances, their legislated rights to information in proceedings before the Commission are not sufficient, and the interests of justice outweigh any prejudice resulting to the party who disclosed the evidence. Different facts may lead to different conclusions regarding how the interests of justice will best be fostered.

I agree with Arbitrator Wacyk’s emphasis on a consideration of how importing documents from a civil action will affect the arbitration process.

CAA argued that subject to the rules of privilege, full disclosure in the FSCO proceeding must be the ultimate goal, and that any application of the deemed undertaking rule that countenances non-disclosure of relevant evidence must be avoided. The operation of the rule, by its very nature, countenances non-disclosure of relevant evidence. CAA is in effect asking me to ignore the rational for the rule. I am not prepared to do so. Complete disclosure is a laudable goal, but it has always been subjected to constraints. The deemed undertaking rule is but one example.

CAA also argues that a liberal application of the rule may increase the risk that a judge presiding over a trial, and a FSCO arbitrator, might come to inconsistent findings because they are basing their decisions on different evidence. This is a valid concern, particularly in light of the close variations in the findings of fact must have been apparent to the legislature when it provided the arbitration option. Inevitably, if there are two parallel proceedings, the triers of fact will have different versions of the evidence, and hence there is a risk of inconsistent findings.

The resolution of disputes over statutory accident benefits at FSCO is governed by a comprehensive set of procedural rules and practices. Some of these are set out in the SABS and are applicable to both civil actions and arbitrations, but most of the rules are set out in FSCO’s Dispute Resolution Practise Code or have developed as a result of a body of arbitrator’s rulings. These rules and practises are designed to afford each party an adequate level of disclosure. But they are also designed to provide a cheaper and more expeditious process than can be provided in a civil action. These differences in procedure should not be ignored for the sake of consistent results. The impact on the arbitration process must be taken into account when considering a request to compel production from a tort file. In some cases, such as the present, the concern about inconsistent finding will be significantly diminished due to the fact that the civil action has settled.

Of more concern to me than the possibility of inconsistent findings due to a difference in the evidentiary record, is guarding against the possibility that the person might assert inconsistent claims. For example, in a case of multiple accidents where causation is an issue, the principles underlying the deemed undertaking rule should not operate in a way that would allow the person to assert in one proceeding that the cause of his ongoing difficulties is the first accident, and to assert in the other proceeding that the second accident is to blame. To a large extent, this possibility can be guarded against by a review of the pleadings and other documents in the civil proceeding that become part of the public record. In cases where there is evidence of such duplicity, production of the entire tort file would be called for. In this case, there is no suggestion of such duplicity.

With these comments in mind, I turn to a consideration of each of the categories of documents identified above.

Medical and employment records

The documents in the first category relate to records compiled by Mr. Sandhu’s doctors and other health care professionals, or by his employer. As noted above, Mr. Sandhu’s counsel indicated that all of these documents have already been produced pursuant to FSCO’s normal disclosure practices. As there has been no suggestion that proper disclosure has not been made, I see no reason to resort to production from the tort file. I uphold the arbitrator’s ruling as it relates to this category of documents.

Medical reports generated for the purposes of litigation

The second category of documents relates to medical reports generated in the tort action. These include defence medicals conducted pursuant to Rule 33, and reports commissioned by the plaintiff. Different considerations apply to each.

I do not think the insured person should expect the same level of privacy with respect to medical reports they commission themselves, as they can expect in relation to reports generated at the behest of an opposing party. In addition, requiring the insured person to disclose his own reports, reduces the possibility that he will be able to assert inconsistent claims in the two forums. In this instance, counsel for Mr. Sandhu has advised that he has disclosed all the reports commissioned on behalf of Mr. Sandhu. If Mr. Sandhu had not already produced copies of the reports prepared at his behest in the tort action, I would have had no hesitation in requiring him to produce them.

With respect to the issue of defence medicals, I presume that the defendant to the tort action conducted one or more examinations, and that the reports are unfavourable to Mr. Sandhu. I also start from the premise that the reports are relevant. I reject Mr. Sandhu’s submission that because the tort claim is limited to non-pecuniary damages, the report is not relevant to these proceedings. Typically, such reports describe the injuries sustained in the accident and their sequella, issues of interest to the opposing party and the arbitrator. The weight to be afforded to such a report is a matter to be left to the hearing arbitrator.

CAA relies upon the Court of Appeal’s judgement in Cook v. Ip (1985), 1985 CanLII 163 (ON CA), 52 O.R. (2d) 289, for the proposition that a litigant who puts his physical or mental health in issue waives any privacy over his medical records. This proposition, with some exceptions, is now beyond debate. But in Cook v. Ip, the Court was referring to “medical records” produced in the ordinary course of affairs by the plaintiff’s own doctor’s and health care providers. Reports produced by doctors examining the plaintiff on behalf of a third party are a wholly different matter. In my view Cook v. Ip, has little application to this matter, which should be determined by applying the principles that inform the implied undertaking rule.

Any consideration of a request to order production of defence medicals must be made against the backdrop of the insurer’s ability to generate medicals within the FSCO proceeding. Section 65(1) of the SABS-94, authorizes the insurer to conduct medical examinations (“IEs”) “as often as reasonably necessary.” In addition, a dispute over a statutory accident benefit will often trigger an assessment at an independent, government sanctioned assessment centre (“DAC”) which sends a report to each party. As a result, an insurer defending a claim advanced at FSCO will rarely be able to assert that it needs the defence medicals to properly assess its exposure or assert its defence.

This case is not analogous to Reid and Royal & Sunalliance Insurance Company of Canada. In that case the insurer did not have access to reports in the FSCO proceeding, which was governed by the previous version of the SABS.⁶ In this case, CAA relied upon the SABS to conduct a number of medical examinations, and Mr. Sandhu was examined at a DAC. There is nothing in the record that suggests the medical examinations in CAA’s possession, are insufficient to allow it to assess its exposure, or to present its case.

In this context, the comments of Justice Browne in Tanner v. Clark, [2001] O.J. No. 2126 are germane. Justice Browne adopted counsel’s argument that granting a tort defendant who had already obtained three defence medicals the right to compel production of three medical reports from the accident benefits file, was analogous to granting the defendant three additional defence medicals.

In the absence of some compelling reason why the medical reports obtained by the insurer pursuant to the SABS are insufficient, I would not grant the insurer’s request for production of the defence medicals from the tort file. The insurer is not prejudiced by the non-production, whereas production of the reports will inevitably and unnecessarily lengthen and complicate the arbitration proceeding.

I uphold the arbitrator’s decision as it relates to the defence medicals in the tort file.

Discovery Transcripts

The third category of documents relates to transcripts from the examination for discovery. For the reasons noted above in relation to the relevance of the medical reports, I reject Mr. Sandhu’s submission that the transcript is not relevant. This category of documents provides the starkest example of the different procedures governing a civil proceeding and an arbitration. FSCO’s processes do not include examinations for discovery. An insured person who elects to arbitrate, instead of bringing a civil action, forgoes the opportunity to conduct a pre-hearing examination of one of the insurer’s representatives. But correspondingly, he is not subjected to such an examination at the behest of the insurer. The insured person’s election must be honoured and given meaning. If the insurer can routinely obtain production of the discovery transcript from a related tort action, the parity identified at the top of the paragraph is lost.

Insurer’s will no doubt gain an advantage if they can obtain a transcript. If they cannot compel production of the transcript they lose that advantage, but the absence of an advantage is not necessarily the same as prejudice. To my mind, whatever small prejudice might exist, is far outweighed by the distortion of the process and the inherent unfairness of affording one party access to a pre-hearing discovery, but not the other.

I uphold the arbitrator’s ruling as it relates to the discovery transcript.

Surveillance

The fourth category is surveillance evidence. Mr. Sandhu’s counsel advised that no surveillance was disclosed to him. In the circumstances, I need not comment further on this category of documents.

IV. CONCLUSION

In conclusion, CAA’s appeal is dismissed, and the arbitrator’s ruling that Mr. Sandhu need not produce the documents found in the related tort file, is upheld. Mr. Sandhu is entitled to his expenses of the appeal.