Neutral Citation: 2008 ONFSCDRS 175 FSCO A08-000567

BETWEEN:

M. S. Applicant

and

ACE INA INSURANCE Insurer

Before: Arbitrator Suesan Alves Heard: By written submissions received by September 26, 2008 Appearances: Esther M. Cantor and Dejan Ristic for Mr. S Thomas Harley for ACE INA Insurance

Issues:

The Applicant, M.S. was injured in a motor vehicle accident on March 23, 2006. He applied for and received statutory accident benefits from ACE INA Insurance (“ACE INA”), payable under the Schedule.¹ M.S. applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended, and claims medical and rehabilitation benefits, interest, expenses and a special award. The Insurer disputes the Applicant’s entitlement to the relief he seeks and claims its arbitration expenses

The issues in this hearing are:

Should the Insurer produce the accident benefits file of ACE INA including adjusting notes and field notes of the independent adjuster Mr. Faber and of the broker who made decisions as to whether benefits were to be paid between the date of the accident and the date of mediation in its entirety between March 23, 2006 and September 28, 2007?
Is the Applicant entitled to an award of expenses payable forthwith and in any event of the cause?

Result:

ACE INA shall produce the insurer’s file between March 23, 2006 and September 28, 2007, subject to any claims for privilege which do not include litigation privilege.
The Applicant is entitled to an award of expenses fixed at $450 payable on or before October 10, 2008 in any event of the cause.

EVIDENCE AND ANALYSIS:

Background:

The Applicant is a minor. In this arbitration, he claims entitlement to medical and rehabilitation benefits, interest, expenses and a special award. The Insurer alleges that he failed to attend an examination under oath; that it has surveillance of the Applicant taken in and around his home on which it intends to rely; and that based on its review of the Applicant’s clinical notes and records the Applicant has claimed treatment for a pre-existing medical problem or condition.

Counsel for the Applicant seeks an order for the production of the complete accident benefits file of ACE INA and Faber adjusters, including adjusting notes and field notes of the independent adjuster Mr. Faber and of the broker who made the decisions as to whether benefits were to be paid between the date of the accident and the date of mediation. Counsel for the Applicant submits that the documents are relevant to the issues in dispute. This is the fifth request. The Applicant requested these files on April 8, 2008, prior to the pre-hearing, and at the pre-hearing, held on July 31, 2008.

During the pre-hearing, there was a brief discussion of arbitral jurisprudence with respect to the production of the Insurer’s file and surveillance. The Insurer’s representative was in attendance. Counsel for the Insurer advised that he would take the Applicant’s request under advisement and advise counsel for the Applicant of his position within 45 days of the date of the pre-hearing. He did not do so. Counsel for the Applicant followed up by e-mail and by letter following the pre-hearing to no avail before seeking a ruling. The Applicant seeks an award of interim expenses in relation to this motion payable forthwith and in any event of the cause.

Counsel for the Insurer submits that immediately following the pre-hearing he requested production of the file. He states that he was advised on August 21, 2008 that material would be produced. The file was received in his office on September 24, 2008 and he has yet to review the material. He advises that he will review the material and produce the file as appropriate subject to the exceptions based on relevance and privilege. He proposes to produce material and explain the non-production of material on or before October 7, 2008. The hearing is set to commence on November 5, 2008.

The submissions of counsel for the Insurer focus on the timelines relating to the evidence he intends to rely on at the hearing as set out in Rule 39 of the Code. However, the issue before me is the obligation of a party, in this case the Insurer, to produce documents prior to the pre-hearing and thereafter in a timely manner as required by Rules 32, 33 and 34 of the Code.

The Applicant submits that his position will be irreparably prejudiced if the files are produced on October 7, 2008, as this will allow him less than 30 days for filing his document brief and advising potential witnesses whose identity may arise out of the file content. Further, he is not content to allow the Insurer to decide the questions of relevance and privilege.

On October 2, 2008, I made an Order with respect to this production dispute with reasons to follow. The Order is set out on pages 11 and 12 of this decision.² These are my reasons.

Authority to order productions

Section 22 of the Insurance Act gives arbitrators at the Financial Services Commission of Ontario the same power to compel the production of documents, records and things as is vested in the Superior Court of Justice for the trial of civil actions.

The Director of Arbitrations has made Rules pursuant to section 21 of the Insurance Act and section 25.1 of the Statutory Powers Procedure Act, R.S.O. 1990, c. S.22, as amended, (“SPPA”). Those Rules, contained in the Code, address disclosure and production obligations amongst other matters. Accordingly, pursuant to subsection 5.4(1) of the SPPA, an arbitrator may make orders at any stage of the proceeding for the exchange of documents; the oral or written examination of a party; the exchange of witness statements and reports of expert witnesses; and any other form of disclosure. This includes ordering the provision of an Affidavit of Documents.³

Relevance

The Applicant seeks production of the accident benefits file up to the date of the mediation, September 28, 2007. The Applicant relies on Campeau and Liberty Mutual Insurance Company (FSCO A00-000522, March 12, 2001), and Rules 32, 34, 39 and 41 of the Dispute Resolution Practice Code—Fourth Edition, Updated October 2003.

Documents which are relevant are producible subject to claims of privilege. The Applicant submits that the Insurer’s file is relevant to all the issues in the arbitration, namely his claims for medical and rehabilitation benefits, interest, a special award and both parties’ claims for expenses. He submits that the Applicant has no information, knowledge or notice with respect to the Insurer’s allegation in its Response that he failed to comply with the requirements of section 33 of the Schedule. He also submits that the documents are relevant to the question of whether the Insurer’s conduct represents an unfair or deceptive act or practice.

The Insurer’s submissions are silent on the issue of relevance in relation to the order I have been asked to make. I will nevertheless decide this issue based on the submissions which were made and arbitral jurisprudence. In Nigro and State Farm Mutual Automobile Insurance Company (FSCO A99-000656, April 28, 2000), Arbitrator Wilson noted that at this stage of the process, the test for production of a document was “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.”

Arbitrator Wilson noted that “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.” I agree with Arbitrator Wilson’s reasons.

A portion of the file which is sought is that of the independent adjuster and of the broker who made decisions as to whether benefits were to be paid from the date of the accident and made recommendations to the insurer. I find the adjuster and broker were acting as agent for the Insurer in the course of the adjustment of the Applicant’s claim for benefits and that those documents are also relevant to the issues in dispute.

I adopt the reasons of Arbitrator Blackman, as he then was, in the case of Campeau and Liberty Mutual Insurance Company, (FSCO A00-000522, March 12, 2001), in which he stated: “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....” For these reasons and the additional reasons given by Arbitrator Blackman in Campeau, I find that the documents which the Applicant seeks are relevant to the issues in dispute.

Privilege

The Applicant seeks production of the accident benefits file up to the date of the mediation, September 28, 2007. Unfortunately, although the Applicant has been seeking production of the file since April 8, 2008 and has made several requests for the file, the Insurer’s submissions are silent with respect to the question of privilege as it relates to the order I have been asked to make.

Section 5.4(2) of the SPPA does not authorize the making of an order requiring disclosure of privileged information. In my view, the Insurer cannot avoid adjudication of the issue of privilege by failing to make submissions with respect to litigation privilege. That question was placed squarely in issue by the Applicant. I find that the Insurer had the opportunity to make submissions which addressed the question of litigation privilege but did not do so. In similar circumstances, arbitrators have held that the insurer has waived privilege and ordered production of the documents in question. Generally, I agree with that approach.

However, the Insurer’s submissions suggest that claims for privilege, other than litigation privilege may be asserted. I am mindful of the almost sacrosanct nature of solicitor-client privilege. Although it may appear to be inconsistent, I am prepared to find that the Insurer has waived litigation privilege, yet allow the Insurer an opportunity to address privilege, other than litigation privilege, provided I am apprised of those claims by October 7, 2008. Should those claims for privilege be disputed by the Applicant, his submissions should be provided by October 8, 2008.

In Campeau, Arbitrator Blackman used the date of mediation as a prima facie dividing line between producible and non-producible insurer documentation, subject to submissions as to why the scope of production should be narrowed or broadened in a particular case. In the absence of any submissions from the Insurer on this question, I find that the date of mediation, September 28, 2007, is the date on which litigation privilege can be said to attach in this case.

In Dyczok and Wawanesa Mutual Insurance Company (FSCO A02-000766, August 26, 2003), Arbitrator Blackman was of the view that in an alternate dispute resolution system, Affidavits of Documents should be ordered in extraordinary circumstances and not form a routine part of the production process. I agree. In my view, the extraordinary circumstances in this case include the fact that the claim is being advanced by a minor, the number of requests that have been made; the absence of a meaningful-response to the Applicant’s request for the Insurer’s file. Those documents are routinely sought by applicants and produced on consent by insurers based on arbitral jurisprudence which has been in existence at least since 2000. There is also the further concern raised on behalf of the Applicant that he be provided with the entire file.

For these reasons, I ordered counsel for the Insurer to prepare and serve an Affidavit of Documents with respect to each document which forms part of the accident benefits file from March 23, 2006 to September 28, 2007, and to provide copies of all documents which the Insurer does not object to produce by October 6, 2008. The documents and any claim for privilege asserted in the Affidavit, other than litigation privilege, should be described in sufficient detail, that counsel for the Applicant is able to determine whether the document in question is properly the subject of the claimed privilege. If there is a dispute as to whether a note or document is shielded by privilege, counsel for the Insurer will send a copy of the document(s) in question to me, together with his Affidavit of Documents and any written submissions by October 7, 2008 for a ruling. Counsel for the Applicant is to provide any responding written submissions by October 8, 2008.

Surveillance

As the Code contains separate provisions regarding the production of surveillance evidence, I will deal with the surveillance separately.

Rule 40 of the Code states:

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.

Counsel for the Insurer determined, at least from April 21, 2008, the date of the Response, that the Insurer intended to rely on surveillance evidence. In Schedule “B” to the Response, the Insurer lists reports with respect to two periods of surveillance as key documents in the Insurer’s possession on which it intends to rely. Under the heading of surveillance, the Insurer disclosed that surveillance was conducted during the periods May 9 to May 13, 2006 and October 5 and 6, 2007, in and around the Applicant’s home.

Once the Insurer makes the decision that it intended to rely on any of its surveillance, it is obliged to produce all of the surveillance evidence to the Applicant, together with the additional documents specified by Rule 40 of the Code.

For these reasons, I ordered the Insurer to produce copies of the names and qualifications of the persons who secured the investigative or surveillance evidence, the dates, times and places where all 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 on or before October 6, 2008.

Prejudice

The Applicant submits that his position will be irreparably prejudiced if the documents he seeks are produced on October 7, 2008, as this is beyond 30 days for filing its document brief and advising potential witnesses whose identity may arise out of the file content. I agree with the Applicant.

To temper the effect of this prejudice, I relieve the Applicant from his obligations to identify witnesses, file documents briefs and any medical reports which respond to the surveillance 30 days before the hearing and abridge that time to 10 days before the hearing is scheduled to commence. If necessary, the Applicant may also seek leave from the hearing arbitrator to further abridge the time for service of any such medical report.

Expenses:

The Applicant seeks expenses of the motion, payable forthwith and in any event of the cause. He did not claim a specific amount. The Insurer did not respond to the Applicant’s claim for expenses.

An arbitrator’s authority for making an interim award of expenses derives from section 282(11.1) of the Insurance Act. That section provides that an arbitrator may at any time during an arbitration proceeding make an interim award of expenses, subject to such terms and conditions as may be established by the arbitrator.

I award the Applicant interim expenses of this motion because of his success, because the Commission’s approach to early disclosure has been flouted, because educative steps have been taken in writing by sending copies of practice notes and a pre-hearing letter which summarized the parties’ obligations to exchange documents. Although counsel are presumed to know the law, arbitral jurisprudence concerning productions was discussed during the pre-hearing. Counsel for the Insurer’s instructing client was present at the pre-hearing. Counsel for the Insurer was given an opportunity to take the Applicant’s request for the Insurer’s file under advisement as he requested and to inform counsel for the Applicant of his position within 45 days of the pre-hearing. No explanation was provided to me as to the circumstances under which counsel for the Insurer failed to advise counsel for the Applicant of his position within 45 days of the pre-hearing. The law on which I rely in relation the relevance and production of the accident benefits file has been in existence for several years.

In Cordeiro and Wellington Insurance Company, (FSCO P97-00029 April 15, 1998), Director’s Delegate Draper, as he then was, held that timely disclosure is an important part of the arbitration system at the Commission; however, “tactical games and brinkmanship are not.” I find that it is not reasonable to have the Insurer continue to set the timetable as to productions without regard to the provisions of the Code. In my view, this motion should not have been necessary.

An arbitrator has a discretion with respect to the amount of expenses. Counsel for the Applicant attended the pre-hearing. Most of the follow up and the submissions in relation to this motion appear to have been performed by a senior law clerk. In the circumstances, I award the Applicant expenses of this motion in any event of the cause. I fix the Applicant’s expenses at $450 to be paid by ACE INA on or before October 10, 2008.

October 30, 2008

Suesan Alves Arbitrator

ARBITRATION ORDER

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

ACE INA shall provide counsel for the Applicant with an Affidavit of Documents which identifies each document in the accident benefits file of ACE INA, including the adjusting notes and field notes of the independent adjuster Mr. Faber and of the broker who made the decisions as to whether benefits were to be paid, between March 23, 2006, the date of the accident, and September 28, 2007, the date of mediation, on or before October 6, 2008.

The documents and any claim for privilege asserted in the Affidavit, other than litigation privilege, should be described in sufficient detail, that counsel for the Applicant is able to determine whether the document in question is properly the subject of the claimed privilege. If there is a dispute as to whether a note or document is shielded by privilege, counsel for the Insurer will send a copy of the document(s) in question to me, together with his Affidavit of Documents and any written submissions by October 7, 2008 for a ruling. Counsel for the Applicant is to provide any responding written submissions by October 8, 2008.

ACE INA shall produce copies of the documents which it has been ordered to produce in paragraph one on or before October 6, 2008.
ACE INA shall produce the names and qualifications of the persons who secured the investigative or surveillance evidence, the dates, times and places where all 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 on or before October 6, 2008.
The 30 day time period prescribed by the Dispute Resolution Practice Code during which the Applicant is obliged to serve documents it intends to introduce at the hearing and provide its list of witnesses, is abridged to a period which is 10 days before the hearing is scheduled to commence.

Should the Applicant wish to respond to the surveillance with a medical report or the substance of an expert’s opinion, the 30 day time period is also abridged to 10 days before the hearing is scheduled to commence. However, if it is necessary, the Applicant is at liberty to seek leave from the hearing arbitrator to further abridge the time in relation of these documents.

ACE INA shall pay the Applicant’s costs of this motion, fixed at $450, and payable in any event of the cause on or before October 10, 2008.