Financial Services Commission of Ontario

Neutral Citation: 2011 ONFSCDRS 71 FSCO A09-002774

BETWEEN:

BAILEY PHILLIPS Applicant

and

AVIVA CANADA INC. Insurer

PRE-HEARING DECISION

Before: Susan Sapin Heard: By written submissions concluded January 31, 2011 Appearances: Timothy P. Boland for Ms. Phillips Grant R. Dow for Aviva Canada Inc.

Background and Issues:

The Applicant, Bailey Phillips, was injured in a motor vehicle accident on December 30, 1994, when she was 5 years old. She applied for and received statutory accident benefits from Aviva Canada Inc. (“Aviva”), payable under the Schedule.¹ Aviva refused to pay later claims for education disability benefits after November 10, 2005, or a loss of earning capacity benefit (“LECB”) after November 10, 2007. The parties were unable to resolve their disputes through mediation, and Ms. Phillips 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 October 26, 2010, Ms. Phillips sought an order that Aviva produce items from its complete insurer’s file relevant to the benefits in dispute and created after the date she filed her Application for Mediation (February 12, 2008), including adjuster’s log notes, memoranda, correspondence, etc, but excluding documents protected by litigation privilege.²

Aviva opposes the order on the basis that it had completed its claims handling by the time the Application for Mediation was filed, and Ms. Phillips has raised no basis or grounds “ . . . as to why the insurer’s file after the Application for Mediation is relevant or not subject to litigation privilege.” Aviva further submitted that it is a longstanding practice at the Commission of treating the Application for Mediation as the point in time at which the parties would be contemplating litigation, and litigation privilege would apply based on the presumption that material created after that date was created for the dominant purpose of litigation.

Result:

I find Aviva is not required to produce the complete adjuster’s file created after February 12, 2008, the date Ms. Phillips filed her Application for Mediation. I communicated my decision to the parties by letter dated June 30, 2011, with reasons to follow.

Reasons:

The parties’ obligations and arbitrators’ authority with respect to exchange and production of documents before a pre-hearing stem from Rule 32 of the Dispute Resolution Practice Code, the relevant portions of which read:

Subject to the time lines under Rule 39, the parties have an ongoing responsibility to ensure the prompt and complete exchange of documents that are reasonably necessary to determine the issues being arbitrated, including updates to the information previously exchanged and any additional documents obtained. 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.

Rule 39.3(a) further provides that no evidence will be admitted at a hearing that “would not be admissible in a court by reason of any privilege under the law of evidence.”

According to the Code, reasonable relevance and privilege under the law of evidence are the two main criteria for determining whether a document should be produced. As pointed out by Arbitrator Bujold in Ghaedsharagy and Kingsway General Insurance Company³, Commission jurisprudence has evolved since these criteria were first considered in Allstate Insurance Company of Canada and Al-Obaidi⁴ and Leitgeb and Allstate Insurance Company of Canada⁵, (two cases relied on by Aviva). “The decision in Campeau and Liberty Mutual Insurance Company⁶ provides an in-depth review of this evolution and probably best marks when the evolving principles became generally accepted practice.”⁷

I agree with Arbitrator Bujold that it is now well established practice for insurers to produce their entire accident benefits file, “. . . 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.” ⁸

The “routine” production of an insurer’s file (subject to claims for privilege) is based on the presumption, articulated in Campeau and other decisions, that a significant portion of the insurer’s file is going to be relevant to the entitlement issues in dispute, as “the whole raison d’etre of the insurer’s adjusting file is to respond to the applicant’s no-fault claim . . .” ⁹. It is also based on the reality that “there is no cost-effective and efficient process to determine the relevance of documents in the insurer’s file.”

Requests for production of documents in the insurer’s accident benefits file prepared after the Application for Mediation was filed are not the norm at the Commission, and should be determined on a case-by-case basis with regard to the Commission’s mandate to provide a streamlined, expeditious and cost-effective dispute resolution alternative to the courts, which have more particular and extensive rules and procedures governing disclosure, such as affidavits of documents, cross-examination of same, vetting of material by judges, discovery, etc. Although arbitrators have the authority to require similar procedures where warranted and have done so in the past, these are costly and time-consuming steps inconsistent with the Commission’s mandate, and should continue to be the exception rather than the norm. If Ms. Phillips wants material from Aviva’s file created after she filed her Application for Mediation, I find she must first put forward some reasonable basis or foundation that material in the file would be relevant.

I find Ms. Phillips has provided no evidence or compelling argument to persuade me that there would be any material relevant to her disputed accident benefit claims in Aviva’s file, that were created post-mediation. Aviva submits, and I accept, that it had completed its claims adjusting by the time the mediation application was filed. It submitted that:

“in the Application for Arbitration materials submitted by the Applicant, there is a Schedule A listing 94 documents, the most recent of which is dated March 16, 2006 or almost two years before the February 12, 2008 dated Application for Mediation. With regard to the Insurer’s material, the most recent medical assessment and the one which disputes the Applicant’s entitlement to an education disability/loss of earning capacity benefit is the neuropsychological assessment report of WorkAble (Dr. Gates) dated October 11, 2007 or four (4) months before the Application for Mediation is dated.”¹⁰

Had Ms. Phillips submitted material in the form of health practitioner reports, requests for assessments, or new facts to Aviva for its consideration after she filed her Application for Mediation, Aviva would have been required to respond as part of its ongoing obligation to continue adjusting her claim, and documents created for that purpose would arguably be relevant and producible. However, Ms. Phillips did not tender such evidence and there is none to suggest there was any activity on the file until Ms. Phillips filed her Application for Arbitration. On that basis, I accept there is no potentially relevant material in Aviva’s file that I could order it to produce. As relevance has not been established, I find I am not required to consider Ms. Phillips’ request for an order that Aviva be required to list and describe documents for which it claims privilege.

I did consider the parties’ submissions on the question of litigation privilege, which highlighted the difference in procedure and practice between the Commission and the courts. The Commission’s practice is to treat the Application for Mediation as the point after which insurer’s records were likely prepared for the dominant purpose of litigation. I agree with the reasoning of Arbitrator Bujold in Ghaedsharagy about the purpose and scope of the presumption:

. . . 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 the 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.

The presumption is consistent with the Commission’s mandate to provide a streamlined, cost-effective alternative to the courts. It is not graven in stone. Nor do I find it inconsistent with the legal principle, that the burden lies on the party withholding documents to establish that they were privileged,¹¹ or with recent court decisions cited by Ms. Phillips, Trecartin v. Pilot Insurance Company¹², a 2010 decision of the Superior Court of Ontario, and Mamaca (Litigation Guardian of) v. Coseco Insurance Co.¹³ a Divisional Court decision which denied leave to appeal a Superior Court judge’s decision to uphold a Master’s decision requiring Coseco to produce documents it created after an application for mediation was filed.

These cases represent the general trend of the law in Ontario, as it applies to the courts, and appear to stand for the proposition that, as stated by Pitt J. in Mamaca, “there is ample authority for the application of a dominant purpose test that is not solely concerned with the date on which litigation was first reasonably contemplated,” and “. . . it is not in every case fair to presume that all subsequently prepared documents are covered by the assertion of litigation privilege.” I do not disagree with this principle. However, the obvious corollary to it would be that it is, in some cases, fair to presume that documents prepared after a certain date would be protected by litigation privilege.

The point at which litigation is first contemplated and privilege can be claimed, is a question of fact in each case, a principle the Commission recognizes but applies as an exception to its presumption and where facts and circumstances warrant. This approach is consistent with the Commission’s mandate to provide a streamlined and cost-effective alternative to the courts. Ms. Phillips did not persuade me that hers is a case where the scope of production should be shifted beyond the Application for Mediation.

EXPENSES:

The question of entitlement to expenses of this pre-hearing proceeding is remitted to the hearing arbitrator.

August 30, 2011

Susan Sapin Arbitrator

Financial Services Commission of Ontario

Neutral Citation: 2011 ONFSCDRS 71 FSCO A09-002774

BETWEEN:

BAILEY PHILLIPS Applicant

and

AVIVA CANADA INC. Insurer

ARBITRATION ORDER

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

1. Aviva is not required to produce to Ms. Phillips any material in its accident benefits file created after Ms. Phillips filed the Application for Mediation, February 12, 2008.

August 30, 2011

Susan Sapin Arbitrator

Footnotes

1. 1The Statutory Accident Benefits Schedule — Accidents after December 31, 1993 and before November 1, 1996, Ontario Regulation 776/93, as amended.
2. 2The parties agree that documents protected by litigation privilege need not be disclosed, and that it is well settled by the Supreme Court of Canada that for a document to be privileged it must have been created for the dominant purpose of litigation: Blank v. Canada (Minister of Justice) 2006 SCC 39, [2006] S. C. J. 39 at para 60.
3. 3(FSCO A07-001061, February 12, 2008). Arbitrator Bujold’s decision includes a comprehensive discussion of FSCO practice and procedure with regard to production.
4. 4(FSCO P99-00009, May 2, 1999), Appeal
5. 5(OIC P-012407, November 16, 1995), Appeal
6. 6(FSCO A00-000522, March 12, 2001)
7. 7Ghaedsharagy, p. 6
8. 8Ghaedsharagy, p. 8
9. 9Campeau, p. 14
10. 10Aviva’s written reply submissions.
11. 11As per Justice Doherty of the Ontario Court of Appeal in General Accident v. Chrusz 1999 CanLII 7320 (ON CA), [1999] O.J. No. 3291
12. 12Trecartin v. Pilot Insurance Company (court file no.: 03-2861, September 21, 2010). Also cited by Ms. Phillips were court decisions in Blank and General Accident v. Chrusz
13. 132008 CanLII 30312 (ON SCDC), [2008] O.J. No. 2508