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

Neutral Citation: 2008 ONFSCDRS 50

FSCO A07-002341

BETWEEN:

TSAI HSIAO KUAN

Applicant

and

KINGSWAY GENERAL INSURANCE COMPANY

Insurer

PRE-HEARING DECISION

Before: Anne Sone

Heard: March 4, 2008, in at the offices of the Financial Services Commission of Ontario in Toronto, Ontario.

Appearances: Sahereh Baghbani for Ms. Kuan Marla Emdin for Kingsway General Insurance Company

Issues:

The Applicant, Tsai Hsiao Kuan, was injured in a motor vehicle accident on May 25, 2006. She applied for statutory accident benefits from Kingsway General Insurance Company (“Kingsway”), payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and Ms. Kuan applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

At the pre-hearing discussion of this case held on March 4, 2008, two issues emerged regarding the production obligations of the parties.

The issues are:

1. Is Ms. Kuan entitled to production of Kingsway’s adjusters’ notes and records up to the date of her application for mediation?

2. Is Kingsway entitled to production of Ms. Kuan’s bank records for two months before and two months after the date of the accident?

Result:

1. Ms. Kuan is entitled to production of Kingsway’s adjusters’ notes and records up to the date of her application for mediation.

2. Kingsway is entitled to production of Ms. Kuan’s bank records from March 25 to July 25, 2006.

EVIDENCE AND ANALYSIS:

Background:

Prior to her accident on May 25, 2006, Ms. Kuan alleges that she worked for one month at a noodle factory, called Cashly Food Co. (“Cashly”). Apparently, Cashly is owned by Ms. Kuan’s brother-in-law.

Ms. Kuan provided to Kingsway an Employer’s Confirmation Form (OCF-2) signed by Shao Long Tan of Cashly indicating that she worked packing food products from April 24, 2006 to May 24, 2006. According to this form, her gross weekly income in each of the four weeks prior to the accident was $336 per week. Ms. Kuan has also provided to Kingsway what appears to be a computer printout from Cashly indicating that she was entitled to three cheques after the accident – cheque #246 in the amount of $570.73 dated May 26, 2006, cheque #267 in the amount of $570.73 dated June 9, 2006, and cheque #285 in the amount of $196.76 dated June 23, 2006. When Kingsway sought production of these cheques, Ms. Kuan indicated that she had been paid by direct deposit at her bank.

Ms. Kuan has mediated income replacement benefits at the rate of $228.29 per week from May 25, 2006 onward, expenses and interest. Kingsway has not paid Ms. Kuan any income replacement benefits. Her application for arbitration did not refer to a special award; however, she stated at the pre-hearing that she was claiming one.

Statutory Framework:

Arbitrators have a wide range of powers which allows them to order parties to carry out their production obligations.

The Dispute Resolution Practice Code (Fourth Edition, updated October 2003) (the “Code”) makes it clear that the parties in an arbitration are obliged to disclose relevant evidence to the opposite side prior to a hearing. Rule 32.3 specifically provides arbitrators with the power to order production of documents.

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.

Section 22(1) of the Insurance Act gives arbitrators the same powers to produce documents, records and things as is vested in the Superior Court of Justice for the trial of civil actions. Section 22(1) provides:

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.

Section 12(1) of the Statutory Powers Procedure Act, R.S.O. 1990, c.S.22 (“SPPA”) also grants extensive powers to tribunals, including arbitrators, to order the production of relevant evidence in matters before them.

In Reyn and State Farm Mutual Automobile Insurance Company,² Arbitrator Wilson states and I agree:

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.

Production of Kingsway’s Adjusters’ Notes and Records:

Ms. Kuan is seeking production of Kingsway’s adjusters’ notes and records up to the date of the application for mediation. Kingsway objects to producing its adjusters’ notes and records on the basis that Ms. Kuan is conducting a “fishing expedition.” It did not raise any claim for privilege on these notes and records.

As noted above, an arbitrator has a wide discretion to order parties to produce notes and records so long as they are relevant to the issues in the hearing and not privileged. Simply claiming a special award does not necessarily mean that an insurer’s adjusters’ notes and records are automatically relevant. As the Director’s Delegate stated in the appeal decision of Leitgeb and Allstate Insurance Company of Canada:³

An applicant seeking production from an insurer’s records must demonstrate some reasonable basis for its relevance to the issue before the arbitrator.

In Al-Obaidi and Allstate Insurance Company of Canada,⁴ the Director’s Delegate looked at Leitgeb and other decisions and agreed that a “a bald assertion of a special award does not, in and of itself, entitle an insured to access the company’s complete file.”

Since Leitgeb and Al-Obaidi, the position of the Commission has evolved in this production area. In Campeau and Liberty Mutual Insurance Company,⁵ Arbitrator Blackman weighed competing interests and canvassed the issue of production of an insurer’s file very thoroughly. He stated, and I concur:

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.

In Ghaedsharagy and Kingsway General Insurance Company,⁶ Arbitrator Bujold made the following comments on the effect of the Campeau decision:

…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.

I agree with these comments. Currently at the Commission, it not unusual for insurers to produce their adjusters’ files up to the date of the application for mediation, even where a special award has not been claimed.

In this case, Ms. Kuan has not received any income replacement benefits. It is conceivable that she may be entitled to a special award if the hearing arbitrator finds she was entitled to be paid benefits and that these payments were “unreasonably withheld or delayed” pursuant to section 282(10) of the Insurance Act. Accordingly, the manner in which Kingsway has adjusted the file is relevant to the issues in this proceeding. I find that Kingsway’s adjusters’ notes and records up to the date of the application for mediation are relevant and order Kingsway to produce them to Ms. Kuan.

Production of Ms. Kuan’s Bank Records:

Kingsway sought production of Ms. Kuan’s bank records for two months before and two months after the accident. Ms. Kuan objected to producing these records on the basis that she had already provided an Employer’s Confirmation Form (OCF-2) indicating her income.

Normally, where applicants provide an Employer’s Confirmation Form (OCF-2) indicating income, insurers do not seek production of the applicant’s bank records, (which might be considered to be an unduly intrusive invasion of privacy). However, in this case, Ms. Kuan has admitted that the employer signing the form is her brother-in-law. In addition, she is stating that she happened to start working for this employer almost exactly four weeks prior to the accident. Under these circumstances, where the person signing the Employer’s Confirmation is not at arms’ length and the period of employment is very short, other independently verifiable evidence becomes important. Since Ms. Kuan claims that she received payment through direct deposits rather than cheques, Ms. Kuan’s bank records become relevant.

As stated above, an arbitrator has a wide discretion to order production of documents that are relevant and not subject to privilege. Should an arbitrator also look at whether the probative value of bank records outweighs the invasion of the applicant’s privacy rights? On the one hand, early and full disclosure clearly assists in resolving cases. In the course of making an accident benefits claim, applicants routinely waive privacy rights in areas such as their medical records, if those records are relevant to determining the issues in dispute. On the other hand, if applicants’ bank records are questionably or minimally relevant, I would be hesitant to order their production, given their inherently private nature.

In this case, Ms. Kuan has not provided any independently verifiable evidence to support her claim for income replacement benefits. She has advised that she was paid by means of direct deposits at her bank. Under these circumstances, I find that her bank records for the period two months before and two months after the accident (from March 26 to July 26, 2006) are relevant and order them produced. Kingsway only sought production of Ms. Kuan’s bank records for this period, and I agree that it is the minimum period of time that would be of assistance in this case.

March 28, 2008

Anne Sone Arbitrator

Date

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

Neutral Citation: 2008 ONFSCDRS 50

FSCO A07-002341

BETWEEN:

TSAI HSIAO KUAN

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 General Insurance Company produce to Ms. Kuan its adjusters’ notes and records up to the date of her application for mediation.

2. Ms. Kuan produce to Kingsway General Insurance Company her bank records from March 26 to July 26, 2006.

March 28, 2008

Anne Sone Arbitrator

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule - Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
2. 2(FSCO A07-001566, March 4, 2008).
3. 3(OIC P-012407, November 16, 1995) at page 5.
4. 4(FSCO P99-00009, May 2, 2000).
5. 5(FSCO A00-000522, March 12, 2001) at page 14. See also Wilkerson and Allianz Insurance Company of Canada (FSCO A03-000753) and Halford and Allstate Insurance Company of Canada (FSCO A04-001379, April 27, 2005).
6. 6(FSCO A07-001061, February 12, 2008).