Sukwant Partola v. Liberty Mutual Insurance Company, 2004 ONFSCDRS 104

Neutral Citation: 2004 ONFSCDRS 104 FSCO A03-000097 FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

SUKWANT PARTOLA Applicant

and

LIBERTY MUTUAL INSURANCE COMPANY Insurer

PRE-HEARING DECISION

Before: Janice Sandomirsky

Heard: By telephone conference call on May 21, 2004. Written submissions were received on June 11, 2004.

Appearances: Gurcharan Anand for Ms. Partola Suzanne Courtlander for Liberty Mutual Insurance Company

Issues:

The Applicant, Sukwant Partola, was injured in a motor vehicle accident on June 6, 2002. She applied for and received statutory accident benefits from Liberty Mutual Insurance Company ("Liberty Mutual"), payable under the Schedule.¹ Liberty Mutual terminated weekly income replacement benefits, payment for housekeeping and home maintenance services and some health care benefits. The parties were unable to resolve their disputes through mediation, and Ms. Partola 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 May 1, 2003, the issues in dispute identified, and agreed to by the parties, included claims for income replacement benefits, housekeeping services, health care benefits, expenses, interest and a special award.

Production issues were also dealt with during the pre-hearing discussion. Ms. Partola requested production of Liberty Mutual's adjusters' notes, memos and documentation related to the special award. Liberty Mutual was ordered to produce its adjusters' notes related to the payment of caregiver benefits and the claim for income replacement benefits up to the date of the filing of the application for mediation on November 21, 2002.

The arbitration hearing was initially scheduled to commence on October 27, 2003. At the request of Ms. Partola, and on the consent of Liberty Mutual, the hearing was adjourned until March 8, 2004.

According to the submission from Ms. Partola, during a settlement conference on March 3, 2004, Liberty Mutual paid the outstanding income replacement benefit, housekeeping and medical expenses with interest and reinstated all benefits. As a result, the only issue left to be decided at the arbitration was Ms. Partola's entitlement to a special award.

On March 5, 2004, Ms. Partola requested production of additional documents from Liberty Mutual, including: the legal opinions received by Liberty Mutual regarding the reinstatement of benefits; Liberty Mutual's manuals and claims policies relating to the adjustment of accident benefits claims; and all adjusting notes, memos, reviews and all writings or other evidence of communication regarding the handling of Ms. Partola's accident benefit claim.

Liberty Mutual refused to produce these documents. It argued that the legal opinions were protected by solicitor-client privilege, the manuals and claims policies were irrelevant and the adjuster notes were already the subject of an order from the pre-hearing discussion, which was complied with. Further, it took the position that the adjusters' notes after the date of filing for mediation were protected by either litigation privilege and/or solicitor-client privilege.

The parties raised the production issue at the outset of the hearing. The hearing arbitrator adjourned the hearing and referred the matter back to the pre-hearing arbitrator. The hearing arbitrator also suggested that Liberty Mutual provide an "Affidavit of Documents" like list of the adjusters' computer log notes. On April 29, 2004, Liberty Mutual produced a list of all the computer log notes from June 7, 2002 to April 16, 2004 (numbered 1-262) with the dates, name of the adjuster and "litigation privilege" beside the majority of entries.

The resumption of the pre-hearing took place on May 21, 2004 to consider the additional production request. The parties asked for a ruling on the following:

Is Liberty Mutual required to produce:

a) all adjusting notes, memos, reviews and all writings or other evidence of communication regarding the handling of Ms. Partola's accident benefit claim;

b) legal opinions received by Liberty Mutual regarding the reinstatement of benefits; and

c) Liberty Mutual's manuals and claims policies relating to the adjustment of accident benefits claims?

Result:

Liberty Mutual is ordered to file with the Commission and serve on Ms. Partola two weeks from the date of this decision an Affidavit of Documents, sworn by a person in authority at Liberty Mutual, that lists all the adjusters' notes, and includes enough particulars to identify each note and fully articulates the basis of the claim of privilege.
Ms. Partola will have a further two weeks to file with the Commission and serve on Liberty Mutual any challenges she may have to the Affidavit of Documents.
Liberty Mutual will then file with the Commission a copy of each of the adjusters' notes which is challenged by Ms. Partola.
On the basis of the grounds set out and particularized in Liberty Mutual's Affidavit of Documents and the written submission filed by Ms. Partola, I shall determine what, if any, further documents shall be produced by Liberty Mutual. Those documents not ordered to be produced shall be sealed.

EVIDENCE AND ANALYSIS:

1. The adjusters' notes

The question of production of the adjusters' notes and records from the Insurer's accident benefits claim file in relation to a claim for a special award has been the subject of a number of arbitration decisions. In Al-Obaidi and Allstate Insurance Company of Canada (FSCO P99-00009, May 2, 1999), Director's Delegate Naylor states that she agrees with Leitgeb² that a "bald assertion of a special award does not, in and of itself, entitle an insured to access the company's complete file. "Arbitrators will order an insurer to produce the adjusters' notes where there is a sufficient connection between the notes and the parameters of the dispute.³

In this case, Liberty Mutual has produced the adjusters' notes and records up to the date of the filing of the application for mediation as ordered at the pre-hearing. It claims litigation privilege over adjusters' notes prepared after that date. The decision in Campeau and Liberty Mutual Insurance Company (FSCO A00-000522, March 12, 2001) confirms the date of the filing an application for mediation is "an appropriate prima facie dividing line between producible and non-producible insurer documentation, subject to submissions by either side as to why the production period or scope in a particular case should be narrowed or broadened."

Ms. Partola submits that the scope of production ought to be broadened in this case. She argues that, in light of Liberty Mutual's decision to abandon its position on all the disputed issues and pay the outstanding benefits, it is clear that it continued to adjust the file right up to and just prior to the hearing. She noted that her benefits were terminated based on a report from Dr. Kwok on November 6, 2002, and nothing further happened until a few days before the hearing in March 2004, when Liberty Mutual paid all outstanding benefits. In the 17-month period between the report from Dr. Kwok and the payment of benefits, numerous medical reports were sent to Liberty Mutual from her treating specialists which, she argued, required the continued adjusting of the claim file. Finally, she submitted that, given that a special award is based on an evaluation of the conduct of the insurer, the production of the adjusters' notes are highly relevant to that issue.

Since the Court of Appeal case in General Accident Assurance Co. v. Chrusz (1999) 1999 CanLII 7320 (ON CA), 45 O.R. (3d) 321, the courts have adopted a "dominant purpose" test to establish the existence of litigation privilege. The Chrusz case quotes from a lecture by R.J. Sharpe (now Sharpe J.A.) entitled "Claiming Privilege in the Discovery Process," which analyzed the underlying rationale for litigation privilege as follows:

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.

The effect of a rule of privilege is to shut out the truth, but the process which litigation privilege is aimed to protect - the adversary process - among other things, attempts to get at the truth. There are, then, competing interests to be considered when a claim of litigation privilege is asserted; there is a need for a zone of privacy to facilitate adversarial preparation; there is also the need for disclosure to foster fair trial.

In Davies v. American Home Assurance Co., 2002 CanLII 62442 (ON SCDC), 60 O.R. (3d) 512, the Divisional Court confirms that litigation privilege exists "to protect from production a communication made or a document created for the 'dominant purpose' of assisting the client in litigation." It then states that:

The point is that litigation privilege (or solicitor-client privilege), when properly asserted, trumps relevance in almost all circumstances. That is its very nature. There is no "bad faith insurance claim" exception to either litigation privilege or solicitor-client privilege that creates a special rule for bad faith claims against insurers and consigns the normal rules respecting privilege to other claims. The same rules apply in all cases.

In light of these authorities, I am satisfied that, even where the issue in dispute is entitlement to a special award, litigation privilege protects the adjusters' notes where the dominant purpose of the note was created for the purpose of the litigation process. As a general rule, the line that demarks the point at where the insurer stops adjusting the file and starts preparing the file for litigation is the date of the filing of the application for mediation. However, an insurer continues to have an obligation to adjust the claim even after benefits have been denied and litigation has been initiated.

The case of Graper and Liberty Mutual Insurance Company (FSCO A00-000133, July 20, 2001) noted that there may be cases where a document-by-document approach to the claim of litigation privilege may be appropriate.⁴ As noted in Davies, claims for litigation privilege require the determination of questions of mixed law and fact and, when there is concern about the adequacy of privilege claims, the court may order further evidence such as an affidavit of documents.

This case is somewhat unusual in light of the fact that all the benefit claims have been resolved, and the only issue left in dispute is the special award. In essence, the case has been bifurcated and the adjusters' notes are highly relevant to that claim. While there is no "bad faith insurance claim" exception to litigation privilege, the insurer still has the burden of establishing that the dominate purpose of the notes was to facilitate the litigation. While it has generally been accepted that there is a presumption that documents produced after the date of filing for mediation are protected by litigation privilege, in light of the many medical reports that were submitted by Ms. Partola after the mediation, and Liberty Mutual's subsequent decision to pay the benefits, I find that the simple claim of privilege without further particulars raises concerns about the adequacy of the privilege claim.

As a result, I order that Liberty Mutual file with the Commission and serve on Ms. Partola an Affidavit of Documents, sworn by a person in authority at Liberty Mutual, that lists all the adjusters' notes, and includes enough particulars to identify each note and fully articulates the basis of the claim of privilege.

2. Legal Opinions

Documents consisting of communication between solicitor/client are also protected by privilege if they are confidential, made within the scope of the professional relationship and the purpose for the communication is to seek or obtain legal advice. The only exception to this rule is where there is a waiver of privilege.

Ms. Partola did not present an argument that Liberty Mutual waived the privilege it claimed over any legal opinions it received regarding the reinstatement of benefits and I find that it is protected from production on the basis of solicitor-client privilege.

3. Manuals and claims policies

Ms. Partola requested productions of Liberty Mutual's manuals and claims policies relating to the adjustment of accident benefits claims. Liberty Mutual advised that it did not have any documents of this description and Ms. Partola was satisfied with that answer. In any event, I would decline to order production of these documents as I was not satisfied that they would be relevant to the issues in dispute.

July 15, 2004

Janice Sandomirsky Arbitrator

Date