Diana Sekyiwaa and Justice Yeboah v. Kingsway General Insurance Company, 2007 ONFSCDRS 247

Financial Services Commission des

Commission services financiers

of Ontario de l’Ontario

Neutral Citation: 2007 ONFSCDRS 247

FSCO A07-001502 and A07-001516

BETWEEN:

DIANA SEKYIWAA

Applicant

and

KINGSWAY GENERAL INSURANCE COMPANY

Insurer

AND BETWEEN:

JUSTICE YEBOAH

Applicant

and

KINGSWAY GENERAL INSURANCE COMPANY

Insurer

PRE-HEARING DECISION

Before: Arbitrator Lawrence Blackman

Heard: By in-person Pre-Hearing Discussion held October 18, 2007 and by telephone Resumption of Pre-Hearing held November 29, 2007.

Appearances: Ms. Rita Gratsias (October 18, 2007) and Mr. Murray Tkatch (November 29, 2007) for Ms. Sekyiwaa and Mr. Yeboah.

Ms. Angela James for Kingsway General Insurance Company.

Issues:

As a result of injuries they sustained in a motor vehicle accident on May 10, 2006, Ms. Sekyiwaa and Mr. Yeboah applied for statutory accident benefits from Kingsway General Insurance Company (“Kingsway”), payable under the Schedule.¹ Kingsway refused payment of certain benefits. The parties were unable to resolve their disputes through mediation. The Applicants,

therefore, applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

A joint pre-hearing discussion in these matters was held before me on October 18, 2007. Pursuant to Rule 30 of the Dispute Resolution Practice Code (Fourth Edition, Updated – October 2003) (the “Fourth Code”), and on the consent of both parties, I combined these two proceedings, ordering that they be heard together or one after another, at the discretion of the hearing arbitrator. I was persuaded that there was an overlap of legal issues and witnesses in these matters such that combining them would result in the most just, quickest and least expensive means of resolving these disputes.

The parties partially agreed on production exchange at the pre-hearing discussion. Two of the production issues in dispute were production of Kingsway’s adjusting file and disclosure of its investigation and surveillance. In my October 26, 2007 pre-hearing letter regarding Ms. Sekyiwaa, I addressed the issue of production of Kingsway’s adjusting file as follows:

The Applicant sought production of the Insurer’s entire adjusting notes on the basis that there is a claim for a special award. The Insurer consented to producing a copy of its file up [to] the date of application for mediation.

Order: The usual dividing line for production from an insurer’s adjusting file is the date of application for mediation, subject to persuasive reasons why the period of production should be expanded or narrowed. Other than advising that there is a claim for a special award, the Applicant laid no basis for departing from the general guideline, and I am not persuaded to do so.

Regarding the Insurer’s investigation and surveillance I stated that:

The Applicant sought production of the Insurer’s investigation. The Insurer objected to same. The Insurer advised that there had been investigation over the summer of 2006 regarding the Applicant’s housekeeping and IRB claims.

Order: The Dispute Resolution Practice Code sets a minimum thirty day period prior to the beginning of an arbitration hearing for a party to serve their investigation or surveillance documentation, if the party is intending to rely on any part of same. However, the Code also requires that its rules be applied so as to produce the fairest, most expeditious and cost efficient resolution of the dispute. The Commission encourages the early resolution of proceedings and the early exchange of documentation. Pursuant to this general intent of the Code, I was persuaded that the Insurer shall, within sixty days of the date of this pre-hearing discussion, confirm with the Applicant whether it intends to rely on any part of its investigation or surveillance material, and if so, shall, also within sixty days of this pre-hearing discussion, provide complete disclosure of same in accordance with the Code.

My pre-hearing letter regarding Mr. Yeboah confirmed the above production order pertaining to Kingsway’s adjusting file. I further stated that:

Regarding production of the Insurer’s investigation and surveillance, I made the same order as with Ms. Sekyiwaa that Kingsway shall confirm, within sixty days of this pre-hearing discussion date, whether it intends to rely on any portion of its surveillance or investigation information, and if so, shall produce the entire documentation required by the Code, again, within sixty days of this pre-hearing discussion date.

Kingsway’s counsel, Ms. James, by letter dated November 7, 2007, stated that I had made an administrative error in my Order. She agreed that Kingsway was to advise the Applicants within sixty days of the pre-hearing discussion whether it intended to rely on any part of its surveillance or investigation evidence. However, she understood that this evidence was to be released in accordance with the Fourth Code, which appeared to mean thirty days before the start of the arbitration hearing. Ms. James asked that my October 26, 2007 pre-hearing letters be corrected or clarified.

By further letter dated November 8, 2007, Ms. James asked that I consider the decision of the Director’s Delegate in the recently posted decision of Security National Insurance Co./Monnex Insurance Mgmt. Inc. and Morgan (FSCO P07-00002, October 29, 2007).

Ms. Gratsias, counsel for the Applicants, responded by letter dated November 12, 2007 stating that my pre-hearing letters of October 26, 2007 accurately reflected the October 18, 2007 pre-hearing discussion. Ms. James replied by letter dated November 15, 2007 saying that those assisting her at the pre-hearing agreed with her version of my Order.

Accordingly, the issue to be addressed at this resumption of pre-hearing is:

1. Shall any investigation and/or surveillance evidence conducted by Kingsway General Insurance Company be released to the Applicants, and if so, on what, if any, terms?

Result:

1. Kingsway shall, within the time lines agreed by the parties, produce to each Applicant any surveillance or investigation evidence pertaining to that Applicant which came into existence prior to the date of that Applicant’s Application for Mediation. Kingsway shall further, within sixty days of the date of the pre-hearing discussion of October 18, 2007, confirm with each Applicant whether it intends to rely on any portion of its surveillance or investigation evidence. For each Applicant for whom Kingsway wishes to rely on any portion of its surveillance or investigation evidence, Kingsway shall, also within sixty days of the pre-hearing discussion of October 18, 2007, provide complete disclosure to that Applicant of all surveillance and investigation videotapes, photographs, investigative reports, notes and summaries taken or prepared in connection with the issues in dispute pertaining to the said Applicant.

EVIDENCE AND ANALYSIS:

At the pre-hearing resumption, Kingsway submitted that I had exceeded my jurisdiction if I had ordered them to produce any surveillance and investigation prior to thirty days before the start of the arbitration hearing, in the event they were relying on any such evidence.

Kingsway submits that as a result of Morgan, arbitrators must now “toe the line.” It argues, essentially, that Morgan enshrines Rule 40 of the Fourth Code not merely as a separate production rule, but as a distinct area of privilege; that privilege may be claimed under Rule 40 for surveillance or investigation evidence even in the absence of any claim for litigation or solicitor/client privilege. Kingsway concedes that Rule 40 does not say that directly, but submits that it is how it has been interpreted.

Kingsway further argues that Morgan stands for the proposition that only in the most exceptional of circumstances can surveillance and investigation be ordered produced more than thirty days before the start of the arbitration hearing. The Insurer states that my order regarding surveillance and investigation evidence was “off the cuff,” and did not meet the rigorous and exceptional demands of Rule 40.

Kingsway also submits that any order requiring it to decide within sixty days of the initial pre-hearing discussion whether it was relying on surveillance or investigation evidence was unfair when I allowed the Applicant ninety days to complete its production undertakings.

Before noting the Applicants’ submissions, I wish to address this allegation of unfairness. I did not make an order regarding production time limits regarding undertakings, nor did different standards apply to the parties. Rather, my October 26, 2007 pre-hearing letters confirmed that:

The parties undertook to:

1. file a list of agreed productions with the Financial Services Commission of Ontario within 60 days of this pre‑hearing discussion; and,

2. comply with the undertakings given (or provide proof of best efforts to comply, in the case of documents not in a party’s possession, control, or power) within 90 days of this pre‑hearing discussion.

[in bold and in italics in the original letters]

Also, as I best recollect, these undertakings were given after, not before, my above orders.

In any event, as pointed out by the Applicants, there is a difference between obtaining documents from third parties on the one hand and deciding whether to rely on surveillance or investigation evidence on the other. Kingsway had in its possession the results of its investigation for at least a year before the initial pre-hearing discussion. It is difficult to see how that time period, plus an additional two months, was insufficient to determine whether one intended to rely on same.

The Applicants submitted that my written order corresponded with my oral order. The Applicants further submitted that if surveillance was created before the litigation process, it must be produced. Lastly, they argued that having made my production order, I was now functus.

Regarding the latter argument, Rule 65.6 of the Fourth Code provides that:

An adjudicator may at any time clarify a decision or order that contains a misstatement, ambiguity or similar error.

In order to clarify my order, I arranged a resumption of the pre-hearing discussion.

My written orders from my October 26, 2007 pre-hearing letters noted above accurately reflect my decisions. Respectfully, it would simply be illogical to order Kingsway to decide by December 18, 2007 (being sixty days after the initial pre-hearing) whether it intended to rely on any surveillance or investigation evidence and then allow the Insurer to “bury” that evidence for more than ten months until October 17, 2008 (being thirty days before the start of the arbitration hearing, the hearing dates agreed to by the parties based on the availability of counsel).

Delegate Evans, in Morgan, took an identical approach, combining the decision date regarding surveillance with the production date for same, by ordering that:

Security National is not required to produce any of its surveillance or supporting documentation at this time, but it must indicate within 60 days of the hearing whether or not it will be relying on its surveillance, and, if so, it must produce all the information and documentation required by Rule 40.1 of the Dispute Resolution Practice Code at that time.

Regarding Kingsway’s further arguments, nowhere in Rule 40, or in Morgan, is there any suggestion that only in the most exceptional of circumstances can an adjudicator order production of surveillance or investigation evidence earlier than thirty days before the start of the arbitration hearing.

Rather, Delegate Evans stated in Morgan that “[o]f course, the 30 day requirement is a minimum, and arbitrators often require insurers to make the decision earlier, a fact the insurer in this case recognized.” I fully agree with Delegate Evans’ statement.

In these cases before me, I was advised that investigation was conducted the summer of 2006. Mediation in both cases was sought on or about November 24, 2006. My October 26, 2007 pre‑hearing letter states that Kingsway “consented to producing a copy of its file up [to] the date of application for mediation.” No claim of privilege was made for any time prior to the start of the mediation process. At the resumption of pre-hearing, Kingsway specifically and explicitly acknowledged that its consent noted above included agreement to produce its investigation and surveillance evidence up to the date mediation was sought.

Kingsway’s confirmation conformed with my understanding of Rule 40 of the Fourth Code.

Rule 40 reads as follows:

40.1 If a party intends to rely on any portion of surveillance or investigative evidence, including videotapes, photographs, reports, notes and summaries of surveillance observations or investigations, at least 30 days before the hearing, the party shall provide:

(a) 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,

(b) copies of all videotapes, photographs, investigative reports, notes and summaries taken or prepared in connection with the issues in dispute.

It is important to review the history of surveillance and investigation evidence at the Commission.

The Dispute Resolution Practice Code (First Edition - July 20, 1990) (the “First Code”) did not include a specific provision regarding surveillance or investigation evidence. The Dispute Resolution Practice Code (Second Edition - August 1, 1995) (the “Second Code”) introduced the following provision regarding surveillance evidence:

37. SURVEILLANCE EVIDENCE

37.1 If a party intends to introduce surveillance evidence, including videotapes, photographs, notes and summaries of surveillance observations, it must be provided with the names and qualifications of the persons who secured the evidence and the dates, times, and places where the surveillance was undertaken. [sic]

A sub-committee of three arbitrators, including myself, was assigned to consider this provision subsequent to the publication of the Second Code. The question was how to address surveillance and investigation evidence, otherwise not producible, where a party wished to rely on any portion of such evidence.

For example, if an insured is seen doing cartwheels on their front lawn, can a video of that be produced, but the immediately subsequent tape “buried,” which shows the person writhing in pain and being rushed by ambulance to hospital? Rule 37 of the Second Code would appear to say yes.

Let us consider another scenario. What if, in a case where an insured’s credibility, disability and motivation to return to work are in issue, an initial video is taken of the insured person enjoying a leisurely week day taking boxes of empties back to the Beer Store, buying snacks from a local variety store and taking in the racetrack for the remainder of the day? Can that be relied on and at the same time, a video taken by the same investigator six weeks later be buried, the latter showing the same person spending the day going from the chiropractor, to the family doctor, to the gym to do prescribed structured exercises, to the acupuncturist, and finally to the pharmacy to fill painkiller prescriptions?

Let us change the second scenario slightly, that is, that the subsequent surveillance was conducted by a different investigation company.

There is an argument that surveillance and investigation evidence should be treated like expert evidence. If privilege is waived for one report of an expert, privilege is deemed to be waived for all reports, notes and records of that expert. However, the waiving of privilege for one expert does not waive privilege for all experts a party may have retained.

Drafting Rules of Practice sometimes resembles litigation settlement; compromises are made that everyone can live with, or perhaps, with which everyone is equally unhappy. The Dispute Resolution Practice Code (Third Edition – April 15, 1997) (the “Third Code”) addressed surveillance as follows in an amended Rule 37, which, as I advised the parties, I wrote:

37. SURVEILLANCE EVIDENCE

37.1 If a party intends to rely on any portion of surveillance or investigative evidence, including videotapes, photographs, reports, notes and summaries of surveillance observations or investigations, the party shall provide:

1. 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

2. copies of all videotapes, photographs, reports, notes and summaries taken or prepared by anyone upon whose evidence the party intends to rely at the hearing. [emphasis added]

Hence, what the Third Code did was create a production rule more liberal than its predecessor, encompassing the first two scenarios noted above, but not the third.

The Fourth Code, the creation of which I was also involved, further expanded surveillance and investigation production. No longer was it a criterion as to who had brought such evidence into existence. Rather, surveillance and investigation was now treated as a single entity. A party relying on any portion of such evidence could not “bury” the remainder pertaining to the issues in dispute simply by hiring a different investigator.

However, nowhere in these editions of the Rules was there any suggestion that there was a new class of privilege being created for surveillance or investigation evidence. Rather, what was being addressed was the requisite scope of disclosure when a party noted its intention to rely on any portion of its surveillance or investigation. Relevant surveillance or investigation not otherwise protected by solicitor/client or litigation privilege remained producible. If a party, however, confirmed its intention to rely on any portion of its surveillance or investigation evidence, under the Fourth Code it waived any claim for privilege regarding that entire class of evidence regarding the issues in dispute.

For clarity, the simple act of production of surveillance or investigation evidence, either voluntarily or by order, does not trigger the consequences of Rule 40 of the Fourth Code nor the waiver of any claim for privilege over this class of evidence. Rather, such waiver of privilege is triggered only by a party’s decision to rely on any portion of such evidence.

Puljic and Zurich Insurance Company (FSCO P00-00022, June 1, 2000) considered the meaning of the Rule 37 surveillance section of the Third Code. Director Draper stated that:

Courts and tribunals have generally been moving toward early and full disclosure, minimizing the ability of a party to “bury” relevant information that might assist the other side. The Commission certainly encourages the early exchange of documents as an important part of the mediation process and to ensure a fair hearing.

Nonetheless, although noting that “[t]here is no question that the courts have been moving toward earlier and more complete disclosure,” Director Draper held that:

In my opinion, the clear implication of Rule 37.1 is that the insurer’s production obligation only arises when it decides “to rely on any portion of surveillance or investigative evidence.” There may be reason to question the appropriateness of this rule in a first-party system, but in my view, that is what the rule provides.

The appeal decision in Morgan held that arbitrators are bound by Puljic, finding that there was no significant difference between Rule 37 of the Third Code and the present Rule 40. The Delegate found that the purpose of Rule 40 was to simplify procedures in arbitrations at the Commission, that “sidestepping the Rule will lead to unnecessary complications. The insurer is entitled to rely on Rule 40, regardless of when the surveillance took place.” Thus, it was found that an insurer’s obligation to produce any surveillance or investigation evidence arises only if that insurer intends to rely on any part.

In his decision, Delegate Evans referred to Vo and Maplex General Insurance Company and Insurance Bureau of Canada, (OIC P-002777, December 12, 1997), in which Director Sachs stated that:

Binding precedent on the interpretation of the Schedule and Act does exist in the administrative tribunal created by the Legislature as alternative adjudicative system for the resolution of disputes over statutory accident benefits. Decisions of the Director, to the extent they cannot be distinguished [Footnote in original –For example, cases may be distinguishable because of their factual basis or a new interpretive argument not previously made or change in the environment in which the Act or Schedule operates] are binding on the arbitrators. Flexibility and the application of precedent are not mutually exclusive. To hold otherwise would deprive the appeal process of its logical purpose.

The authority for this statement is questionable, considering the comments of Justice Borins, speaking for the Ontario Court of Appeal, in Transcanada Pipelines Ltd. v. Beardmore (Township) 2000 CanLII 5713 (ON CA), [2000] O.J. No. 1066:

Moreover, there is a well-accepted principle of administrative law that stare decisis does not apply to administrative tribunals. A tribunal is not bound to follow its own decisions on similar issues, although it may consider an earlier decision persuasive and find that it is of assistance in deciding the issue before it. See, e.g., Evans v. Public Service Commission Appeal Board, 1983 CanLII 141 (SCC), [1983] 1 S.C.R. 582; Domtar Inc. v. Québec (Commission d'appel en matière de lésions professionelles) (1993), 1993 CanLII 106 (SCC), 105 D.L.R. (4th) 385 (S.C.C.).

In any event, keeping within, for argument’s sake, the confines of Vo, certainly a Commission appeal decision is distinguishable if it is not merely incorrect, but patently unreasonable.

The statement in Puljic that “the insurer’s production obligation [regarding surveillance and investigation] only arises when it decides ‘to rely on any portion of surveillance or investigative evidence’” is patently unreasonable. There was no need, as done in Puljic, to “question the appropriateness of this rule in a first-party system,” as this is not what the Rule provides. As stated, Rule 40 does not, either explicitly or implicitly, create a new area of privilege where surveillance or investigation evidence is concerned, but rather simply clarifies the requisite scope of production when a party intends to rely on any portion of that evidence.

Furthermore, there has been a change in the environment regarding production. Arbitrator Ashby, in Morgan and Security National Insurance Co./Monnex Insurance Mgmt. Inc. (FSCO A06-000409, December 22, 2006), made reference to the Ontario Court of Appeal decision in General Accident Assurance Company et al. v. Chrusz et al., C.A., September 14, 1999, 45 O.R. (3rd ) 321. Speaking for the majority, Carthy J.A. stated that:

It is an instinctive reflex of any litigation counsel to collect evidence and to pounce at the most propitious moment. That's the fun in litigation! But the ground rules are changing in favour of early discovery. Litigation counsel must adjust to this new environment and I can see no reason to think that clients may suffer except by losing the surprise effect of the hidden missile.

Accordingly, in accordance with its undertaking, Kingsway shall, within the time lines agreed by the parties, produce to the Applicants any surveillance or investigation evidence which came into existence prior to the date of the applicable Application for Mediation, regardless of whether it is intending to rely on any portion of same.

Kingsway shall further, as stated in my October 26, 2007 pre-hearing letters, within sixty days of the date of the pre-hearing discussion of October 18, 2007, confirm with each Applicant whether it intends to rely on any portion of its investigation or surveillance material. For each Applicant for whom Kingsway wishes to rely on any portion of its investigation or surveillance, Kingsway shall, also within sixty days of the pre-hearing discussion of October 18, 2007 provide complete disclosure to that Applicant of all surveillance and investigation videotapes, photographs, investigative reports, notes and summaries taken or prepared in connection with the issues in dispute pertaining to the said Applicant.

EXPENSES:

The parties did not make any submissions regarding the legal expenses of these pre-hearing discussions, and I make no order in this regard at this time.

December 11, 2007

Lawrence Blackman Arbitrator

Date

Financial Services Commission des

Commission services financiers

of Ontario de l’Ontario

Neutral Citation: 2007 ONFSCDRS 247

FSCO A07-001502 and A07-001516

BETWEEN:

DIANA SEKYIWAA

Applicant

and

KINGSWAY GENERAL INSURANCE COMPANY

Insurer

AND BETWEEN:

JUSTICE YEBOAH

Applicant

and

KINGSWAY GENERAL INSURANCE COMPANY

Insurer

ARBITRATION ORDER

Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

1. Kingsway shall, within the time lines agreed by the parties, produce to each Applicant any surveillance or investigation evidence pertaining to that Applicant which came into existence prior to the date of that Applicant’s Application for Mediation. Kingsway shall further, within sixty days of the date of the pre-hearing discussion of October 18, 2007, confirm with each Applicant whether it intends to rely on any portion of its surveillance or investigation evidence. For each Applicant for whom Kingsway wishes to rely on any portion of its surveillance or investigation evidence, Kingsway shall, also within sixty days of the pre-hearing discussion of October 18, 2007, provide complete disclosure to that Applicant of all surveillance and investigation videotapes, photographs, investigative reports, notes and summaries taken or prepared in connection with the issues in dispute pertaining to the said Applicant.

December 11, 2007

Lawrence Blackman Arbitrator

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule - Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.