Qadeer Osmani v. Economical Mutual Insurance Company, 2011 ONFSCDRS 90

Financial Services Commission des

Commission services financiers

of Ontario de l’Ontario

Neutral Citation: 2011 ONFSCDRS 90

FSCO A10-001951

BETWEEN:

QADEER OSMANI

Applicant

and

ECONOMICAL MUTUAL INSURANCE COMPANY

Insurer

DECISION ON A PRELIMINARY ISSUE

MOTIONS FOR DISCLOSURE

Before: Arbitrator Denise Ashby

Heard: June 24, 2011

Appearances: Anu Malhotra for Mr. Osmani

Ashu Ismail for Economical Mutual Insurance Company

ISSUES:

The Applicant, Qadeer Osmani, was involved in an incident on March 9, 2009. He applied for statutory accident benefits from Economical Mutual Insurance Company (“Economical”), payable under the Schedule.¹ Economical denied payment. The parties were unable to resolve their disputes through mediation, and Mr. Osmani 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 motion hearing are:

Mr. Osmani:

1. Is Economical required to disclose to Mr. Osmani the following:

(a) All log notes, memoranda, correspondence and policy manuals from March 9, 2009 to February 15, 2011, the date of the pre-hearing;

(b) Legal opinion letters;

(c) Reserves;

(d) Investigations related to Mr. Osmani’s claim save and except the engineer’s report previously produced; and

(e) All communications with experts and third parties,

pursuant to Rule 32 of the Dispute Resolution Practice Code?

2. Is Economical required to provide Mr. Osmani with particularized schedules of documents setting out the documents which it is prepared to produce, those for which a partial privilege is claimed and those for which privilege is claimed?

Economical:

1. Is Mr. Osmani required to disclose:

(a) His complete Ontario Works file;

(b) The complete RBC insurance file; and

(c) The clinical notes and records of his family physician, Dr. Singh,

pursuant to Rule 32 of the Dispute Resolution Practice Code?

Result:

Mr. Osmani:

1. Economical shall produce Mr. Osmani’s entire accident benefits file compiled from March 9, 2009 to February 15, 2011, save and except those notes, documents, correspondence or materials for which Economical claims privilege. If Economical claims privilege in respect of any of the foregoing it shall within 30 days of the date of this decision serve upon Mr. Osmani and file with the Commission a particularized schedule describing the document or documents and the privilege claimed.

If Economical has conducted surveillance it shall make its election regarding its intention to rely on the surveillance at the hearing within 30 days of the date of this decision. If Economical elects to rely on the surveillance, it shall disclose the surveillance and supporting information set out in Rule 40 of the Dispute Resolution Practice Code within 30 days.

2. Economical shall produce its policy manuals with respect to the adjusting of its files.

3. Economical is not required to produce legal opinion letters prepared in respect of Mr. Osmani’s claim.

4. Economical is not required to disclose the reserves attributed to Mr. Osmani’s claim or policy manuals relating to the setting of reserves.

Economical:

1. Mr. Osmani shall, within 30 days of this decision, sign a release authorizing his family physician, Dr. Singh, to produce Mr. Osmani’s clinical notes and records from March 9, 2008 and ongoing to 30 days prior to the hearing date to Economical. In the alternative, Mr. Osmani shall obtain those clinical notes and records and provide them to Economical.

2. Mr. Osmani shall, within 30 days of this decision, sign a release authorizing RBC to produce its file in respect of Mr. Osmani’s claim arising from the incident on March 9, 2009. The release shall specify that any information relating to persons other than Mr. Osmani shall be redacted. In the alternative, Mr. Osmani shall obtain the file and release it to Economical.

3. Mr. Osmani shall, within 30 days of this decision, sign a release authorizing the Region of Peel to release the date upon which he applied for benefits pursuant to the Ontario Works Act and the reasons for his application. The release shall specify that any information relating to persons other than Mr. Osmani shall be redacted. In the alternative, Mr. Osmani shall obtain the information from the Region of Peel and release it to Economical.

PROCEDURAL RULINGS:

Adjournment of Proceeding:

At the motion hearing, Mr. Osmani sought to have the proceeding adjourned to permit him an opportunity to cross-examine Ryan Kirshenblatt, Barrister and Solicitor, on his affidavit sworn June 16, 2011. Mr. Osmani referred to paragraphs 21 and 22 of Mr. Kirshenblatt’s affidavit as follows:

21 On April 12, 2010, Kodsi Engineering sent Ms. Rebecca Carley of Economical an addendum to its original report dated September 17, 2009. Based on evidence, statements and photographs, Kodsi Engineering has concluded that the accident did not occur as described by the applicant and his two passengers. Attached as Exhibit “Q” to this my affidavit is a copy of the Kodsi Engineering reports dated April 12, 2009 and September 17, 2009.

22 I am advised and do believe that Rebecca Carley is a bodily injury adjuster with Economical. This is a separate department from the accident benefits department. I am advised that the engineering reports were prepared in response to a claim being made against the applicant’s insurance policy for unidentified motorists’ coverage. In addition, I am advised that when it was determined that the accident did not happen as described, the engineering reports and only the engineering reports were shared with the accident benefits department of Economical.

I denied Mr. Osmani’s request on the basis that Mr. Kirshenblatt’s affidavit was one of information and belief and he had no actual knowledge of the release of the engineering report to the Accident Benefits department. Therefore, Mr. Kirshenblatt could not assist Mr. Osmani in determining the extent to which there was any breach of his privacy rights. My order was without prejudice to Mr. Osmani seeking to have the reports excluded from the hearing on the basis that they were improperly released to the Accident Benefits department.

Preliminary Issue Hearing:

At the pre-hearing held on February 15, 2011, Economical advised that it was denying the benefits on the basis that the accident did not occur as described by Mr. Osmani. Economical relied on two engineering reports, the latest of which was issued in April 2010. These had not been disclosed to Mr. Osmani. Economical sought to have the issue dealt with as a preliminary issue.

I am not persuaded that a preliminary issue hearing would provide the most expeditious resolution of the disputes between the parties. The manner in which the incident occurred is a factual dispute that can best be dealt with at the hearing.

EVIDENCE AND ANALYSIS:

Background:

Mr. Osmani submits that on March 9, 2009, he, his father-in-law and brother-in-law were travelling on Highway 427 when an unidentified truck hit the rear of his vehicle forcing him to lose control. Following the impact, he drove his vehicle to a police station and reported the damage.²

Mr. Osmani claims the injuries arising from the incident resulted in impairments which have prevented him from returning to work and engaging in his pre-accident housekeeping and home maintenance. His impairments have also necessitated medical treatment and attendant care.

Economical denies that Mr. Osmani is entitled to any benefits on the basis that he misrepresented the manner in which the accident occurred.

Law:

Rule 32.3 of the Dispute Resolution Practice Code (DRPC) provides that:

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 requires parties to serve on the opposing party all documents, reports and assessments to be introduced at hearing at least 30 days prior to the first day of hearing.

Disclosure 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.³

Mr. Osmani:

Mr. Osmani submits that in the two and a half years since the accident, Economical has failed to fairly adjust his claim. It has made multiple requests for information that were unnecessary for it to establish the quantum of his income replacement benefit and to determine his eligibility for the other benefits Mr. Osmani claims. Economical’s failure to pay the benefits to which he is entitled has caused him great emotional distress and financial hardship.

At the pre-hearing, Economical challenged Mr. Osmani’s claim as fraudulent. Economical did so having failed to disclose the engineering reports upon which it based its assertion notwithstanding the latest of the reports was issued in April 2010.

Mr. Osmani submits that Economical’s conduct in obtaining the engineering reports from a department within Economical which is required to be separated by a firewall from the Accident Benefits section is improper and a potential breach of Mr. Osmani’s privacy rights.

Economical has retained three law firms since the incident. Mr. Osmani submits that this is unusual and necessitates broader disclosure to permit him to know the case he must meet and establish the particulars of his claim for a Special Award. Therefore, Mr. Osmani seeks disclosure of correspondence between Economical and its counsel.

Mr. Osmani also submits that Economical’s failure to adequately adjust the file leads to a reasonable inference that the setting of the reserves may have impacted the manner in which the file was adjusted. This provides a basis for requiring Economical to disclose the reserves set in respect of this claim.

Economical submits that where it is investigating a fraudulent claim, delay is permitted. As well, there is no reasonable basis for extending the disclosure of log notes beyond the date upon which an application for mediation is filed, as is the practice at the Commission. This is the date which is generally accepted as the date upon which the intention to litigate was crystallized.

I agree with Economical that presently the Commission’s usual practice requires insurers to produce its adjuster’s file to the date of the filing of the Application for Mediation except where an insurer establishes a claim for privilege. This bright line recognizes that there is no formal discovery process at the Commission and its proceedings are mandated to provide expeditious and cost effective resolution of disputes. Regrettably, the bright line has given rise to an effective presumption of privilege. I find this is inconsistent with consumer protection which is the purpose of the legislation⁴ and the obligation of a first-party insurer to act in utmost good faith.⁵

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.”⁶

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 the information it seeks to withhold is not reasonably relevant to the proceedings or is protected by privilege.

Therefore, Economical shall produce Mr. Osmani’s entire accident benefits file compiled from March 9, 2009 to February 15, 2011, except those portions for which Economical claims privilege. If Economical claims privilege, within 30 days of the date of this decision it shall serve upon Mr. Osmani and file with the Commission a particularized schedule describing the document or documents and the privilege claimed.

If Economical has conducted surveillance it shall make its election regarding its intention to rely on the surveillance at hearing within 30 days of the date of this decision. If Economical elects to rely on the surveillance, it shall comply with the disclosure provisions of Rule 40 of the Dispute Resolution Practice Code within 30 days.

I also find that the manuals compiled by an insurer are relevant to determining whether an adjuster has acted in a manner consistent with an insurer’s policies. Any proprietary interest an insurer might have is trumped by its insured’s interest in knowing that his or her claim has been adjusted in a manner consistent with the insurer’s policies.

I am not persuaded that the failure of Economical to disclose its theory of the case prior to the pre-hearing leads to an inference that the setting of the reserves influenced the manner in which the file was adjusted. Rather, the more likely inference is Economical’s theory that the accident was staged was the dominant factor in setting the reserve. Therefore, Economical is not required to disclose either the manuals relevant to the setting of reserves or the reserves.

It is unusual for an insurer to retain a number of firms during the course of a claim. However, this does not provide grounds for breaching the presumption that communications between a client and its counsel are privileged. I am not persuaded that Mr. Osmani has demonstrated that Economical’s conduct requires that the sanctity of solicitor and client privilege should be breached. Therefore, Economical is not required to release its correspondence with its counsel to Mr. Osmani.

Economical:

I am not persuaded that Mr. Osmani should be required to produce his physician’s clinical notes and records beyond the usual one year prior to the accident. Notwithstanding Economical had the benefit of Mr. Osmani’s OHIP records, it failed to provide a foundation for expanding the disclosure period.

I am persuaded that the date upon which Mr. Osmani applied for Ontario Works benefits and the reasons for his application are relevant to his claim for an income replacement benefit. Therefore, he shall authorize the Region of Peel to release this information. However, the release shall clearly indicate that information relating to persons other than Mr. Osmani shall be redacted.

Mr. Osmani, his father-in-law and brother-in-law obtained extended insurance from RBC prior to the accident. RBC payed Mr. Osmani the full policy limit. Economical submits that this file is relevant to the income replacement issue. Mr. Osmani responds that the file contains information about third parties unrelated to these proceedings. Further, as the limit of the policy was paid out, Economical has all the relevant information.

I find that the RBC file is relevant to the issues to be arbitrated. Therefore, Mr. Osmani shall authorize the release of his file. The release shall contain a statement that information relating to persons other than Mr. Osmani shall be redacted.

EXPENSES:

The parties made no submissions with respect to expenses. I defer the issue of expenses of this motion hearing to the hearing arbitrator.

October 14, 2011

Denise Ashby

Arbitrator

Date

Financial Services Commission des

Commission services financiers

of Ontario de l’Ontario

Neutral Citation: 2011 ONFSCDRS 90

FSCO A10-001951

BETWEEN:

QADEER OSMANI

Applicant

and

ECONOMICAL MUTUAL 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. Economical shall produce to Mr. Osmani its entire accident benefits file compiled from March 9, 2009 to February 15, 2011, except for those portions to which Economical claims privilege. If Economical claims privilege, it shall within 30 days of the date of this decision serve upon Mr. Osmani and file with the Commission a particularized schedule describing the document or documents and the privilege claimed.

If Economical has conducted surveillance, it shall make its election regarding its intention to rely on the surveillance at hearing within 30 days of the date of this decision. If Economical elects to rely on the surveillance, it shall disclose the surveillance and supporting information set out in Rule 40 of the Dispute Resolution Practice Code within 30 days.

2. Economical shall produce to Mr. Osmani its policy manuals with respect to the adjusting of its files.

3. Mr. Osmani shall, within 30 days of this decision, sign a release authorizing his family physician, Dr. Singh, to produce his clinical notes and records from March 9, 2008 and ongoing to 30 days prior to the hearing date to Economical. In the alternative, Mr. Osmani shall obtain those clinical notes and records and provide them to Economical.

4. Mr. Osmani shall, within 30 days of this decision, sign a release authorizing RBC to produce its file in respect of Mr. Osmani’s claim arising from the incident on March 9, 2009. The release shall specify that any information relating to persons other than Mr. Osmani shall be redacted. In the alternative, Mr. Osmani shall obtain the file and release it to Economical.

5. Mr. Osmani shall, within 30 days of this decision, sign a release authorizing the Region of Peel to release the date upon which he applied for benefits pursuant to the Ontario Works Act and the reasons for his application. The release shall specify that any information relating to persons other than Mr. Osmani shall be redacted. In the alternative, Mr. Osmani shall obtain the information from the Region of Peel and release it to Economical.

October 14, 2011

Denise Ashby

Arbitrator

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule - Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
2. 2Factum of the Applicant, Tab 1
3. 3General Accident Assurance Co. v. Chrusz, 1999 CanLII 7320 (ON CA), 45 O.R.(3d)321, 124
4. 4Smith v. Co-operators General Insurance Co., 2002 SCC 30, [2002] 2 S.C.R. 129 (S.C.C.)
5. 5Whiten v. Pilot Insurance Co. (1999), 1999 CanLII 3051 (ON CA), 42 O.R.(3d)641(Ont. C.A.)
6. 6(FSCO A06-002177, October 23, 2007), pages 11 and 12