Neutral Citation: 2008 ONFSCDRS 35

FSCO A07-001566

BETWEEN:

EVA REYN Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY Insurer

PRE-HEARING DECISION

Before: John Wilson

Heard: January 24, 2007, at the offices of the Financial Services Commission of Ontario in Toronto, Ontario.

Appearances: Alon Rooz for Mrs. Reyn Darrell March for State Farm Mutual Automobile Insurance Company

The Applicant, Eva Reyn, claimed to have been injured in a motor vehicle accident on August 7, 2005. She applied for statutory accident benefits from State Farm Mutual Automobile Insurance Company ("State Farm"), payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and Mrs. Reyn 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 was held on January 24, 2008 in which several issues emerged as to the production obligations of each party.

ISSUES:

Is Mrs. Reyn entitled to an order that State Farm create either an affidavit of documents or a list of all documents in its file subsequent to mediation?
Is State Farm entitled to an order that Mr. Rooz provide a written answer to State Farm as to whether or not there is a tort claim being advanced by Mrs. Reyn arising out of this accident?

RESULT:

Mrs. Reyn is not entitled to an order that State Farm create either an affidavit of documents or a list of all documents in its file subsequent to mediation.
State Farm is entitled to an order that Mr. Rooz provide a written answer to State Farm as to whether or not there is a tort claim being advanced by Mrs. Reyn arising out of this accident.

EVIDENCE AND ANALYSIS:

Before directly addressing the issues raised by the parties, I would like to clarify the range of the powers available to arbitrators in directing parties to carry out their pre-hearing discovery obligations.

Section 22(1) of the Insurance Act provides as follows:

Proceedings before Director or arbitrator

For the purpose of exercising the powers and performing their duties under this Act, the Director and every arbitrator has the same power to summon and enforce the attendance of witnesses and compel them to give evidence on oath or otherwise, and to produce documents, records and things, as is vested in the Superior Court of Justice for the trial of civil actions.

As a result of this provision, an arbitrator, once appointed to a matter, is endowed with all the powers vested in a judge of the Superior Court, with regard to compelling the appearance of witnesses and the production of documents, records and things.

The Oxford Canadian Dictionary defines "vested" as:

Adj. 1. in senses of vest v. 2 absolute, fixed; not contingent 3 established by law or tradition. [Emphasis added]

The use of the word "vested" incorporates, by reference, the powers of the judiciary arising from both the common law and statute, whether the Courts of Justice Act or the relevant sections of the Rules of Civil Procedure.

Although the Dispute Resolution Practice Code (the "Code") does not provide specifically for oral discoveries, or affidavits of documents in the arbitration process, it provides both general guidance and significant leeway to arbitrators in crafting procedural solutions that may be necessary to do justice between the parties.

When faced with a lacuna in the Code, an arbitrator is in a position to use his or her discretion to craft a procedural direction that is appropriate to the case at hand. In doing so, the discretion should be exercised fairly in the spirit of the balance of the Code. One of the first considerations should be Rule 1.1 which reads as follows:

1.1 These Rules will be broadly interpreted to produce the most just, quickest and least expensive resolution of the dispute.

1.2 Where something is not specifically provided for in these Rules, the practice may be decided by referring to similar Rules in this Code

The Code makes it clear that the parties to an arbitration have a general obligation to each other and to the tribunal to disclose relevant evidence in their hands to the opposite side prior to a hearing and, in Rule 32.3, specifically accords the power to so order to arbitrators.

Subject to Rule 39, an arbitrator may at any time order the production of documents or the giving of information that he or she considers relevant to the determination of the issues in the arbitration, on such terms as he or she considers appropriate. [Emphasis added]

Arbitrators are given a further, and, indeed, separate grounding for ordering both documentary and oral production where required, by section 22(1) of the Insurance Act.

Section 12(1) of the Statutory Powers and Procedures Act ("SPPA") also grants an extensive power to tribunals, including arbitrators, to order the production of relevant evidence in matters before them.

In effect the rule as to productions at the Commission, is that everything that is relevant and probative, and not subject to privilege is producible.

At the pre-hearing in this matter two separate production issues arose; one raised by each party.

Listing or "affidavit of documents"

Mr. Rooz requested that State Farm produce its file to mediation, with a further production of a list of all documents in its file subsequent to mediation. Essentially, Mr. Rooz wanted an order for the equivalent of an affidavit of documents in this matter.

He reasoned that in the event that State Farm was continuing to adjust the file subsequent to mediation, there would be documents related to the claims handling that would not necessarily be subject to litigation privilege. He was unable, however to point to any specific activity post-mediation that would suggest that there would be documents whose primary object would be ongoing claims handling.

While I accept that I have the power to order the creation of something akin to an affidavit of documents under section 22(1) of the Insurance Act, as well as under the provisions of the Code, where such would be necessary for the efficient and orderly determination of a matter, there are good reasons why such orders are not routinely made in this forum.

Generally, parties abide by the spirit of the arbitration system and voluntarily produce all relevant and probative documents that are not subject to privilege. The need to produce a listing of all documents in the possession or control of a party adds an extra step, and it should be noted, a potentially expensive step to what is supposed to be an expedited process.

As noted earlier Mr. Mazin has not provided any reason to support his assertion that there are likely important documents in the hands of the Insurer, created after the application for mediation that would not be subject to privilege of some nature. What should be the threshold if any in such a request? Master Dash in an analogous situation found:

The evidence must convince the court of a real likelihood that documents not disclosed in the lawyer's affidavit of documents exist or have once existed. It is not sufficient for a client to say in the course of a lawsuit, "I believe there are more documents," or "it appears to me that documents are being hidden." That would be no more than a fishing expedition.²

Generally, where requested, insurers will release their complete files to the date of the application for mediation, since in it would be highly unusual for litigation privilege to have crystallized before that date. Although there is nothing magic about an Application for Mediation, most arbitrators have accepted that it is a rough and ready way of determining when a dispute between parties is likely to become evident.

While the Director of Arbitrations³ in another context has suggested that there should be no presumption that mediation indicates that a dispute has crystallized, the more accepted point of view has been that it may well be an indication of serious disagreements between parties, and, indeed, is the statutory pre-condition to filing an arbitration or launching a court action.

Consequently, the practice has arisen to permit production of an insurer's file to the point of the application for mediation on a routine basis.

Obviously evidence of a general practice in the arbitration forum is not an answer to a claim to vary that practical dividing line, whether by a claim of privilege (either solicitor-client or litigation), or a claim of waiver of privilege or that, under the factual circumstances no privilege was established or possible.

The assertion of litigation privilege turns, however, on the facts of each case. Mediation is not necessarily the first step to litigation. It may well also be the first step to resolution of a claim. Patently, not all mediations lead to litigation.⁴ Thus, notwithstanding the general practice it is always possible that documents created after mediation may be non-privileged. That, however, is a factual determination specific to each case.

There is also the question of the unique first party relationship between an insured and the accident benefit insurer. As Master Clark noted:

This is an accident benefit action. It is not a tort action. The plaintiff and defendant (insured and insurer respectively) are bound together by obligations and responsibilities until it can be said that to one or the other the prospect of litigation between them is clear.⁵

A first party relationship, however, is not a fiduciary relationship and does not necessarily mean an absolute right to all documents.⁶ While the first-party relationship perhaps underlines the need to consider a relatively liberal approach to the demarcation point when the "prospect of litigation is clear" it does not help Ms. Reyn, in the absence of at least some evidence that there is at least a possibility that documents were created after mediation that would not properly be subject to litigation or solicitor-client privilege.

Privilege of any nature is not however to be set aside lightly. The recognition of privilege is of crucial importance to our legal system. Major J. commented in Pritchard:

Solicitor-client privilege describes the privilege that exists between a client and his or her lawyer. Clients must feel free and protected to be frank and candid with their lawyers with respect to their affairs so that the legal system, as we have recognized it, may properly function.

In this matter, Mr. March willingly agreed to the production of the Insurer's file to the date for the Application for Mediation. He refused to produce a document list for the file post-mediation however on the basis that all the documents contained in that file would prima facie be subject to litigation privilege.

I do not accept all of Mr. March's assertions with regard to privilege, I do, however, accept that there is a high probability that documents created after mediation in the Insurer's file would be protected by litigation privilege.

While in general I support wide ranging documentary discovery within the arbitration process, my ruling in this matter is based on the simple fact that there exist no circumstances demonstrated at present to justify the ordering of what would be in effect an affidavit of documents, a step which in these circumstances, would be superfluous.

In the absence of even a scintilla of evidence of circumstances which would suggest to me that non-privileged documents, or documents upon which any privilege may have been somehow waived exist and are in the Insurer's file, I decline to make the order requested.

To routinely order affidavits of production, as counsel for Ms. Reyn seems to wish would render the arbitration process cumbersome and expensive. To so order in this particular case would offend the principle of proportionality, Rule 1.1 of the Code and provide licence for unsupported "fishing expeditions" by both sides. The result would not be "the most just, quickest and least expensive resolution of the dispute."

Refusal to answer questions

State Farm also requested an answer as to whether Ms. Reyn also had initiated a tort claim. Mr. Rooz refused to disclose this information on the basis that although information as to court proceedings was public, he was obliged by confidentiality requirements and the Rules of Professional Conduct from disclosing such information.

Mr. Mazin did not elaborate as to the basis of the confidentiality requirements, nor as to the part of the Rules of Professional Conduct that he relied upon.

Mr. March elaborated that his request was highly relevant to the issues in arbitration, since if there were documents created for tort litigation, or medical reports developed in the same context they could well be probative in this arbitration. Without confirmation as to the existence or not of litigation, State Farm would be unable even to request disclosure of such documents let alone move for their production.

While there are no examinations for discovery in arbitration, the obligation on parties to provide relevant information is not restricted to documentary production. As has been noted by Arbitrator Rotter, and re-affirmed many times since, "both sides have a duty to communicate with each other openly and in good faith."⁷ Such communication is an on-going process that continues throughout arbitration.

Rule 32.3 of the Code specifically provides for this situation in allowing an arbitrator to order "the giving of information that he or she considers relevant to the determination of the issues in the arbitration."

While there is some controversy about the appropriateness of the use of materials obtained from a tort file in an arbitration, especially transcripts from examinations from discovery, it is not a foregone conclusion that everything created in the context of related tort litigation is inadmissible in the arbitration forum. Certainly relevance would not be difficult to establish in most cases.

I accept that there is an obligation on a party to disclose the potential existence or not of other relevant document sources that may directly relate to the issues in this hearing. Without deciding as to whether any documents in a tort file, if such exists, would be producible, or whether they should be identified by the party having possession of them, I order that Mr. Rooz provide a written answer as to whether or not there is a tort claim being advanced in this matter, forthwith.

March 4, 2008

John Wilson Arbitrator

ARBITRATION ORDER

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

I decline to order that State Farm create either an affidavit of documents or a list of all documents in its file subsequent to mediation, at this point in the arbitration.
I order that Mr. Rooz provide a written answer forthwith to State Farm as to whether or not there is a tort claim being advanced by Mrs. Reyn in this matter.