Neutral Citation: 2003 ONFSCDRS 149

FSCO A02-000766

BETWEEN:

ZENON DYCZOK

Applicant

and

WAWANESA MUTUAL INSURANCE COMPANY

Insurer

PRE-HEARING DECISION

Before:

Lawrence Blackman

Heard:

September 16, 2003, at the offices of the Financial Services Commission of Ontario in Toronto.

Appearances:

Timothy P. Boland and Erin Farrell for Mr. Dyczok

Darrell March for Wawanesa Mutual Insurance Company

The Applicant, Zenon Dyczok, was injured in a motor vehicle accident on October 19, 2000. He applied for and received statutory accident benefits from Wawanesa Mutual Insurance Company ("Wawanesa"), payable under the Schedule.¹ Wawanesa terminated weekly income replacement benefits ("IRBs") on March 31, 2001. The parties were unable to resolve their disputes through mediation and Mr. Dyczok applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The pre-hearing discussion in this case was first held on August 26, 2002 before Arbitrator Bayefsky. His subsequent pre-hearing letter dated September 9, 2002 confirmed that Wawanesa was to provide Mr. Dyczok with its accident benefits file up to the date mediation was applied for, subject to specific claims of privilege.

Arbitrator Bayefsky set a January 10, 2003 preliminary issue hearing date to determine whether Mr. Dyczok had failed to participate in an insurer medical examination ("IE"). The main four-day arbitration was to commence May 12, 2003. The preliminary issue hearing was subsequently adjourned to March 24, 2003. Shortly before that date, the parties resolved the preliminary issue. At the Insurer's request, the main arbitration hearing was adjourned to August 2003.

On July 18, 2003, the pre-hearing discussion was resumed before me. I confirmed my oral rulings by letter dated July 21, 2003, a copy of which is attached as Appendix "A" to this decision. On August 13, 2003, I heard motions brought by both parties. My subsequent letter decision of August 26, 2003 is attached as Appendix "B."

At Wawanesa's request, I put the following issue raised by Mr. Dyczok over to September 16, 2003:

Is Wawanesa required to produce a copy of its entire accident benefits file?

Wawanesa's request on September 16, 2003 for an adjournment of this motion is declined.
Wawanesa shall, by 4:30 p.m. on Tuesday, October 28, 2003, serve on Mr. Dyczok and file with the Financial Services Commission of Ontario, an Affidavit of Documents pertaining to the accident benefits file arising from Mr. Dyczok's October 19, 2000 motor vehicle accident, sworn by a person in authority at Wawanesa who might reasonably be expected to have knowledge of the transactions or occurrences in issue, setting out:

(a) confirmation that (i) the deponent has conducted a diligent search of Wawanesa's records and has made appropriate enquiries of others to inform herself or himself in order to make such affidavit and that (ii) the affidavit discloses, to the full extent of the deponent's knowledge, information and belief, all documents relating to the accident benefits file herein that are or have been in Wawanesa's possession, control or power, excluding documents which are in the exclusive control of its counsel and which counsel has not shared with or communicated to Wawanesa.

(b) in Schedule "A," by consecutively numbered document, every document and every dated log or computer entry in Wawanesa's possession, power or control which was created or came into existence on or before October 12, 2001 (being the date, as agreed by both counsel, upon which mediation was sought). Each item shall have sufficient particulars to identify the document, including, but not necessarily limited to, the type and function of the document, its date, and the role and status of the receiver and sender (or creator) of the document. Wawanesa shall further provide sworn confirmation that every document listed therein has been provided to Mr. Dyczok or shall forthwith provide to Mr. Dyczok any document so listed which has not been provided, together with an explanation as to why the document had not yet been served.

(c) in Schedule "B," by consecutively numbered document, every document and every dated log or computer entry in Wawanesa's possession, power or control which was created or came into existence after October 12, 2001 which Wawanesa does not object to producing to Mr. Dyczok. Each item shall have sufficient particulars to identify the document, including, but not necessarily limited to, the type and function of the document, its date, and the role and status of the receiver and sender (or creator) of the document. Wawanesa shall further provide sworn confirmation that every document listed therein has been provided to Mr. Dyczok or shall forthwith provide to Mr. Dyczok any document so listed which has not been served.

(d) in Schedule "C," by consecutively numbered document, every document and every dated log or computer entry in Wawanesa's possession, power or control which was created or came into existence after October 12, 2001 which Wawanesa objects to producing to Mr. Dyczok. Each item shall have sufficient particulars to identify the document, including, but not necessarily limited to, the type and function of the document, its date, and the role and status of the receiver and sender (or creator) of the document. Wawanesa shall, for each listed document, articulate and particularize the full grounds for its objection to producing the document.

(e) in Schedule "D," by consecutively numbered document, every document and every dated log or computer entry in Wawanesa's possession, power or control which was created or came into existence after October 12, 2001 that was formerly in Wawanesa's possession, control or power, but is no longer in its possession, control or power, whether or not any other objection to production is made, together with a statement of when and how the party lost possession or control of or power over the document and its present location. Each item shall have sufficient particulars to identify the document, including, but not necessarily limited to, the type and function of the document, its date, and the role and status of the receiver and sender (or creator) of the document.

(f) a statement that Wawanesa has never had in its possession, control or power any document relating to its accident benefits file arising from Mr. Dyczok's motor vehicle accident of October 19, 2000 other than those listed in the affidavit, excluding documents which are in the exclusive control of its counsel and which counsel has not shared with or communicated to Wawanesa.

(g) a certificate signed by a lawyer that he or she has explained to the deponent the necessity of making full disclosure of all documents relating to its accident benefits file arising from Mr. Dyczok's October 19, 2000 motor vehicle accident.

Mr. Dyczok shall, by 4:30 p.m., on Monday, November 10, 2003, serve on Wawanesa and file with the Financial Services Commission of Ontario, his submissions as to any challenge he may have of any document listed in Schedule "C" of Wawanesa's Affidavit of Documents.
Wawanesa shall, by 4:30 p.m., on Monday, November 17, 2003, file with the Financial Services Commission of Ontario, a copy of each document listed in Schedule "C" of its Affidavit of Documents which is challenged by Mr. Dyczok. On the basis of the grounds articulated and particularized in Wawanesa's Affidavit of Documents and the written submissions filed by Mr. Dyczok, I shall determine what, if any, further documents shall be produced by Wawanesa. Those documents not ordered to be produced shall be sealed.
If the parties cannot agree on the entitlement to or the amount of the expenses pertaining to the motions heard August 13, 2003 and September 16, 2003, they may request an appointment for a determination of same in accordance with Rule 79 of the Dispute Resolution Practice Code (Fourth Edition, May 31, 2001).

1. Adjournment request

Mr. Dyczok sought, in part, the following relief in his motion record dated August 13, 2003:

An order compelling the Insurer to:

produce the entire accident benefits file;
provide a schedule of all documents for which claims of privilege are made;
provide details with respect to the nature, author and date of the privileged document; and
identify specific grounds for claiming privilege for each document.

At the beginning of the September 16, 2003 motion, Mr. Dyczok's counsel expanded the production request to include production of the file of the Insurer's counsel, Mr. March. Mr. March responded that as no notice had been given of this production request, he was requesting an adjournment. He also indicated that he would be seeking production of the entire file of the Applicant's counsel.

The Applicant's counsel then restricted the production request to exclude counsel's file, but to include any legal opinions or communication received by Wawanesa from its counsel. The Insurer maintained its adjournment request. It indicated that this was a significant production request and that an adjournment was necessary, in part, to see if the Law Society of Upper Canada wished to intervene.

I declined to further adjourn this matter.

I was persuaded that fair and reasonable notice had been given to Wawanesa. Mr. Dyczok's August 11, 2003 Motion Record specifically sought, amongst other things, production of Wawanesa's "entire" accident benefits file. I am persuaded that the word "entire" reasonably encompasses any correspondence or opinions in Wawanesa's possession received from counsel.

I noted that Mr. March's own, very concise case brief included the decision in Graper and Liberty Mutual Fire Insurance Company (FSCO A00-000133, March 21, 2001). Graper specifically addresses the issue of production of communications between counsel and client. I also noted that I had already adjourned the Applicant's present motion from August 13, 2003 to September 16, 2003 at the Insurer's request that it needed time to properly prepare, notwithstanding that production from the Insurer's file is a routine pre-hearing request.

I further note that the Dispute Resolution Practice Code (Fourth Edition, May 31, 2001) (the "Code”) refers to interventions only in the context of Appeals. Rule 59 states that the Director may request that persons not parties to an appeal make submissions on any issue of law arising in an appeal and participate on such terms as the Director considers appropriate. Persons who are not parties may also apply to make submissions on an issue of law arising in an appeal.

2. Production of the Insurer's pre-mediation file

As noted above, in his September 9, 2002 pre-hearing letter, Arbitrator Bayefsky stated that the Insurer would provide its accident benefits file up to the date mediation was applied for, subject to any specific claims of privilege.

By letter dated October 22, 2002, Mr. March wrote Mr. Boland, counsel for the Applicant, enclosing what he termed the "updated company file records up to the first date of the Application for Mediation." I measure the enclosed documentation at one centimetre. Mr. March also enclosed a Schedule "B" which lists 15 documents for which privilege was claimed. All of these items are dated after the agreed date that mediation was sought, being October 12, 2001, with the exception of an undated handwritten note. However, by its place in the chronologically listed documents, the note would appear to have been created in late February or March 2002.

On August 13, 2003, the Insurer had undertaken to again send a copy of its pre-mediation file, as confirmed in my letter of August 26, 2003 which is attached. On the afternoon of September 15, 2003 (being the day before this most recent pre-hearing resumption), Mr. Dyczok's counsel were served with a copy of the Insurer's accident benefits file, together with a revised Schedule "B," now listing 13 items (two items having been eliminated from the prior Schedule "B"). The enclosed documents which were produced now measured three centimetres.

Mr. Dyczok queried the discrepancy in size of the documents produced on these two occasions. He submitted that documents one would normally expect in an accident benefits file were missing and sought confirmation that all of the Insurer's documents had been provided.

Wawanesa's counsel submitted that as best as he knew, the Insurer had produced everything up to the date mediation was requested and had produced that on two occasions. Mr. March, however, could not say that someone at Wawanesa may have inadvertently failed to have provided a document which may have accidentally dropped on the floor. It was also indicated that the first delivery may not have included documents received from the Applicant.

While Mr. March indicated that he had passed on to the Applicant everything that he had received from Wawanesa which was encompassed by Arbitrator Bayefsky's order, he argued that reserve information, communication from counsel and communication from the Insurer's accounting expert were not producible. I enquired of Mr. March whether privilege was then being sought for anything in addition to the now 13 items listed in the Insurer's Schedule "B." Mr. March indicated that he was not prepared to say for which documents privilege was being claimed. He also indicated that the Insurer was not prepared to say whether or not it was prepared to produce an Affidavit of Documents.

Arbitration at the Commission is intended to be more expeditious, less complicated and less costly than the court system. Arbitration deals with first-party claims with the accompanying requirement of good faith, and in significant measure, depends on the candour and fairness of the parties. In Campeau and Liberty Mutual Insurance Company (FSCO A00-000522, March 12, 2001) I noted that the Code does not provide for affidavits of documents. I further indicated that I found "it difficult to see the advantage of introducing into this alternative [dispute resolution] procedure to the courts, a multi-stepped pre-hearing process, accompanied by variations on affidavits of documents, to determine whether notes already in the possession, control or power of the insurer, should be produced."

However, the relative informality of this dispute resolution system should not result in parties being less attentive to their responsibilities or by action or inaction possibly circumventing a ruling or undertaking. Section 23 of the Statutory Powers Procedure Act, R.S.O. 1990, c. S. 22 (as amended) provides tribunals, for the purpose of any of its proceedings, to make such orders or give such directions as it considers proper to prevent abuse of its process. Rule 32.9 of the Code provides that an arbitrator may order, at any time, the giving of information he or she considers relevant to the determination of the issues in the arbitration, on such terms as he or she considers appropriate.

I consider the ordering production of affidavits of documents as part of an arbitrator's powers, to be appropriate in exceptional circumstances where fairness so demands based on the unique facts of the case.

I am persuaded that such circumstances exist in this case.

Mr. March submitted, in regard to the Applicant's request for the Insurer's entire file, that Arbitrator Bayefsky had already made his order and that I had no jurisdiction to vary that order.

I am concerned that Wawanesa may have implicitly varied Arbitrator Bayefsky's order, by adding its own limitations. I am concerned as to how a centimetre of production turned into three centimetres. I am concerned that broad arguments are still being made about possible privilege for the pre-mediation period, notwithstanding that details of any specific claim for privilege for that period have never been provided in the year following the initial order. I am concerned that Wawanesa now refuses to advise which documents it submits are not producible. I am concerned that rather than hearing that counsel has impressed upon his principal the necessity of making full disclosure, I am hearing that one cannot be responsible if a document has inadvertently fallen on the floor. I am concerned about Wawanesa's emphasis in its submissions on the adversarial nature of this process in this first-party claim. I am concerned, to quote Stinson J. in McCullough v. AXA Insurance Company (an unreported decision dated July 21, 2000), that production exchange in this proceeding not descend into a "cat and mouse exercise."

Arbitrator Bayefsky, by his order, has already determined the material which was to be produced to be relevant to the determination of the issues in the arbitration. Wawanesa has had more than sufficient opportunity to advise of any specific claims of privilege for the period on or before October 12, 2001. Having failed to do so, I find that they have waived any such claims up to that date.

Hence, in order to enforce, not overturn, Arbitrator Bayefsky's order, I am persuaded that an Affidavit of Documents from the Insurer is necessary and proper as an extraordinary remedy, based on the circumstances of this particular case, to address the concerns noted above. The required particulars of same are set out in my order. The specifics of each document and each dated log or computer entry is required; a "boiler-plate" Affidavit of Documents will not suffice.

3. Production of the Insurer's post-mediation file

Turning to Arbitrator Bayefsky's September 9, 2002 pre-hearing order and the question of production from Wawanesa's post-mediation file, I agree with the general proposition that the production process at the initial pre-hearing discussion should not be revisited by another arbitrator. Parties should not be encouraged nor allowed to take numerous "kicks at the can" in endeavouring to get ever greater and broader production exchange. In this specific case, however, there are numerous reasons which cumulatively call for a revisit of the specific production issue of the Insurer's file:

(a) the very significant and unusual passage of time; it is more than one year since the initial pre-hearing discussion, the adjournment delay being to a significant degree at the Insurer's request;

(b) Campeau held that the usual dividing line regarding production from the Insurer file was subject to submissions as to why production should be narrowed or broadened. Mr. Dyczok submits that there has been a significant change in circumstances since the pre-hearing discussion, namely what he submits was a last- minute change in position by Wawanesa in March 2003 regarding the IE attendance, that justifies expanding the usual production order made by Arbitrator Bayefsky;

(c) my concerns expressed above as to whether there has been compliance by the Insurer with the prior order of Arbitrator Bayefsky;

(d) Wawanesa's present refusal to produce any document created after mediation was sought;

(e) Wawanesa's present refusal to advise which documents it claims are privileged;

(f) the general practice, as confirmed, in part, in the September 9, 2002 pre-hearing letter that production exchange may be subject to new developments, such as issues arising out of the documents to be exchanged; and,

(g) the ongoing new requests for documentation by the Insurer itself.

However, I am ultimately not persuaded by the Applicant's argument that there is, in fact, a basis upon which to order production of Wawanesa's entire file.

Succinctly, Mr. Dyczok submits that on the eve of the preliminary issue hearing to decide whether he had unreasonably refused to participate in scheduled IEs, Wawanesa, "without any explanation whatsoever, abandoned its position that it had vigorously maintained for approximately 2 years." The Applicant further submits that once the Insurer had abandoned this position, "there were further unreasonable delays caused by irresponsible claims handling in arranging assessments," leading to significant prejudice to himself in being denied IRBs for over two years and being denied his right to a disability Designated Assessment Centre ("DAC") assessment. The Applicant submits that the Insurer's state of mind has been placed into issue.

Blair R.S.J., in Davies v. American Home Assurance Co. 2002 CanLII 62442 (ON SCDC), 60 O.R. (3d) 512, stated, citing as authority

Doherty J.A. in General Accident Assurance Co. v. Chrusz (1999), 1999 CanLII 7320 (ON CA), 45 O.R. (3d) 321, that:

There can be no debate that solicitor-client privilege - sometimes called legal advice privilege is one of the cornerstones of our system of justice.

Blair R.S.J. continues, that the "privilege is not absolute; but 'must be as close to absolute as possible to ensure public confidence and retain relevance.'" However, that solicitor-client privilege may be waived "where a party asserting the privilege places its state of mind in issue by attempting to justify its position on the grounds of detrimental reliance upon the legal advice received," citing Bank Leu Ag v. Gaming Lottery Corp., [1999] O.J. No. 3949 (S.C.J.).

In Samoila v. Prudential of America General Insurance Co. (Canada) et al. 2000 CanLII 22690 (ON SC), 50 O.R. (3d) 65, Brockenshire J. referred to the testimony of an experienced claims person that before accusing an insured of fraud in an accident benefits claim, he would rely on the advice of legal counsel. This, he held, provided a factual basis for concluding that a legal opinion would be sought to make a determination of whether or not to deny coverage for fraud, and, therefore, he found that the insurer had waived solicitor-client privilege. Accordingly, Brockenshire J. ordered production of "any and all opinions obtained by the insurer relating to the denial of coverage."

In this particular case, there is no factual basis upon which to make a finding of waiver. The Applicant, himself, submits that Wawanesa abandoned its position "without any explanation whatsoever." There is no evidence before me that Wawanesa has placed its "state of mind in issue by attempting to justify its position on the grounds of detrimental reliance upon the legal advice received."

In Davies, Blair R.S.J. held, at paragraph 17, that "the mere assertion of a bad faith claim against an insurer is [not] sufficient to destroy the solicitor-client privilege attaching to communications of legal opinions from the insurer's counsel to the insurer. Such an intrusive undermining of a fundamental protective principle of substantive law cannot be justified on legal or policy grounds." At paragraph 38, it is held that "the preferable order, I think, would have been – and is – for the matter to be remitted to the parties and the delivery of a further and better Affidavit of Documents with a properly particularized Schedule B to be ordered."

Having determined that Mr. Dyczok is not entitled to production of Wawanesa's entire file, it is also necessary to address Wawanesa's present position that it is not prepared to produce anything created after mediation was sought. Campeau set the date of the application for mediation as a general dividing line between producible and non-producible insurer documentation. This was, however, in the context of claims of privilege regarding an adjuster's notes. Such a dividing line does not apply to all documentation in an insurer's possession, such as, for example, DAC reports and records, IE reports and records, documentation received from the applicant and treatment providers, or surveillance and investigation (for which a separate rule, under the Code, applies).

Given Wawanesa's present position regarding privilege, I do not think that it is fair to limit the Insurer's claims of privilege to the limited items which it previously listed in correspondence to the Applicant. However, given the concerns noted above, and specifically Wawanesa's present refusal to produce any documents created after mediation was sought (notwithstanding having earlier produced at least some documentation created post-mediation) and Wawanesa's present refusal to advise which documents it now claims are privileged, in order to avoid a "cat and mouse exercise," I again find it necessary and proper as an extraordinary remedy, based on the circumstances of this case, to order Wawanesa to produce an Affidavit of Documents regarding its post-mediation file on the terms set out in my order.

I further set out in my order time limits within which Mr. Dyczok may object to any claims by the Insurer that certain documents should not be produced, as well as setting out how those disputes will be determined. I reiterate, for the assistance of the Applicant, that I have already ruled that the Insurer has not waived privilege for the post request for mediation period.

Lastly, it is my hope that this decision should not have to be used as a precedent. Rather, it is my intent that this decision should act as a caution; that parties, aware of the potential extraordinary remedy of an affidavit of documents applicable in unique circumstances, will be ever more mindful of their respective responsibilities to ensure that this system operates efficiently, cost-effectively, fairly and in good faith, in a relatively simple and uncomplicated manner.

EXPENSES:

If the parties cannot agree on the entitlement to or the amount of the expenses pertaining to the motions heard August 13, 2003 and September 16, 2003, they may request an appointment for a determination of same in accordance with Rule 79 of the Code.

October 14, 2003

Lawrence Blackman Arbitrator

Date