Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2007 ONFSCDRS 17

FSCO A06-001260

BETWEEN:

AINSLEY WARD

Applicant

and

WAWANESA MUTUAL INSURANCE COMPANY

Insurer

PRE-HEARING DECISION

Before:

Beth Allen

Heard:

October 2, 2006, at the offices of the Financial Services Commission of Ontario in Toronto. Written submissions were received by November 21, 2006.

Appearances:

Derek L. Smith for Mr. Ward Ian D. Kirby for Wawanesa Mutual Insurance Company

The Applicant, Ainsley Ward, was injured in a motor vehicle accident on September 4, 2001. He applied for and received statutory accident benefits from Wawanesa Mutual Insurance Company ("Wawanesa"), payable under the Schedule.¹ Wawanesa disputes the Applicant's entitlement to further accident benefits. The parties were unable to resolve their disputes through mediation, and Mr. Ward applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The parties have requested that I determine a matter that arose at a pre-hearing discussion held on October 2, 2006. The Applicant requested the adjuster's log notes in Wawanesa's file to support his claim for various accident benefits under the Schedule. Wawanesa disputed the production of those documents arguing that they are protected by litigation privilege.

The issue to be determined is:

Is the Applicant entitled to production of the adjuster's log notes in the accident benefits file generated from August 4, 2003 to March 15, 2006?
The parties did not raise the issue of arbitration expenses. I therefore make no order in this regard and refer this matter to the hearing arbitrator.

The Applicant is entitled to the adjuster's log notes in the accident benefits file generated from August 4, 2003 to the date of the second Application for Mediation.

Background:

The Applicant filed two Applications for Arbitration in relation to his September 4, 2001 motor vehicle accident. The first Application, containing claims for income replacement, medical, rehabilitation, attendant care and housekeeping benefits, a special award, arbitration expenses and interest ("first set of claims") was filed on or about November 10, 2002; and the second Application for Arbitration, containing claims for benefits for medical treatment, medical evaluations, assistive devices, rehabilitation expenses, vocational training, a replacement motor vehicle, arbitration expenses and interest ("second set of claims") was filed on or about March 15, 2006.

The first set of claims was settled on August 4, 2003. The issue is whether the litigation privilege that might have arisen with the Application for Mediation of the first set of claims continues after the settlement of those claims up to the date of the second Application for Arbitration.

The Law:

Litigation privilege, also referred to as "work product privilege", developed at law to protect communications between lawyers and third parties or a client and third parties, or communications generated by the lawyer or client "for the dominant purpose of litigation when litigation is contemplated, anticipated or ongoing."² The doctrine of litigation privilege arose through the adversarial system to allow parties to have a "zone of privacy" around their work to prevent access by the opposing party to the products of their preparation for litigation.³ The law makes it clear that litigation need not be the sole purpose for creating the document or communication sought to be protected. While litigation needs to be the dominant purpose, the litigation must be "realistically anticipated" and not merely a "possibility or suspicion."⁴ If there is more than one purpose for the generation of the document or communication, a factual assessment of the nature of the document or communication is required to determine whether litigation is the dominant purpose.

The Arbitrator in Campeau and Liberty Mutual Insurance Company⁵set out the approach to applying the principle of litigation privilege to the Commission's dispute resolution process. He held that the prima facie dividing line for an insured person gaining production of documents in the insurer's file, which is rebuttal by reasons why the line should be drawn elsewhere, should be the date of the application for mediation. In a dispute over the dividing line, the Commission's approach has been to find that litigation privilege applies to protect documents in the insurer's file that were generated before the date of the application for mediation unless a reasonable basis to use another date is advanced. As the Arbitrator in Wilkerson and Allianz Insurance Company of Canada states: "the bright line [between claims adjustment and litigation] only reflects a presumption, which is rebuttable, that after that date its focus might have reasonably shifted to preparing for litigation."⁶

Parties' Arguments:

At the pre-hearing discussion, the Applicant sought production of any adjuster's log notes in Wawanesa's file generated during the period subsequent to the August 4, 2003 settlement date up to the date of the second Application for Arbitration, March 15, 2006. Wawanesa, on the other hand, seeks protection from disclosure for all documents generated during that period as being subject to litigation privilege.

The Applicant, relying on Wilkerson and Ouimet and Wawanesa⁷, argues that since Wawanesa is asserting the claim to litigation privilege, it has the burden to prove the privilege applies. The Arbitrators in those cases held that the party asserting solicitor/client or litigation privilege has the onus of proof.

Wawanesa submits that the Applicant has failed to provide a reasonable basis for his request for the adjuster's log notes. Alluding to the fact that adjuster's log notes are most commonly requested in association with a special award claim, Wawanesa pointed out that the Applicant did not make such a claim and has failed to establish the relevance of the documents requested.

Wawanesa accepts, with respect to the first Application for Mediation, the general rule that the date of application for mediation is the appropriate dividing line that signifies the transition from the adjustment process to a potential for litigation. In his submissions, the Applicant quotes the rulings of two Masters of the Ontario Superior Court, without directly applying them to the case before me - which rulings held in essence that the applications for mediation under their consideration were not statements of contemplation of litigation.⁸

Irrespective of where the dividing line might be drawn in this case, the parties dispute whether any litigation privilege that might have arisen with the first set of claims, continues to protect the adjuster's log notes, generated after the date the first set of claims was settled, right up to the date of the second Application for Arbitration.

Wawanesa argues that litigation of the claims in the second Application for Mediation was reasonably contemplated from the time of the settlement of the first set of claims. It submits that the claims made in the first Application for Mediation, and brought to arbitration in the first Application for Arbitration, while settled on August 4, 2003 just before arbitration, were not settled on a full and final basis. In Wawanesa's view, future claims would be contemplated under those circumstances and litigation, therefore reasonably contemplated.

Wawanesa filed the Release signed by the Applicant and dated August 4, 2003. The Applicant agreed to settle, for $10,500, all claims up to May 8, 2003 that arose in relation to the first Application for Arbitration, excluding any unknown or unanticipated future claims. The Release states, in part, in its first paragraph:

... I HEREBY release and forever discharge THE WAWANESA MUTUAL INSURANCE COMPANY from any and all claims, actions, causes of action, mediations, arbitrations, claims and demands whatsoever for Statutory Accident Benefits arising or occurring up to May 8, 2003 ~~and including any and all claims not now known or anticipated~~ under the Statutory Accident benefits Schedule for all those benefits described in the Attached Written Notice (Schedule "A") under Policy No. 7639602, arising out of a motor vehicle accident which occurred on or about September 4, 2001. [emphasis by author of document]

In the right margin, next to the words that are stricken out, are the initials of the Applicant. It is confirmed by the Applicant's counsel's letter to Wawanesa's counsel, dated August 5, 2003, that the Applicant struck out the words and initialled the amendment. Wawanesa points out that Page 2 of the Release indicates that all past medical and rehabilitation benefits are settled to May 8, 2003. The Release also states that all past and future income replacement benefits are settled, as well as arbitration expenses and disbursements. According to Wawanesa, the words stricken out in the first paragraph, together with the statements on page 2 of the Release, indicate the settlement of the first set of issues was not final. Wawanesa finds further support in the Applicant's counsel's August 5, 2003 letter which confirms the Applicant's intention to "leave open any potential future medical or rehabilitation claims, occurring after the date of the most recent accident." Wawanesa also submitted, on a without prejudice basis, an entry dated February 10, 2006 from the adjuster's activity log report to show that Wawanesa left the Applicant's accident benefits file open.

In sum, it is Wawanesa's contention that because the first set of claims was not finally settled, leaving open the possibility of future claims, and the adjuster did not close the file after settlement, litigation was reasonably contemplated, and any documents generated up to the second Application for Arbitration should be protected from disclosure.

The Applicant submits, on the other hand, that litigation of the second set of claims could not have been reasonably contemplated by Wawanesa after the August 4, 2003 settlement. He argues that Wawanesa is not entitled to make a blanket claim to privilege over all documents in its file without establishing the basis for the privilege. The Applicant asserts that all documents in the adjuster's file generated during the period in question are producible and are not protected by litigation privilege. In support of this argument, the Applicant pointed out that there were no outstanding issues in dispute after the August 4, 2003 settlement because the Applicant had disputed no further claims until he filed the second Application for Arbitration. The Applicant argued that Wawanesa is not entitled to extend the litigation privilege protection that might have arisen with the first set of claims, to prevent the Applicant access to relevant documents in the adjuster's file that were generated between August 4, 2003 and March 15, 2006.

REASONS FOR DECISION:

For the most part, I agree with the Applicant’s position for the following reasons:

On the question of the burden of proof, I concur with the arbitration decisions that hold that the onus of proof rests with the party asserting privilege, in this case, Wawanesa.

I agree with Wawanesa that the Applicant is required to provide a reasonable basis for requesting production of documents in the adjuster's file. I find that the Applicant has done so. I note Wawanesa’s comment that the Applicant has not made a claim for a special award among his second set of claims and has therefore failed to provide a reasonable basis for his request. In arriving at my conclusion on this matter, I refer to Commission cases that have not restricted their orders for production of the adjuster's file to only circumstances where special awards have been claimed. Arbitrators have held that entitlement disputes can give rise to reasonable requests for documents from the adjuster's file. The Arbitrator in Campeau⁹ held, and I agree, :

It appears obvious that prima facie, a significant part of the insurer’s file is going to be relevant to the entitlement issues in dispute. The whole raison d'etre of the insurer’s adjusting file is to respond to the applicant’s no-fault claim arising from the motor vehicle accident in question...

Arbitrators have also found that an applicant need only establish a reasonable possibility that a document in the insurer’s file is relevant: The Arbitrator in Nigro and State Farm¹⁰ held, and I concur, that the test for production of a document from the insurer's file is:

a reasonable possibility that a document in an insurer's file is relevant to the issues at arbitration, that is sufficient to allow an arbitrator to order production of the document, subject to any claim for privilege.

The Arbitrator went on to hold that this is in keeping with the Commission’s practice with other production matters:

...such an approach is consistent with the practice of the Commission in routinely ordering full production of the medical records of applicants, up to one year prior to the motor vehicle accident, without the necessity to demonstrate the relevance of each and every document contained in the record.

The Applicant’s second set of claims involves issues of entitlement to the costs of various accident benefits - medical treatment, medical evaluations and assistive devices, rehabilitation, vocational training and a replacement motor vehicle. I find that there is a reasonable possibility that documents are contained in the adjuster’s notes that are relevant to those entitlement claims.

Turning to the privilege question, I do not find, under the circumstances of this case, that a reasonable contemplation of litigation arose automatically after the Applicant’s first set of claims was settled. I am not persuaded, because the settlement of the Applicant's first set of claims allowed for future claims, and the adjuster did not close its file after settlement, that the litigation of future claims was reasonably contemplated under those conditions. Court and the Commission cases have held that litigation need not be the only purpose, but must be the dominant purpose of any document sought to be protected. Litigation must be realistically anticipated and be more than a mere possibility or suspicion. I find the circumstances, for most of the period disclosure is sought, fall short of meeting those tests.

I agree with the Applicant that after the August 4, 2003 settlement and before he applied for the second set of benefits, there were no outstanding claims and therefore there could be no reasonable contemplation of litigation during that period and no basis to seek protection for documents in Wawanesa's file generated during that period.

Looking further along the time line after the settlement, it is generally the case that once an insured files an application for accident benefits, the process enters into the adjustment phase. During that phase an insurer can decide to pay or not pay the insured's claims. I find that after the settlement of the Applicant's first set of claims, once he made his second set of claims, Wawanesa had to decide whether or not to pay those claims. Wawanesa ultimately refused to pay the second set of claims and the Applicant moved to file an Application for Mediation of those claims. I find in this case that not until the Applicant applied for mediation of the second set of claims did the claims process cross the line from the adjustment phase to the level of a dispute, providing the basis for a reasonable prospect of litigation at that point.

It is possible that litigation may be the ultimate result of the claims and adjustment process. However, a mere possibility of litigation alone is not enough to assign privilege to documents in an insurer's file generated during that period. A number of other equally possible events could also reasonably occur after an insured applies for benefits. The insurer could decide to pay the claims before the insured applies for mediation; or the parties could settle the claims; or the insured could chose to withdraw their claims without filing for mediation.

In conclusion, I find that the adjuster's log notes generated from August 4, 2003 to the date of the second Application for Mediation¹¹ are not protected by litigation privilege. I disagree with the Applicant that litigation was not reasonably contemplated until the date of the second Application for Arbitration, March 15, 2006. The appropriate point when a reasonable contemplation of litigation arises in this case is the date of the Application for Mediation containing the Applicant's second set of claims.

I find there is a reasonable possibility that the adjuster's log notes pertaining to the second set of claims are relevant to the Applicant's entitlement issues. I therefore order Wawanesa to produce to the Applicant all adjuster's log notes, pertaining to the benefits claimed in the second Application for Arbitration dated March 15, 2006, generated from August 4, 2003 to the date of the second Application for Mediation.

If Wawanesa withholds a note or document on the basis of privilege, Wawanesa shall provide the Applicant with a description and summary of that note or document, together with the basis for the claim of privilege, within 60 days of the date of this decision. If a dispute arises as to whether a note or document is protected by privilege, counsel may arrange a resumption of the pre-hearing by teleconference call to obtain a ruling. Should a ruling be necessary, the documents in question should be forwarded to the attention of the pre-hearing arbitrator.

EXPENSES:

The parties did not raise the issue of expenses incurred in respect of the arbitration. I will refer that issue to the hearing arbitrator.

February 2, 2007

Beth Allen Arbitrator

Date