Financial Services Commission des Commission services financiers of Ontario de l’Ontario

Neutral Citation: 2008 ONFSCDRS 19

FSCO A07-001061

BETWEEN:

SAEED GHAEDSHARAGY

Applicant

and

KINGSWAY GENERAL INSURANCE COMPANY

Insurer

DECISION ON A PRODUCTION ISSUE

Before: Robert Bujold

Heard: By written submissions concluded on November 28, 2007

Appearances: Jeremy Solomon for Mr. Ghaedsharagy Jamie Pollack for Kingsway General Insurance Company

Issues:

The Applicant, Saeed Ghaedsharagy, was injured in a motor vehicle accident on September 15, 2002. He applied for and received statutory accident benefits from Kingsway General Insurance Company (“Kingsway”), payable under the Schedule.¹ Kingsway terminated weekly income replacement benefits (“IRBs”) effective September 22, 2006. Other disputes subsequently arose, including entitlement to certain medical benefits and costs of examinations. The parties were unable to resolve their disputes through mediation, and Mr. Ghaedsharagy applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

A pre-hearing discussion was held on August 30, 2007. At that time, the parties were unable to agree on the parameters for production of the adjuster’s log notes in Kingway’s file. The parties agreed to have this issue determined by written submissions.

The issue to be determined is:

Is Mr. Ghaedsharagy entitled to production of the adjuster’s log notes beyond the date of the first Application for Mediation, i.e. January 15, 2003?

Result:

Mr. Ghaedsharagy is entitled to the production of all adjuster’s log notes to the date of the last Application for Mediation, June 28, 2007, subject to the following: entries related to issues that were the subject of all prior Applications for Mediation, need not be produced beyond the date that each such issue was referred to mediation; Kingsway need not disclose entries related to reserve information; Kingsway need not disclose entries that are subject to solicitor-client communications.
The issue of expenses of this motion is left to the hearing arbitrator to consider in the context of expenses of the proceeding as a whole.

EVIDENCE AND ANALYSIS

Background:

The issues in dispute in this arbitration were the subject of two separate mediations.

A mediation to address the dispute over IRBs for the period September 22, 2006 and ongoing was commenced by Application for Mediation dated February 14, 2007. The mediation was conducted on May 3, 2007.

Medical benefits for physiotherapy and acupuncture for the period April and May 2007, transportation expenses for the period September 2006 to August 2007, as well as payment for the cost of a functional capacity evaluation and reassessment in March and April 2007 were the subject of a failed mediation commenced by Application for Mediation dated June 28, 2007. These issues were mediated on August 14, 2007.

I understand from the written submissions that several other disputes over the payment of benefits have resulted in several other Applications for Mediation, going back as far as just a few months after the accident of September 15, 2002. Specifically, in addition to the Applications for Mediation that cover the issues that are the subject of this arbitration, Mr. Ghaedsharagy has filed Applications for Mediation dated January 15, 2003, April 30, 2004, August 22, 2004, March 14, 2006 and November 1, 2006. I am not aware of the disposition of these prior disputes, except that an issue regarding payment of IRBs was the subject of the first Application for Mediation dated January 15, 2003 and that all of the issues in dispute in that mediation were apparently not resolved and to this date remain unresolved. As well, an issue related to IRBs was added to a mediation that took place on November 18, 2004.²

The Positions of the Parties:

Mr. Ghaedsharagy seeks production of all log notes to February 14, 2007, being the date of the first Application for Mediation that deals with issues in dispute in this arbitration. Thereafter, he seeks production of log notes relating to the issues identified in the subsequent Application for Mediation dated June 28, 2007, presumably to that date.

Kingsway maintains that Mr. Ghaedsharagy has failed to demonstrate a reasonable basis for the production of log notes beyond January 15, 2003, the date of the very first Application for Mediation arising from this accident. Kingsway’s argument is essentially two-fold.

First, Kingsway submits that “all log notes created after January 15, 2003 were created for the purpose of preparing for both actual litigation and subsequent litigation which was reasonably apparent.”

Second, Kingsway submits that Mr. Ghaedsharagy is not entitled to log notes beyond January 15, 2003 because “the insured has merely provided an unparticularized and baldly pleaded claim for a special award.” This argument is based on relevance and Kingsway relies on the decisions in Leitgeb and Allstate Insurance Company of Canada³ and Al-Obaidi and Allstate Insurance Company of Canada.⁴

In Leitgeb, the Director’s Delegate found that the special award provision does not expand the scope of the arbitration into a generalized inquiry into the insurer’s conduct. He also found that “an applicant seeking production from an insurer’s records must demonstrate some reasonable basis for its relevance to the issues before the arbitrator.” In Al-Obaidi, the Director’s Delegate reviewed Leitgeb and other decisions and agreed that “a bald assertion of a special award does not, in and of itself, entitle an insured to access the company’s complete file.”

Although Kingway maintains that it should not have to produce any log notes beyond January 15, 2003, it submits, in the alternative, that the production of log notes, if any, should be restricted to the issues in dispute and should be further limited in time to the filing of the Applications for Mediation in respect of each issue in dispute.

Mr. Ghaedsharagy strongly resists Kingsway’s attempt to limit production of all log notes on all issues by relying on a mediation proceeding that was commenced on January 15, 2003, shortly after the accident. Mr. Ghaedsharagy points out that the issues in dispute in this arbitration arise from terminations and denials many years later. The Applications for Mediation dealing with the issues in this arbitration are dated February 14, 2007 and June 28, 2007. Mr. Ghaedsharagy argues that if Kingsway is correct, then an insurer could create a tactical advantage by denying a benefit early in the claim and prompting its insured to apply for mediation. At least presumptively, all log notes created thereafter would be privileged, even though other benefits may be the subject of ongoing adjustment and subsequent disputes may not arise for months or years. This result, Mr. Ghaedsharagy argues, would be “both absurd and a denial of natural justice.”

Mr. Ghaedsharagy also points out that the onus rests with Kingsway to establish its claim for litigation privilege and, in that regard, the test is whether the documents were created for the dominant purpose of litigation.⁵ Mr. Ghaedsharagy maintains that Kingsway has failed to establish a claim of litigation privilege over log notes from January 15, 2003 onward. In fact, Mr. Ghaedsharagy maintains that, at least as it relates to the medical and cost of examination issues, Kingsway has failed to establish litigation privilege from February 14, 2007 when he applied for mediation of the IRB claim. Mr. Ghaedsharagy did not apply for mediation on the medical and cost of examination issues until June 28, 2007. Since these issues are completely distinct issues from the IRB issue, there is every reason to believe that the log notes between February 14, 2007 and June 28, 2007 will contain entries documenting their ongoing adjustment.

Mr. Ghaedsharagy also notes other “policy reasons” to require production of log notes beyond the February 14, 2007 Application for Mediation. Mr. Ghaedsharagy argues that since dispute resolution procedures at the Commission do not include affidavits of documents and examinations for discovery, there needs to be a flexible approach to document production and it may include a document-by-document (or note-by-note) approach to the insurer’s privilege claim.⁶ As well, Mr. Ghaedsharagy submits that the adjuster’s notes relevant to decision-making considerations for each denied benefit will likely be disclosed and made exhibits at the hearing. Early production has the potential to enhance settlement by providing the opportunity to better assess the insurer’s decisions.

With respect to the issue of the relevance of the log notes, Mr. Ghaedsharagy submits that log notes are not only relevant to the claim for a special award, but also speak to the issue of entitlement and are important to understanding the basis for an insurer’s decision to deny or terminate the benefits in dispute.

Analysis:

As stated above, Kingsway’s objection to producing log notes beyond January 15, 2003 focus on two main arguments: relevance of the log notes and privilege over the log notes.

Relevance

With respect to the issue of relevance, I note that there has been an evolution of law and practice at the Commission since Leitgeb and Al-Obaidi toward more expanded production of documents in the insurer’s file. The decision in Campeau and Liberty Mutual Insurance Company⁷ provides an in-depth review of this evolution and probably best marks when the evolving principles became generally accepted practice.

In Campeau, Liberty Mutual had also objected to the production of its adjuster’s log notes on the basis of relevance. As Arbitrator Blackman noted:

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. Therefore, substantive portions of the insurer’s file are routinely produced, such as medical documentation, statements from the insured, particulars of property damage and correspondence to and from the insured. When a special award is sought, the relevance of the insurer’s file becomes even greater.

The Campeau decision also cites with approval the pre-hearing letter decision in Link and Zurich Insurance Company⁸ wherein Arbitrator McMahon made the following observations:

In the absence of affidavits of documents or oral pre-hearing discovery, it is impossible for the applicant to know if there is anything in the adjuster’s file that speaks to these matters. In that sense the applicant is in the same position as the insurer who has little opportunity to ascertain if a pre-existing medical condition exists or is germane unless they are given access to the individual’s pre-accident medical history for some reasonable period of time. Ultimately much of the pre-accident medical history is irrelevant and would not be admissible at a hearing, but it is routinely ordered to be produced at the pre-hearing stage, as the only expedient way of ascertaining if it is of use. The same opportunity must be afforded to the insured in her investigation of what information the insurer has that speaks to the specific benefits issue, and the claim for a special award.

Several other cases are referred to in Campeau as examples that demonstrate the “evolving change in the environment at the Commission regarding the production of the insurer’s file.”⁹

As in Link, Campeau recognizes that some of the records in the insurer’s file may not be directly relevant to issues in dispute, but draws the comparison to the production of clinical notes and records of the insured’s treating physicians which usually contain much irrelevant and highly personal information. Nevertheless, it is noted, Practice Note 4 of the Dispute Resolution Practice Code provides a general guideline for the production of unedited clinical notes and records from one year pre-accident.

As with the insured’s clinical notes and records, there is no cost effective and efficient process to determine the relevance of documents in the insurer’s file. Given that arbitrations at the Commission are intended to be an efficient and cost effective alternative to the Courts, I agree with Arbitrator Blackman that a broad stroke approach is appropriate and an insured should generally have access to the insurer’s file, subject to privilege and reserve information, without vetting by the insurer as to the relevance of specific documents or entries.

I also note that Kingsway appears to concede that its log notes up to the date of the first Application for Mediation, January 15, 2003, are producible. Nowhere in its submissions does Kingsway object to producing log notes from the date of the accident, September 15, 2002, to January 15, 2003. The tacit implication, in my view, is that Kingsway itself recognizes that, in the seven years since Campeau, the overwhelming practice has been to treat an insurer’s file as generally producible, at least to the date of the Application for Mediation (when arbitrators have generally recognized a “bright line” or presumption of litigation privilege), even where there has been no claim for a special award or the claim lacks particulars. Insurers today routinely produce their adjuster’s files on such basis and, in most cases, this practice has provided an efficient and effective means of balancing full and fair disclosure of a class of relevant documents, on the one hand, against the need to protect documents prepared for the dominant purpose of litigation, on the other.

In any event, there is a claim for a special award in this case, and a long and apparently contentious history between the parties. I find that the requested entries are potentially relevant to the special award claim.¹⁰

In my view, the more difficult issue on this motion is the issue of privilege, arising as it does in the context of multiple Applications for Mediation.

Privilege

Log notes may contain various types of entries. Log notes typically contain entries pertaining to the adjustment of the file. However, log notes may also contain entries created when litigation was anticipated in respect of certain benefits and those entries may have been created for the dominant purpose of litigation. Some entries may also reflect communications between solicitor and client obtained for the purpose of legal advice, whether or not litigation was contemplated.

At least as it relates to particular issues in dispute, the presumption is that records prepared prior to an Application for Mediation were likely prepared largely, if not wholly, for the purpose of adjustment while records prepared after mediation is initiated, at least in respect of such issues, were likely prepared for the dominant purpose of litigation. Although the presumption is rebuttable, using the date of the Application for Mediation has the advantage of providing a dividing line that works well in the vast majority of cases. It may be appropriate in certain cases to broaden or narrow the period or scope of production, depending on the submissions of counsel.

In this case, Mr. Ghaedsharagy seeks production of all log notes up to February 14, 2007. Beyond that date, Mr. Ghaedsharagy seeks production of log notes relating to the issues that were subsequently denied and are the subject of the Application for Mediation dated June 28, 2007. Mr. Ghaedsharagy does not appear to be requesting log notes in respect of an issue after it was referred to mediation, but he does seek production of entries relating to issues up until they became the subject an Application for Mediation. He resists the suggestion that an earlier Application for Mediation on one issue should operate to preclude the production of adjuster’s notes on some other issue that continues to be adjusted and isn’t denied and mediated until some later time. I agree.

It seems clear that any litigation privilege attaching to a document or record must be established in connection with a specific dispute. In a multiple dispute file, the dominant purpose for creating the document or record must be anticipated litigation of one or more specific disputes. Log notes that are otherwise producible on an issue are not afforded the protection of litigation privilege simply because prior entries on unrelated issues were created for the dominant purpose of litigation.

Here, Kingsway seeks a blanket litigation privilege on all log notes beyond January 15, 2003. Although the dispute at that early stage included an IRB issue, I did not receive any evidence nor hear any submissions that the IRB issue raised at that time related in any way to the IRB issue raised in the February 14, 2007 Application for Mediation which is the subject of this arbitration. The IRB issue in this arbitration is for a period that only begins on September 22, 2006. It does not relate back to January 2003.

Further, even if Kingsway anticipated litigation regarding the particular IRB issue that is the subject of this arbitration prior to the Application for Mediation of February 14, 2007, Kingsway provided no evidence that log entries prior to that date were created for the dominant purpose of anticipated litigation.

The question remains whether it is appropriate to use the date of the Application for Mediation for each disputed issue as the “bright line” between non-privileged and privileged communications on each disputed issue.

Both parties had the opportunity at the pre-hearing discussion, as well as in their written submissions, to put forward argument as to why the “bright line” presumption should not apply to the issues in this case. I have not received any evidence or compelling submissions to move away from the presumption. As stated above, it does not appear that Mr. Ghaedsharagy is seeking production of log notes beyond February 14, 2007 as they relate to his claim for income replacement benefits from September 22, 2006 onward, or production of log notes beyond June 28, 2007 as they relate to the medical and cost of examination issues. To the extent that it is his position that a broader production period is appropriate, I am not persuaded that he has rebutted the presumption.¹¹ To the extent that Kingsway is seeking a shorter production period, it too has failed to convince me that a departure from the presumption is appropriate in this case.

Finally, I note that with respect to any solicitor-client communications that may be reflected in the log notes, I have no evidence that Kingsway would have waived privilege over such entries.

Conclusion:

I find therefore that Mr. Ghaedsharagy is entitled to the production of all adjuster’s log notes to the date of the last Application for Mediation, June 28, 2007, subject to the following: entries related to issues that were the subject of all prior Applications for Mediation, need not be produced beyond the date that each such issue was referred to mediation; Kingsway need not disclose entries related to reserve information; Kingsway need not disclose entries that are subject to solicitor-client communications.

Mr. Ghaedsharagy’s accident benefits file has been open for over five years and, in that time, there have been several Applications for Mediation. There is little doubt that the log notes will be extensively redacted to comply with my order. In the circumstances, Kingsway shall prepare a list of all redacted entries with a brief description of the note and the basis for not disclosing the entry. The log notes, together with the list of redacted entries, shall be provided to Mr. Ghaedsharagy within 20 days of the date of this decision. If a dispute arises regarding whether an entry has been properly withheld, counsel may arrange a resumption of the pre-hearing to obtain a ruling. In that event, the unedited entries in dispute, together with any written submissions, should be forwarded to me at least 5 days prior to the resumption.

While I have provided a process for the parties to seek a ruling on any dispute that remains following the production of the log notes, I strongly encourage the parties to make every effort to resolve any issues that may arise between themselves. A multi-staged pre-hearing or motion procedure to deal with production issues is time consuming and costly and should be avoided, if at all possible. Mr. Ghaedsharagy argued that since the dispute resolution process at the Commission does not include affidavits of documents or examinations for discovery, a flexible approach to documentary production is required. It is important to keep in mind, however, that a principal reason for omitting these discovery procedures is to provide a quick and cost effective alternative to the courts. Further, as the Director’s Delegate noted in Al-Obaidi, “although arbitration does not involve affidavits of documents or discovery, the adjudication process, whether in this forum or in court, is, to a large extent, premised on a general assumption that lawyers will act in accordance with their professional obligations.”¹² While a document-by-document (or note-by-note) vetting by an arbitrator may be necessary in limited circumstances,¹³ the parties should try to avoid engaging the Commission in what effectively amounts to overseeing the execution of professional obligations by counsel to produce documents as required or directed.

Although the issue on this motion dealt with adjuster’s log notes, and my order herein is limited to that issue, my reasons apply with equal effect to all documents and records in the adjuster’s file.

EXPENSES:

The issue of expenses of this motion is left to the hearing arbitrator to consider in the context of expenses of the proceeding as a whole.

February 12, 2008

Robert Bujold Arbitrator

Date