Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2006 ONFSCDRS 60

FSCO A04-000822

BETWEEN:

ALEXANDROS NIKLIS

Applicant

and

WAWANESA MUTUAL INSURANCE COMPANY

Insurer

REASONS FOR DECISION ON A MOTION

Before:

Eban Bayefsky

Heard:

By telephone conference call on August 26 and September 19, 2005. Written submissions were received by October 6, 2005. Order issued October 17, 2005.

Appearances:

Sloan Mandel for Mr. Niklis Stephen B. Macaulay for Wawanesa Mutual Insurance Company

Issues:

The Applicant, Alexandros Niklis, was injured in a motor vehicle accident on June 27, 2001. He applied for and received statutory accident benefits from Wawanesa Mutual Insurance Company ("Wawanesa"), payable under the Schedule.¹ Wawanesa denied Mr. Niklis's claims for ongoing non-earner benefits, attendant care and housekeeping benefits, as well various medical and rehabilitation benefits. The parties were unable to resolve their disputes through mediation, and Mr. Niklis applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended. The issue in this motion is:

1. Is Mr. Niklis entitled to the disputed items in Schedules B and C of Wawanesa's list of documents?

Result:

1. Mr. Niklis's request for the disputed items in Schedules B and C of Wawanesa's list of documents is denied.

EVIDENCE AND ANALYSIS:

Background: Proceedings to Date

Mr. Niklis applied for mediation on October 30, 2003. The Commission conducted the mediation on February 9, 2004. Mr. Niklis applied for arbitration on April 16, 2004.

I initially conducted a pre-hearing conference in this matter on September 20, 2004. Mr. Niklis sought to arbitrate his entitlement to non-earner, attendant care and housekeeping benefits, as well as his entitlement to various medical and rehabilitation benefits. Mr. Niklis also claimed a special award. The parties partially agreed on production exchange subject to any issues arising out of the documents to be exchanged. As stated in my pre-hearing letter of September 20, 2004, the following production issues were addressed at the pre-hearing:

1. Wawanesa will produce the internal memoranda, etc. from its file up to the date of the Application for Mediation, subject to claims of privilege. Wawanesa will review its internal memoranda, etc. following the date of the Application for Mediation to determine which documents it will produce. Mr. Niklis is free to apply for an order requiring Wawanesa to identify and/or produce its internal memoranda, etc. following the date of the Application for Mediation.

2. Wawanesa will confirm that it has no internal manuals, etc. regarding how to handle certain claims, or if such manuals exist, whether they will be produced. A motion can be arranged regarding the production of these materials if a dispute arises.

Mr. Niklis brought a motion for certain productions on August 26, 2005. After hearing submissions from the parties, and by letter of the same date, I made, in part, the following orders:

1. Wawanesa shall produce to Mr. Niklis by September 6, 2005 an affidavit of documents setting out (1) the documents it is prepared to produce from its file and (2) a list identifying and briefly describing the documents from its file it is not prepared to produce.

2. The pre-hearing will resume on September 19, 2005 at 4:00 p.m., by teleconference, to address any disputed items arising from step (1). Wawanesa shall forward the disputed items to my attention prior to the resumption in order for me to address the issue of whether they ought to be produced to Mr. Niklis.

On September 14, 2005, Mr. Macaulay provided three schedules of documents: Schedule "A" - the documents Wawanesa was prepared to produce; Schedule "B" - the documents over which Wawanesa claimed partial privilege; and Schedule "C" - the documents over which Wawanesa claimed privilege. Mr. Macaulay provided to Mr. Niklis the documents in Schedule "A" and the documents in Schedule "B" with certain deletions (Wawanesa's "Activity Log Report dated August 31, 2005 with deleted portions on the basis of contemplation of LitigationSolicitor/lient [sic] privilege and/or reserve information"). Mr. Macaulay provided me with the unedited documents in Schedule "B" and six documents listed in Schedule "C". Mr. Macaulay did not provide the seventh item listed in Schedule "C", namely, those documents over which Wawanesa claimed solicitor-client privilege (stated to be "all written reports and/or other communications between Aronovitch Macaulay Rollo and the Wawanesa").

The matter resumed on September 19, 2005, at which time I made, in part, the following order:

1. Mr. Macaulay shall provide written submissions on Mr. Niklis's production request by September 21, 2005. Mr. Mandel shall provide his reply by October 7, 2005.

The written submissions were completed by October 6, 2005. I issued an Order on October 17, 2005 denying Mr. Niklis's request for productions.

The Parties' Submissions

By letter dated September 23, 2004 to Mr. Macaulay, and confirmed in a letter dated April 26, 2005 to Mr. Macaulay and the Commission, Mr. Mandel stated that he wished to receive "the entire insurer file (apart from correspondence passing between counsel and the insurer)." In his April 26, 2005 letter, Mr. Mandel stated that "at a minimum, the insured seeks production of a complete activity log report through to the date of mediation [and]... given the ongoing duty of utmost good faith, and given the request for a special award, the insured seeks a complete activity log report up to the present day." Mr. Mandel also sought "production consistent with the Wilkerson decision," which, as paraphrased by Mr. Mandel, contained the following production orders:

• production of the entire accident benefits file, including adjuster's notes and internal memoranda to the date of the relevant application for mediation;

• production of the entire benefits file, including any solicitor-client communications to the date of the relevant application for mediation.²

Mr. Macaulay's Schedule "B" contained 9 pages from Wawanesa's Activity Log Report. Some entries were deleted on pages 4, 5, 7, 8 and 9. Mr. Macaulay made the following submissions regarding the deleted portions of Schedule "B":

• the deletions on pages 4 and 5 relate to notes of discussions between Mr. Macaulay's office and Wawanesa and are, therefore, protected by solicitor-client privilege; these discussions also took place following the issuance of the Application for Arbitration.

• the deletion on page 7 relates to a legal reserve notation; the notation was made after the issuance of the Application for Arbitration and is protected by litigation and/or solicitor-client privilege

• the first set of deletions on page 8 relate to payment of the fee of the agent who conducted the FSCO mediation on behalf of Wawanesa and is irrelevant to the issues in the arbitration

• the remaining deletions on page 8 relate to notes of Wawanesa following and regarding the outcome of the FSCO mediation and were prepared in contemplation of litigation

• the deletions on page 9 relate to fees paid to the investigation agency and for legal services to Mr. Macaulay's office and are protected by litigation and/or solicitor-client privilege

Mr. Macaulay made the following submissions regarding the items listed in Schedule "C":

• item 1 - a March 11, 2004 letter from Wawanesa's mediation agent advising of the outcome of the mediation - protected by litigation privilege

• item 2 - a May 7, 2004 report from Wawanesa's mediation agent concerning the outcome of the mediation - protected by litigation privilege

• item 3 - a May 20, 2004 file memorandum concerning the issues in the FSCO mediation/arbitration - protected by litigation privilege

• item 4 - a September 20, 2004 file memorandum concerning the issues in the FSCO arbitration - protected by litigation and solicitor-client privilege

• item 5 - a May 20, 2004 letter from Wawanesa to the investigation agency concerning the conduct of investigations - protected by litigation privilege

• item 6 - an undated excerpt from the adjuster's notes presumed to have been made in late August or early September 2003 concerning the issues raised in Mr. Mandel's letter of August 25, 2003 - protected by litigation privilege

Mr. Macaulay submitted that the documents in item 7 of Schedule "C" (the reports and/or other communications between his office and Wawanesa) post-dated the issuance of the Application for Arbitration, were for the purpose of providing legal advice and are protected by solicitor-client privilege. Mr. Macaulay submitted that Mr. Niklis's "blanket claim for a special award" did not displace this privilege. He noted (in a brief affidavit to which Mr. Mandel had no objection, and in submissions) that Wawanesa retained his firm on April 26, 2004 to represent it in this arbitration, that the communications between his office and Wawanesa were for the purpose of providing legal advice and that there had been no waiver of solicitor-client privilege.

Mr. Mandel submitted that, in respect of those items over which it claimed litigation (both before and after the filing of the Application for Mediation), Wawanesa had not discharged the burden on it of establishing that the documents had been created for the dominant purpose of either actual or contemplated litigation. Mr. Mandel conceded that reserve information is privileged. Mr. Mandel submitted that Wawanesa's claim of solicitor-client privilege was only appropriate if the relevant communications were in relation to seeking legal advice and where the privilege had not been waived.

Findings

For the following reasons, I find that Mr. Niklis is not entitled to the disputed items in Schedules B and C of Wawanesa's list of documents.

There are three groups of documents in this case: (1) post-arbitration entries from Wawanesa's Activity Log Report, (2) pre-mediation, post-mediation and post-arbitration correspondence and materials and (3) reports and/or communications between counsel and Wawanesa.

Regarding the first group of documents, I agree with the principle (now well established at the Commission) that, in determining whether internal insurer documentation is producible, the date on which an insured files for mediation is generally an appropriate point at which to distinguish between documents created for the purpose of adjusting a claim and documents created for the purpose of litigation.³ As set out in Wilkerson, there is a rebuttable presumption that documents created after the Application for Mediation were for the purpose of litigation.

As set out in Mr. Mandel's correspondence of August 22, 2005, Mr. Niklis has sought a special award in this arbitration on the basis of various alleged deficiencies in Wawanesa's handling of the claim. To the extent that the documents requested by Mr. Niklis might be relevant to his claim for a special award, as noted in the case of Davies v. American Home Assurance Co. (2002), 2002 CanLII 62442 (ON SCDC), 60 O.R. (3d) 512 (Ont. S.C.J., Div. Ct.), I find that Mr. Niklis's special award claim does not override or "trump" litigation or solicitor-client privilege.

In the present case, Mr. Niklis filed for mediation on October 30, 2003. All of the disputed items in Schedule B (the deleted entries from Wawanesa's Activity Log Report) were created after Mr. Niklis filed for mediation. These documents are, therefore, presumed to have been created for the purpose of litigation, as opposed to adjusting the claim. All of the disputed entries, in fact, post-date the time at which Mr. Niklis filed his Application for Arbitration. In my view, this creates an even stronger presumption that they were created for the purpose of litigation. However, whether or not the presumption is greater after an insured files for arbitration, upon review of the specific deletions in this case, I find that the presumption that they were created for the dominant purpose of litigation has not been rebutted.

The deletions on pages 4 and 5 of Schedule B relate to notes between Wawanesa and Mr. Macaulay's office following the date on which Mr. Niklis applied for arbitration, and concern the arbitration process itself. The entries are also not relevant to the specific issues in dispute in the arbitration. I find that these entries are not producible as either irrelevant or as protected by litigation and/or solicitor-client privilege.

I agree with the parties that the deleted entries on page 7 of Schedule B are not producible as they post-date the Application for Arbitration and pertain to reserves. I find that they are protected by litigation privilege.

All of the deletions on page 8 of Schedule B concern entries which post-date the filing of the Application for Arbitration. The first set of deletions pertain to the payment of the agent's fees for conducting the mediation on behalf of Wawanesa and are irrelevant to the issues in dispute in the arbitration. The remaining deletions on page 8 pertain to the outcome of the mediation and, in my view, were prepared in contemplation of litigation with Mr. Niklis and not for the purpose of adjusting his claim. I find that these entries are protected by litigation privilege.

The deleted entries on page 9 of Schedule B concern payments to the investigation agency retained by Wawanesa and to Mr. Macaulay's office. The entries post-date the filing of the Application for Arbitration. I find that these entries are not relevant to the issues in dispute in this arbitration. However, to the extent that the investigation-fee notes are relevant, I find that they were made for the dominant purpose of litigation with Mr. Niklis and are, therefore, protected by litigation privilege. I find that the counsel-fee notes are protected by litigation and/or solicitor-client privilege.

Regarding the second group of documents, I find they are protected by litigation privilege. The first two items in Schedule C post-date the mediation between the parties, and consist of a letter and report from the agent who represented Wawanesa at the mediation. The report post-dates the filing of the Application for Arbitration. The documents address the content and outcome of the mediation, as well as a proposed course of action. Various issues were not resolved at the mediation (most of which, I note, have now proceeded to arbitration). I find that the two documents were created for the dominant purpose of, and for assisting Wawanesa in, the existing and/or anticipated litigation between Wawanesa and Mr. Niklis.

The third item is a file memorandum in response to the mediation-agent's report. It post-dates the filing of the Application for Arbitration. I find that it was prepared for the dominant purpose of the existing and/or anticipated litigation with Mr. Niklis.

The fourth item in Schedule C is a file memorandum following the September 20, 2004 pre-hearing conference (at which the substantive, procedural and settlement aspects of the arbitration were canvassed). The file memorandum addresses the issues in the arbitration, the content and outcome of the pre-hearing/settlement discussion, as well as a possible course of action. I find that the document was prepared for the dominant purpose of the existing and/or anticipated litigation with Mr. Niklis.

The fifth item in Schedule C is a letter from Wawanesa to a private investigation company concerning the conduct of surveillance on Mr. Niklis. The letter was prepared after Mr. Niklis filed his Application for Arbitration. The contents of the letter establish that it was created for the dominant purpose of the existing and/or anticipated litigation with Mr. Niklis and not for the purpose of adjusting the claim. Mr. Mandel submitted that the Dispute Resolution Practice Code requires the disclosure of surveillance materials and, therefore, letters requesting surveillance must also be disclosed. Rule 40 of the Code requires a party to produce all of its surveillance or investigative evidence if it intends to rely on any portion of that evidence. In my view, this provision does not require the production of materials that are otherwise privileged. However, to the extent that it does, to my knowledge, Wawanesa has not indicated that it will be relying on whatever surveillance it has gathered at the arbitration. At the present time, I find that the letter to the investigative agency is protected by litigation privilege.

The sixth item in Schedule C (adjuster's notes presumed to have been prepared in late August or early September 2003) pre-dates the filing of the Application for Mediation. Therefore, the presumption of litigation privilege does not apply. However, the notes are in response to Mr. Mandel's correspondence of August 25, 2003 in which he concludes his remarks by notifying Wawanesa of the (approaching) date by which Mr. Niklis must file for mediation (namely, November 1, 2003). The notes pertain to the disputed issues raised by Mr. Mandel and, in my view, there was a reasonable prospect of litigation at that time. I find that they were prepared in contemplation of and for the dominant purpose of the anticipated litigation with Mr. Niklis, and are, therefore, privileged.

The third group of documents are the reports and/or communications between counsel and Wawanesa. As noted earlier, Mr. Macaulay has not provided these materials to me. Mr. Mandel submitted that Mr. Macaulay was in breach of my August 26, 2005 order to forward the disputed items to my attention prior to the September 19th pre-hearing resumption. However, Mr. Mandel's focus throughout has been Wawanesa's internal memoranda and reports. On two occasions following the pre-hearing conference, Mr. Mandel specifically stated that he wished to receive Wawanesa's entire claims file "apart from correspondence passing between counsel and the insurer." I do not find that Mr. Mandel's request for "production of the entire accident benefit file" or, in the alternative, an Affidavit of Documents identifying the materials Wawanesa was not prepared to produce, modified his previous request for the complete file excluding solicitor-client communications. In this context, I do not find that Mr. Macaulay was required to provide the communications between his office and Wawanesa.

In any event, I note that Mr. Macaulay's office was retained following the date on which Mr. Niklis filed his Application for Arbitration to represent Wawanesa in this arbitration and has provided Wawanesa with legal advice. I find significant that there is no evidence that Mr. Macaulay's office was involved in the adjustment of Mr. Niklis's claim or that Wawanesa had waived solicitor-client privilege. While, as noted above, Mr. Mandel has raised various concerns with respect to Wawanesa's handling of the claim, I see no evidence that Wawanesa placed its state of mind in issue in these proceedings.⁴ I find that the documents noted in Schedule C, namely, reports and/or communications between counsel and Wawanesa, are protected by solicitor-client privilege.

EXPENSES:

The matter of expenses of this motion has been addressed in my August 26 and September 23, 2005 Orders.

April 24, 2006

Eban Bayefsky Arbitrator

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule —Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
2. 2Wilkerson and Allianz Insurance Company of Canada (FSCO A03-000753, January 13, 2004)
3. 3See, for example, Campeau and Liberty Mutual Insurance Company (FSCO A00-000522, March 12, 2001), Wilkerson and Allianz Insurance Company (FSCO A03-000753, January 13, 2004) and Kaczmarek and Coachman Insurance Company (FSCO A05-000346, October 7, 2005).
4. 4See, in this regard, Samoila v. Prudential of America General Insurance Co. (2000), 2000 CanLII 22690 (ON SC), 50 O.R. (3d) 65 (Ont. S.C.J.).