April A. David v. Allstate Insurance Company of Canada, 2003 ONFSCDRS 154

Neutral Citation: 2003 ONFSCDRS 154

FSCO A02-000969

BETWEEN:

APRIL A. DAVID

Applicant

and

ALLSTATE INSURANCE COMPANY OF CANADA

Insurer

DECISION ON A MOTION

Before:

Suesan Alves

Heard:

Written submissions were received by August 29, 2003.

Appearances:

Mark J. Voell for Ms. David

Shawn Stringer for Allstate Insurance Company of Canada

The Applicant seeks production of a document in Allstate's file which sets out the rationale for an offer of settlement made by the claims examiner prior to mediation. Allstate opposes production of this document.

The issue in this hearing is:

Is Allstate obliged to produce a document which sets out the rationale for an offer of settlement made prior to mediation?

Allstate is obliged to produce the document to the Applicant by November 6, 2003

Background:

The Applicant, April David, was injured in a motor vehicle accident on April 23, 1997. She alleges that she sustained injuries to her neck, back and an impairment of her psychological and cognitive functions as a result of the accident. She claims entitlement to income replacement benefits, medical benefits, interest, a special award and her expenses in respect of the arbitration. Allstate opposes the relief Ms. David claims and claims its expenses in respect of the arbitration.

At the pre-hearing, Ms. David sought production of Allstate's accident benefits file up to the date of mediation. In accordance with the practice at arbitration, Allstate agreed to produce its file from the date it was notified of the claim to the date of mediation.¹ However, Allstate identified one document within this period which it refused to produce— a memo or a portion of the log notes which sets out the rationale for an offer of settlement Allstate made to Ms. David before mediation.

Ms. David submitted that the document is relevant to her claim for a special award and is therefore producible. Allstate submitted that the document was not relevant to the benefits Ms. David claims. I find that Allstate's submission does not respond to Ms. David's submission that the document is relevant to her claim for a special award, and I will now deal with the question raised by the Applicant's submission.

Reasons:

The test for the production of a document is relevance. If a document is relevant, it ought to be produced, unless it should be shielded because of privilege, or because the prejudicial effect of disclosure far outweighs its probative value.

"Relevance depends directly on the facts in issue in any particular case. ... To be logically relevant, an item of evidence ... must simply tend to 'increase or diminish the probability of the existence of a fact in issue.'"² The facts in issue are determined by examining the applicable legislation, case law and the allegations of the parties.

The discovery process at the Commission is abbreviated and involves the exchange of documents.³ Nevertheless, the goals of that process are to ensure sufficient disclosure so that a party may assess the strengths and weaknesses of its own case as well as that of the other party, obtain admissions, obtain evidence which may be used at a hearing to impeach the credibility of witnesses, with a view to promoting settlement and making the hearing process more efficient and fair. Thus, at the pre-hearing stage of the process, so long as the documents in question have a semblance of relevance, or "seem" to be relevant, documents should be produced.⁴

In this case, Ms. David submits that the information she seeks may be relevant because she claims a special award under section 282(10) of the Insurance Act, R.S.O. 1990, c.I.8, as amended. That section provides:

If the arbitrator finds that an insurer has unreasonably withheld or delayed payments, the arbitrator, in addition to awarding the benefits and interest to which an insured person is entitled under the Statutory Accident Benefits Schedule, shall award a lump sum of up to 50 per cent of the amount to which the person was entitled at the time of the award together with interest on all amounts then owing to the insured (including unpaid interest) at the rate of 2 per cent per month, compounded monthly, from the time the benefits first became payable under the Schedule.

To succeed, Ms. David must establish that Allstate unreasonably withheld or delayed the payment of her benefits.

The following sets out in chronological order the events leading up to the making of the offer interwoven with a summary of the documents which create the foundation of Ms. David's claim for a special award:

Ms. David alleges that she sustained a head injury in the accident. She alleges that shortly after the accident, she provided Allstate with information in this regard and that Allstate failed to pursue or investigate this issue. Allstate disputes that it has such an obligation, particularly where the information was provided to her family physician, Dr. M. Mymko.
In about June 1997, a physiotherapist at the Canadian Back Institute reported to Dr. Mymko and to Allstate that Ms. David was still "having problems with 'ordered thought.' May I suggest that you review her in 2 weeks to see if this is still a problem, if it is, a cognitive assessment may be necessary."
On July 4, 1997, the progress note of a physiotherapist at the Canadian Back Institute recites that the adjuster indicates that there are no plans for a psychological investigation or examination at this stage.
On July 16, 1997, Ms. David's accountant, Mr. Day, contacted the adjuster to discuss settlement of Ms. David's accident benefits claim.
On September 8, 1997, the Canadian Back Institute physiotherapist reported that Ms. David "had to miss an August show because she felt her concentration might not be as good as normal."
On September 10, 1997, the adjuster wrote Ms. David: "Based on the medical information that I have received to date regarding the injuries sustained in the motor vehicle accident of April 23, 1997, you no longer qualify for Income Replacement Benefits. This is due to the fact that you no longer suffer an impairment that results in a substantial inability to perform the essential tasks of Owner/Manager of Silk & Cedar. Benefits have been paid up to August 1, 1997."
In about mid-September 1997, Allstate made an offer of settlement to Ms. David's accountant who was to convey that offer to her. On September 16, 1997, Allstate rescinded the offer of settlement.
On October 31, 1997, a disability DAC report authored by Dr. V. Hoffman, an orthopaedic surgeon, concluded that Ms. David was not disabled from an orthopaedic point of view. However, Dr. Hoffman noted that Ms. David's principal complaints related to her increased fatiguability, difficulty with concentration, decreased ability to work at her previous pace, may be related to the non-physical aspects of the motor vehicle accident. He reported that these symptoms were not within the area of his specialty, and suggested that a neuropsychological assessment might be of value in that regard.

The case law interpreting section 282(10) of the Insurance Act establishes that the focus of a special award claim is the arbitrator's assessment of the evidence that was available to the insurer at the time benefits were refused.⁵ However, the enquiry may also have a subjective component.⁶ An insurer is obliged to read medical reports in a fair and balanced manner.⁷"Wilful or deliberate misconduct or bad faith are additional factors in the conduct of the Insurer, beyond unreasonableness, which should be taken into consideration when assessing the quantum of a special award."⁸

Thus, at this stage of the process, documents which seem to show the objective and subjective components of any refusal, delay or withholding of payment would be relevant and producible. This would include information as to what Allstate knew, when it knew it, whether there was a refusal or delay, whether there was a fair and balanced reading of the medical reports, and whether Allstate considered all available information fairly.⁹

In this case, the document in question – a memo or a portion of the log notes which sets out the rationale for an offer of settlement Allstate made to Ms. David – was prepared with a view to documenting the file and perhaps communicating with superiors. Although prepared for that purpose, since it sets out the rationale for the offer of settlement, I find it is likely to contain evidence of Allstate's assessment of Ms. David's case, which would have both an objective and subjective component, and would therefore be relevant.

The actual contents of the document may be innocuous vis-à-vis the Applicant's claim for a special award. If that is the case, it affords the Applicant an opportunity to moderate or withdraw her claim for a special award, thus enhancing the possibility of settlement and of shortening the hearing.

However, if the document contains evidence which supports a finding of unreasonable withholding, refusal or delay in payment of benefits, then such evidence would also be relevant to the amount of any special award. This will afford the Insurer an opportunity to agree that a special award is appropriate, thus enhancing the possibility of settlement and of shortening the hearing. The point is that it is important that both parties are aware of the facts of the case before the hearing.

As noted earlier, although a document is relevant, it may be shielded because of privilege, or because the prejudicial effect of disclosure far outweighs its probative value. Neither ground was raised by the Insurer, but were briefly addressed by the Applicant. In the interest of completeness I will address these points since they form part of the test for disclosure outlined above.

I find the document would not be shielded by either litigation privilege, solicitor-client privilege or by settlement privilege. Litigation privilege applies once litigation is reasonably anticipated. Arbitrators have held that the demarcation point will generally be around the time of mediation — as early as the date the insured filed for mediation, or the date of the mediator's report, and as late as the date on which the arbitration application was filed. In this case, the offer, and therefore presumably the memo setting out the rationale for the offer, were made prior to the date Ms. David filed for mediation.

Solicitor-client privilege does not apply as there is no evidence that this was a communication to counsel, or that legal advice was sought in relation to the offer or the document.

Settlement privilege prevents third parties from obtaining communications made in furtherance of settlement. This prevents a third party from using such communications as evidence of liability. The purpose of the memo was to set out the rationale for settlement. It is unlikely that it is a communication made in furtherance of settlement. However, if it is such a document, settlement privilege does not shield documents from production where documents have relevance apart from an admission against interest.¹⁰ In this case, the parties to the settlement are the same as those in the arbitration.

With respect to the question of whether the prejudicial effect of disclosure outweighs its probative value, Allstate adduced no evidence that disclosure would have a prejudicial effect. Production involves photocopying and faxing or couriering a few sheets of paper which have already been identified in the file.

As Arbitrator Blackman noted in Campeau, special awards are statutorily mandated by section 282(10) of the Insurance Act. Arbitrators are obliged to make such an award where there is a finding that "an insurer has unreasonably withheld or delayed payments." Although the arbitrator is charged with the responsibility of making the award and determining the appropriate amount, the parties are responsible for obtaining and adducing evidence at a hearing. This suggests that there is an additional public interest in allowing a party to determine whether facts exist which would support a special award. With that disclosure, the insured person will then be in a position to adduce such evidence at a hearing, so that the arbitrator will be able to determine entitlement to a special award and the amount of any such award on the true merits of the case.

For these reasons, I order Allstate to produce the document by November 6, 2003.

November 1, 2003

Suesan Alves Arbitrator

Date