Neutral Citation: 2008 ONFSCDRS 195 FSCO A08-000390

BETWEEN:

JASON CLAYBOURNE Applicant

and

GORE MUTUAL INSURANCE COMPANY Insurer

DECISION ON A PRELIMINARY ISSUE (MOTION FOR PRODUCTION)

Before: Arbitrator Denise Ashby Heard: Written submissions were concluded on October 17, 2008.

Appearances: Nigel Gilby and William A.G. Simpson for Mr. Claybourne Renate Joanna Eschlboeck for Gore Mutual Insurance Company

Issues:

The Applicant, Jason Claybourne, was injured in a motor vehicle accident on March 5, 2007. He applied for and received statutory accident benefits from Gore Mutual Insurance Company ("Gore Mutual"), payable under the Schedule.¹ Gore Mutual disputes that Mr. Claybourne sustained an impairment within the meaning of section 2 of the Schedule. The parties were unable to resolve this dispute through mediation, and Mr. Claybourne applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The issues in this preliminary issue hearing are:

Is Mr. Claybourne entitled to disclosure of Gore Mutual's complete adjuster's file from the date of the Application for Mediation, October 31, 2007 onwards pursuant to Rule 32.3 of the Dispute Resolution Practice Code (DRPC)?

Result:

Gore Mutual shall disclose to Mr. Claybourne its entire adjuster's file, in the event it asserts a claim of privilege in respect of any document, communication or note or any other portion or part of the adjuster's file it shall, within 10 days of the date of this order, provide a list of documents together with its rationale for its claim of privilege. In the event the parties are unable to agree, then a further motion may be brought before me to determine whether the information Gore Mutual seeks to withhold is protected by privilege.

EVIDENCE AND ANALYSIS:

On March 5, 2008, Mr. Claybourne suffered a spinal cord and other injuries in a snowmobile accident. His treating physician has opined that Mr. Claybourne is catastrophically impaired as a consequence of paraplegia. Gore Mutual disputes that Mr. Claybourne meets the definition set out in section 2 of the Schedule. This and Mr. Claybourne's claim for a special award are the issues to be arbitrated at the hearing which is scheduled to commence March 9, 2009.

Mr. Claybourne submits that as he continues to receive benefits and his file is continuing to be adjusted there is a reasonable possibility that the adjuster's file is relevant to both of the issues being arbitrated. Mr. Claybourne relies on the test first enunciated in Nigro and State Farm Mutual Automobile Insurance Company in which the arbitrator held that: "if an applicant demonstrates 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."² This test was followed in Ward and Wawanesa Mutual Insurance Co.³

Gore Mutual submits that it has released the adjuster's file to the date upon which Mr. Claybourne applied for mediation with the exception of documents which were redacted on the basis that either litigation or solicitor-client privilege attached. It further submits that any additions to the file after that date are protected by privilege.

As well, Gore Mutual submits that the discretionary powers of Rule 32.3 are limited by Rule 39 which provides that an arbitrator shall not admit evidence that "would not be admissible in a court by reason of any privilege under the law of evidence." Gore Mutual also relies on subsection 5.4(2) of the Statutory Powers Procedure Act which prohibits an adjudicator from making orders which require disclosure of privileged information.

The Commission's case law establishes two steps in determining whether documents are producible. An arbitrator must first determine whether the information sought is reasonably relevant to the issues in dispute. If reasonably relevant, then it must be determined whether the information is protected by either litigation or solicitor and client privilege.

Is the Adjuster's File Relevant?

In Rama and Allstate Insurance Co. of Canada⁴, the arbitrator stated that: "I am persuaded on a balance of probabilities, to the general relevance of the Insurer's adjusting file, both in regard to the specific categories of claims..., as well as to the broader issue of a special award." In Uka and Aviva Canada Inc.,⁵ which is under appeal, I adopted the approach taken in Nigro finding that Mr. Uka had offered a "plausible argument" that the reserve amounts were relevant to the proceedings.

I do not accept that Rule 39, which deals with admissibility at hearing, limits the discretion to order production as set out in Rule 32 of the DRPC. The scope of what is producible is much broader than what might be admissible at a hearing.

Gore Mutual is continuing to pay benefits, the limits of which will increase if Mr. Claybourne is successful at arbitration. As well, the adjuster's file contains information which may be helpful to the determination of the reasonableness with which the claim is being adjusted. Therefore, the adjuster's file has a reasonable possibility of being relevant to both issues in dispute. Therefore, I find that Gore Mutual's adjuster's file is producible pursuant to the test in Nigro.

Is the Adjuster's File Protected by Privilege?

As Mr. Claybourne has established relevance, it now falls to Gore Mutual to establish the adjuster's file is protected by either litigation privilege or solicitor and client privilege. Gore Mutual has submitted that it has released the adjuster's file to the date of Mr. Claybourne's Application for Mediation redacted for privilege.⁶ Gore Mutual has relied on the bright line established in Commission case law that the adjuster's file to the date of the Application for Mediation is producible and beyond that date it is prima facie protected by privilege.

Mr. Claybourne submits that his claim is such that it requires an item by item consideration of whether the materials withheld from disclosure are protected by privilege. He suggests that Gore Mutual's consideration of his treating doctor's Rebuttal Report and its consideration of the Form 1 in respect of Mr. Claybourne's continuing attendant care benefits provide some evidence that documents created after he applied for mediation were created in the normal course of adjusting the file. Mr. Claybourne further submits that as Gore Mutual has an ongoing obligation to adjust his claim in good faith and to reasonably consider new information in its adjusting of his claims for benefits, this is an appropriate case to require Gore Mutual to provide a cogent basis for its assertion of privilege.

Disclosure in the Courts has been steadily evolving to "complete disclosure." Justice Carthy described the trend as follows:

The "zone of privacy" is an attractive description but does not define the outer reaches of protection or the legitimate intrusion of discovery to assure a trial on all of the relevant facts. The modern trend is in the direction of complete discovery and there is no apparent reason to inhibit that trend so long as counsel is left with sufficient flexibility to adequately serve the litigation client. In effect, litigation privilege is the area of privacy left to a solicitor after the current demands of discoverability have been met. There is a tension between them to the extent that when discovery is widened, the reasonable requirements of counsel to conduct litigation must be recognized.⁷

The present practice at the Commission requires insurers to produce its adjuster's file to the date of the filing of the Application for Mediation unless an insurer can establish privilege. This bright line has been established in recognition that there is not a formal discovery process at the Commission and its proceedings are mandated to provide expeditious and cost effective resolution of disputes. However, the bright line has given rise to an effective presumption of privilege after the date of Application for Mediation. In my view this presumption is inconsistent with the consumer protection purpose of the legislation⁸ and the obligation of a first party insurer to act in utmost good faith.⁹ I agree with the Arbitrator's conclusion in Rama and Allstate Insurance Company of Canada that: "There is, in a law, a legitimate protected zone of privacy regarding communications with counsel. There is also a legitimate protected zone of privacy regarding litigation. There is no protected zone of privacy for adjusting a first-party insurance file."¹⁰ The present practice fails to recognize that the prima facie dominant purpose of an adjuster's file is the adjusting of an insured's claim and therefore has a reasonable possibility of relevance to a dispute. Thus it should follow that the file is producible to the insured subject to an insurer being able to establish information it seeks to withhold is not reasonably relevant to the proceedings or is protected by privilege.

Gore Mutual has not provided any evidence that any portion of its adjuster's file is protected by solicitor and client privilege or was created in anticipation of the present dispute.

Therefore, Gore Mutual is required to provide Mr. Claybourne with a list of documents to which it is asserting privilege together with its rationale. As the hearing is scheduled to commence in early March time is of the essence. Therefore, the list will be provided to Mr. Claybourne within 10 days of the date of this order. In the event the parties are unable to agree on the release or withholding of any part of the file, a further motion may be brought before me to determine the issue.

December 10, 2008

Denise Ashby Arbitrator

Financial Services Commission of Ontario