Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2007 ONFSCDRS 123

FSCO A06-001713

BETWEEN:

TING-ON LAY

Applicant

and

WAWANESA MUTUAL INSURANCE COMPANY

Insurer

PRE-HEARING DECISION

Before:

Elizabeth Nastasi

Written Submissions:

Submissions received March 30, April 30, May 7, June 1, 2007

Appearances:

Sue Chen for Mr. Lay

Stephen B. Macaulay for Wawanesa Mutual Insurance Company

The Applicant, Ting-On Lay, was injured in a motor vehicle accident on October 21, 2004. He applied for and received statutory accident benefits from Wawanesa Mutual Insurance Company ("Wawanesa"), payable under the Schedule.¹ A number of disputes over statutory accident benefits have developed between the parties which they have been unable to resolve through mediation, and Mr. Lay applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

At a pre-hearing discussion of this case held on February 21, 2007, several production disputes arose. I asked for and received written submissions on those issues. After receiving the parties written submissions, I held a brief telephone resumption on June 1, 2007 in order to clarify several points from the Applicant's submissions.

The issues for hearing include whether Mr. Lay is entitled to medical, attendant care and housekeeping benefits.² Mr. Lay also claims a special award pursuant to subsection 282(10) of the Insurance Act.

Mr. Lay is seeking an order for the production of the following:

Any and all surveillance evidence that the Insurer intends to rely on at the arbitration hearing and a description of the particulars, in summary form, of all other surveillance evidence obtained by the Insurer in relation to the case, regardless of whether it will be relied upon by Wawanesa at the arbitration hearing;
The entire Wawanesa accident benefits file for the period up to September 19, 2005 which represents the date of the second and most recent Application for Mediation. Specifically, Mr. Lay is requesting the adjusters' notes, logs, computer notes, e-mails, memoranda, and reports including internal documentation; and
Policy and training manuals, and other written protocols of the insurance company.

Wawanesa shall produce the surveillance evidence that it intends to rely upon at the arbitration hearing in accordance with Rule 40.1 of the Dispute Resolution Practice Code.
Wawanesa shall produce its entire accident benefits file including: adjusters' notes, logs, computer notes, e-mails, memoranda, reports and internal documentation; to the date of the first Application for Mediation on July 12, 2005.
The Applicant's production request for policy and procedures manuals is denied.

1. Production of Surveillance Evidence

Pursuant to Rule 40.1 of the Dispute Resolution Practice Code (the "Code"), if a party intends to rely on any portion of surveillance or investigative evidence, at least 30 days before the hearing, the party shall provide copies of all such evidence to the opposing party. If a party intends to rely on any portion of surveillance or investigative evidence at the hearing then they are required to disclose full details of all the surveillance obtained and not just the portion that they feel may assist them in their case.

Rule 40.1 requires that at least 30 days before the hearing, the party shall provide the names and qualifications of the persons who secured the investigative or surveillance evidence, the dates, times and places where any surveillance or investigation was undertaken, and copies of all videotapes, photographs, investigative reports, notes and summaries taken or prepared in connection with the issues in dispute.

The Applicant did not provide any submissions with respect to why it would be appropriate to extend their request beyond Rule 40.1 in the case where Wawanesa may have surveillance evidence that they do not plan on introducing as evidence at the hearing. As such, I find no reason to order production of surveillance evidence beyond the requirements of Rule 40.1 in this case.

2. Production of the Accident Benefits File

There have been two mediations held in this case. The first Application for Mediation was dated July 12, 2005; the second was July 7, 2006. Wawanesa advised that they have already agreed and produced the entire accident benefits file up to the date of the first Application for Mediation on July 12, 2005 excluding documents related solely to reserve information. Mr. Lay has not made a request for reserve information in this case.

Mr. Lay is requesting the complete file up to the date of the second Application for Mediation. Wawanesa's position is that Mr. Lay is not entitled to the production of their file beyond the date of the first Application for Mediation, as it is subject to litigation privilege. Further, Wawanesa argued that since the issues in the second mediation were identical to those in the first, except for the time period being claimed, the issues had crystalized at the time of the first mediation.

The basis of Mr. Lay's request for the entire accident benefits file beyond the date of the first mediation is that the information is relevant to the issue of the special award. In Mr. Lay's submissions he noted several examples of how the adjuster allegedly "mishandled" the claim. Mr. Lay's position is that this behaviour continued throughout the claim, including the period between the first and second mediation and as such is relevant.³ Further, Mr. Lay argued that if this information is not provided, the prejudice to the Applicant in not being able to bring forward all of the relevant information would outweigh any potential prejudice to the Insurer.

The Applicant indicated that he wants the information to establish the following:

Dates for which expenses were received;
Dates for which treatment plans were received;
Dates for which medical expenses and prior approvals were received;
The basis for the late payments;
The basis for the denial of the treatment plans;
Correspondence between the adjuster and the DAC centres; and
Correspondence between the adjuster and the IE centres.

During our telephone resumption on June 1, 2007, the Insurer conceded that the specific items listed above were not subject to litigation privilege and undertook to provide the information. They did not however agree to provide the entire file.

I agree with Arbitrator Muir in Wilkerson and Allianz Insurance Company of Canada⁴ that an insurer is expected to be continually adjusting a file in good faith even after an Application for Arbitration has been filed. Further, I agree that a bright line is created by filing an Application for Mediation for determining whether internal documentation is produceable or not. Mediation is the first formal step in the dispute resolution process. After this date, it is reasonable to assume that the primary focus of the parties may have shifted to preparing for litigation and that litigation privilege would protect most documents from being disclosed to the other side.

This presumption of mediation being the "bright line" for disclosure can be rebutted if the facts of the case warrant a more limited or expanded scope of production. The bright line serves a purpose and I am not convinced that to blur that line in this case is warranted. I agree with Arbitrator Blackman in Levin and Security National Insurance Co./Monnex Insurance Mgmt. Inc. that there are risks in expanding the scope of production orders to go beyond the mediation process.⁵ For example, it could limit the effectiveness of the mediation if Insurer's counsel were concerned that their notes were at risk of being included in the arbitration hearing.

Although it is possible to identify and remove documents that deal with settlement or whose dominant purpose is for litigation, I believe that one should proceed down this road cautiously and only in the most clear circumstances. If not, the potential risk would be the routine requirement of an affidavit of documents. If any disputes arose at this point, it could result in the need to have an arbitrator review individual documents to determine whether each was produced in contemplation of litigation. This process would add time and expense and overly complicate the arbitration process thus defeating the goal of arbitration as being more efficient and timely than court proceedings.

Once litigation is commenced, it would be more difficult to argue that a document was not prepared in contemplation of litigation or that the impending litigation did not have some effect on its creation. I accept that the information between the first and second mediation may be potentially relevant to the special award which Mr. Lay is seeking, however it will be difficult to separate documents produced for mere adjustment purposes versus pure litigation purposes. Inevitably, there will be some overlap and the two may be intertwined. In this case, the issues in the second mediation were identical to those in the first and it is reasonable to assume that the Insurer believed ongoing litigation was likely and was handling the case with that in mind from the time of the first mediation onwards.

The Insurer has also agreed to provide some of the specific items requested by the Applicant for which they are not claiming litigation privilege. I find that Mr. Lay is not entitled to anything beyond what has already been provided or discussed.

3. Production of Policy and Procedures Manuals

The Applicant is seeking production of any Wawanesa policy and procedures manuals that may exist. The only basis for this request is that a special award is being claimed. Although arbitrators have ordered the production of policy manuals on discreet issues, I am not satisfied that Wawanesa's policy manuals are relevant to the issues in the hearing at this time.

The routine production of policy manuals when a special award is claimed without establishing the specific relevance to the claim and/or the reasonable necessity of the document is too cumbersome and expensive.⁶ Mr. Lay failed to establish the relevance and/or reasonable necessity of any specific manual or similar document in this case.

EXPENSES:

Both parties shall bear their own expenses.

June 15, 2007

Elizabeth Nastasi Arbitrator

Date