Neutral Citation: 2013 ONFSCDRS 13

FSCO A11-002794

BETWEEN:

BEATRICE JONES

Applicant

and

JEVCO INSURANCE COMPANY

Insurer

DECISION ON A MOTION

Before: Arbitrator Suesan Alves

Heard: By telephone conference call on October 23, 2012

Written submissions were received by: September 25, 2012

Appearances: John Richard Thomson and Tracy Cresswell for Ms. Jones Marlett Dobson for Jevco Insurance Company

Issues:

Ms. Jones was injured in a motor vehicle accident on December 14, 2005 and claimed statutory accident benefits from Jevco payable under the Schedule.¹ She sought production of Jevco’s file.

On August 24, 2012, I determined that the entire file in Jevco’s possession in relation to the accident was relevant to the issues in dispute and ordered it produced, subject to a determination of the Insurer’s claims of privilege. The nature of Jevco’s claims for privilege were not identified and there was little in the way of a factual foundation to support those claims. In light of the caselaw, I requested further materials on these points, directing that any factual foundation to support the claims for privilege should be established by Affidavit evidence.

On this motion, the Insurer asserted claims of solicitor-client privilege with respect to three documents; litigation privilege with respect to thirteen documents; and lack of relevance with respect to nine documents. At times more than one claim was asserted with respect to a document.

Jevco also submitted that in May 2011, it had inadvertently provided the Applicant with a copy of an investigation report from CGI. Jevco submitted that the CGI report was privileged and sought to maintain privilege over that document.

The Applicant disagreed with Jevco’s claims of privilege. She submitted that Jevco’s entire file should be produced; that Jevco waived privilege in 2011 when it produced the CGI investigation report; and that the Insurer did not comply with the production Order of August 24, 2012. She also sought production of reserve information.

The issues are:

Is Jevco required to produce the documents in its file over which it asserts claims of solicitor-client privilege, litigation privilege or which it submits are not relevant?
Can Jevco maintain litigation privilege with respect to the investigation report it provided the Applicant in May 2011?
Is Jevco obliged to produce reserve information?
Did Jevco comply with the Order of August 24, 2012?

Result:

Jevco’s claims for solicitor-client privilege, litigation privilege and lack of relevance all fail.
Jevco has not established privilege with respect to the CGI investigation report in question, and with respect to the other CGI investigation reports.
Jevco is obliged to provide documents which show the date(s) on which reserves were set on this file in relation to statutory accident benefits, with respect to whom, and the dates on which those reserves were adjusted. Jevco is not obliged to provide the amounts of the reserves or the basis on which those reserves were adjusted.
Jevco shall produce a further and better copy of the file to the Applicant by February 5, 2013.

Background

Beatrice Jones sustained serious injuries as a result of a motor vehicle accident on December 14, 2005. She claims statutory accident benefits from Kingsway, now Jevco, the insurer of the other vehicle involved in the accident, under s. 268 (2) iii of the Insurance Act. Ms. Jones submits that this is her only recourse, as the vehicle she was driving was uninsured, she was at fault in the accident and did not advance a tort claim.

Ms. Jones notified Jevco of the circumstances giving rise to the accident approximately four years after the accident. However, as she was obliged to do so within 7 days of the accident, Jevco submits Ms. Jones is barred from proceeding to arbitration by section 55 of the Schedule.

Ms. Jones alleges that she has a reasonable excuse. She also alleges that Jevco had full knowledge of the accident and knew or ought to have known that it would be the primary insurer for accident benefits, when it received the CGI investigation report dated December 21, 2005, the 7th day after the accident. Ms. Jones further submits that Jevco’s knowledge at that time was sufficient to trigger its obligation to provide her with information about available statutory accident benefits and appropriate forms to claim those benefits.

A preliminary issue hearing is scheduled to determine these questions. That hearing is adjourned, pending this ruling with respect to the production of the insurer’s file documents, and pending cross-examination of the adjuster on his Affidavit filed in relation to the preliminary issue hearing.

Analysis and findings

1. Solicitor-client privilege

Jevco asserted solicitor-client privilege with respect to Item 3, an adjuster’s note of June 26, 2012; Item 12, an investigation report prepared by Mustang Investigations dated August 18, 2010 and Item 13, an investigation Report prepared by Centura Investigation Agency dated March 25, 2011. For the following reasons, I conclude that Jevco’s claim for solicitor-client privilege fails with respect to these documents.

Law

In Intact Insurance Company v. 1367229 Ontario Inc., 2012 ONSC 5256, Justice Beth Allen summarized the case law with respect to solicitor-client privilege, also known as lawyer/client privilege as follows:

“[14] The basic principles that govern lawyer/client privilege are commonly known. The party seeking the privilege has the onus of showing on a balance of probabilities an evidentiary basis for the privilege [General Accident Assurance Co. v. Chrusz, 1999 CanLII 7320 (ON CA), [1999] O.J. No. 3291, at para. 95, (Ont. C.A.)]. It is well known that privilege does not attach to all communications or documents that pass between a lawyer and their client. The privilege attaches only when legal advice is sought from or provided by the client’s lawyer [Davies v. American Home Assurance Co. (2002), 2002 CanLII 62442 (ON SCDC), 60 O.R. (3d) 512, at para. 22, (Ont. S.C.J.-Div. Ct.)].

15The party seeking the privilege must show on a balance of probabilities that the documents in question are (a) a communication between a solicitor and client for the purpose seeking or giving legal advice and (b) the parties intended it to be confidential [Belgravia Investments Ltd. v. Canada, [2002] F.C.J. No. 870, para. 48, (F.C.T.D.)].

21Privilege does not attach to all communications between a lawyer and their client. A party seeking privilege cannot simply cloak notes, documents or communications with privilege merely because a lawyer was involved or handled the documents [Davies v. American Home, supra, para. 22]. Intact provided no details as to the nature of the lawyer’s involvement − no proof that the memoranda and emails that are the subject of the refusals establish the giving or receiving of legal advice….

22A claim of privilege will not be established by merely asserting it. With respect to the claim to lawyer/client privilege on portions of the January 20, 2009 memo /minutes and the claims file, Intact was required at a minimum to provide a sworn affidavit or viva voce evidence setting out the basis of the claim to lawyer client privilege.”

I find that Jevco failed to establish solicitor-client privilege with respect to Items 12 and 13, because of a lack of evidence that counsel was retained as of the dates of those documents. Although given the opportunity to provide evidence by Affidavit, I have no such evidence. My Order of August 24, 2012 stated in part: “Any facts necessary to establish the foundation of the privilege should be established by Affidavit, and the list of documents annexed as one or more Exhibits.”

The earliest indication of the involvement of counsel for the Insurer is contained in the Applicant’s material, namely, a letter dated October 18, 2010, on Brown & Korte letterhead, advising that the Insurer had retained that firm to conduct an examination of Ms. Jones under oath. I find that this letter does not reflect a retainer for the purpose of providing legal advice.

According to the Report of Mediator dated July 20, 2011, Jevco was represented at the mediation by an adjuster/claims consultant. In the arbitration file, there is a letter dated September 20, 2011, addressed to counsel for the Applicant, and copied to the Financial Services Commission of Ontario which states “We have been retained by Jevco Insurance Company to represent their interests in this matter and I enclose our Response by Insurer to an Application for Arbitration.” I accept that counsel retained to represent Jevco’s interests in an arbitration was retained for the purpose of providing legal advice. The claims for solicitor-client privilege before September 20, 2011 fail.

There is only one document after September 20, 2011, for which solicitor-client privilege is claimed. It is an adjuster’s note “re discussions with counsel re preliminary issue hearing” which is dated June 26, 2012. I have no Affidavit evidence that this or the other two documents in question were communications between a solicitor and a client for the purpose of giving legal advice, nor do I have evidence that the solicitor and client intended the document to remain confidential. For these reasons all of Jevco’s claims for solicitor-client privilege fail.

2. Litigation Privilege

Jevco claims litigation privilege from the date of the accident. Counsel for Jevco submitted that given the report of a possible fatality, it reasonably anticipated litigation from the date of the loss. I reject that submission due to a lack of evidence and because it conflicts with the insurer’s duty of good faith in the conduct of an investigation.

A similar assertion was made in the case of Intact Insurance Company v 1367229 Ontario Inc.² That litigation arose out of the Sunrise Propane explosion in Toronto which resulted in loss of life and extensive property damage. In that case, Intact submitted that “with such a momentous explosion it stands to reason that litigation would be contemplated from August 2008 and hence during the investigation period until the refusal on May 5, 2009.”

That submission was roundly rejected by Master Graham and on appeal by Justice Allen, due to a lack of evidence to support the submission and because the submission conflicted with the insurer’s duty of good faith in the conduct of an investigation.

The duty of good faith in the assessment and investigation phase of the claim means that an insurer cannot be said to have reasonably anticipated litigation until it determines questions of coverage and liability. As Justice Allen stated: “Put another way, good faith during the claims investigation phase requires an open mind or neutrality on the part of the insurer, not an orientation toward litigation.”³

In Intact, Justice Allen also summarized the law with respect to litigation privilege as follows.

26A party seeking litigation privilege is required to establish (a) that litigation was contemplated and (b) that the documents for which privilege is sought were created for the dominant purpose of litigation [Mamaca (Litigation Guardian of) v. Coseco Insurance Co, 2007 CanLII 9890 (ON SC), [2007] O.J. 1190, at paras. 6, 14, 16, 17, 22 and 23 (Ont. S.C.J.) and Kennedy v. McKenzie and Tischler, 2005 CanLII 18295, at paras. 20 and 23 (Ont. S.C.J)].

The onus is on the party claiming litigation privilege to lay an evidentiary foundation for that privilege. The best evidence would be an affidavit from the claims handler as to when she reasonably anticipated that litigation was likely and why her ongoing investigation and document creation was to assist in the defence of the litigation. (Mamaca, supra, at paragraph 15)

Jevco provided no evidence with respect to its assertions of litigation privilege, though given the opportunity to do so. I find that Jevco failed to establish that litigation was contemplated as of the date of the accident. I also find that Jevco failed to establish that litigation was the dominant purpose for the creation of the documents over which it claims litigation privilege.

Both parties made submissions with respect to the “bright line” approach concerning litigation privilege articulated in the case of Campeau and Liberty Mutual Insurance Company, (FSCO A00-000522, March 12, 2001). As I have already determined the question, I do not believe it is necessary to also address the question of litigation privilege using that approach.

3. Lack of relevance

In a ruling on August 24, 2012, I determined that the entire file in Jevco’s possession in relation to the motor vehicle accident of December 14, 2005 was relevant to the issues in dispute and ordered Jevco to produce its entire file, subject to a determination of its claims of privilege.

The Insurer submitted that items 5, 6, 7, 8, 9, 10, 11, 14, and 15 were irrelevant. The difficulty with this submission is that it was made following an Order that the entire file was relevant. As such the submission is inappropriate and I reject it.

4. Can Jevco maintain litigation privilege over the CGI report?

The Applicant requested a copy of Jevco’s file most recently in February 2011 and in April 2011. Jevco provided a copy of the file consisting of 2425 pages on May 4, 2011. Amongst the documents it produced was a copy of the CGI report dated December 21, 2005. Jevco submits that this document was privileged, disclosed by inadvertence, and seeks to maintain litigation privilege.

For the reasons given above, Jevco has not established that this document was privileged. As noted earlier, the claims investigation phase requires an open mind or neutrality on the part of the insurer, not an orientation toward litigation. Jevco also failed to provide evidence which would establish that the document was disclosed through inadvertence.

There appear to have been several investigation reports produced by CGI under their file #755-IB-754/5456 and Jevco file #749-63612/234. As Jevco has not established that these reports are privileged, it is obliged to produce all of the CGI investigation reports and enclosures to Ms. Jones.

Did Jevco produce its entire file as ordered?

Counsel for the Applicant submitted that Jevco failed to comply with the Order on August 24, 2011 to produce its entire file in relation to the December 14, 2005 accident, subject to a determination of its claims for privilege. The Applicant points to three concerns in this regard.

Jevco voluntarily produced a copy of its file to counsel for the Applicant at an earlier point in time under cover of a letter dated May 4, 2011. The Applicant submitted that the documentation produced pursuant to my order of August 12, 2012, was 107 pages less than what Jevco produced on a voluntary basis, at an earlier point in time in May 2011. The Applicant produced a copy of the last page of the documents produced on both occasions to illustrate the discrepancy.

Counsel for the Insurer submitted that she had done her best in reviewing the file for production purposes and speculated that solicitor-client privileged documents might account for the 107 page difference.

Counsel also noted that of the log notes produced following my order there are two which state on their face that they have been edited. However, no claim for privilege was asserted with respect to the content of those redactions.
Counsel for the Applicant submitted that Jevco produced a copy of an Autoplus search in relation to the Applicant, but not one in relation to her husband. Ms. Jones drove a vehicle owned by her husband, which was uninsured. An Autoplus search provides an individual’s automobile policy and claims history.⁴

In order to deny Ms. Jones benefits based on a section 30 exclusion, that she drove an uninsured vehicle, Jevco would likely have obtained this information in relation to Mr. Jones. In addition Jevco raised a priority dispute when the passenger in Ms. Jones’ vehicle asserted claims for statutory accident benefits. It is also likely that Jevco would have obtained such documentation for that reason. Jevco should search its records again in this regard. If the documentation does not exist, it should inform the Applicant in writing that this is the case.

I am satisfied that there is a discrepancy. I have no way of determining what may be missing from the file produced in 2012. It is possible that the documents which the Insurer withheld, based on its claims for privilege, make up much or all of the 107 page difference. In these circumstances, Jevco is obliged to search its records and produce a further and better copy of its file to the Applicant by February 5, 2013.

Is the Applicant entitled to reserve information?

The Applicant sought production of reserve information in an oral motion. Jevco’s position is that it conducted an investigation into liability and the bodily injury aspects of the case; not accident benefits.

Generally, reserve information has been considered to be irrelevant. The amounts of the reserves have also been held to be privileged. Uka and Aviva Canada (FSCO P08-00036, July 16, 2009). ⁵ In these cases, production was refused of the amount of the reserves or the basis on which reserves were set or adjusted.

One of the issues raised by the Applicant in this case is when the Insurer first knew that it was the statutory accident benefit insurer for the Applicant. The author of the December 21, 2005 CGI report recommended that as there was only a binder policy in effect on the vehicle Ms. Jones was driving, that the insurer of that vehicle, “Echelon General Insurance Company be contacted in order to obtain the company claim number and policy number regarding coverages and deductible.” In my view, given the allegations by the Applicant that the Insurer either knew that it would be the primary insurer for accident benefits or that it was wilfully blind to the question, information about reserves is relevant. By that I mean documents which show whether and when reserves were set on this file in relation to accident benefits and with respect to whom, and the dates on which they were adjusted, without disclosing the amounts of the reserves or the basis on which the reserves were adjusted.

For the reasons given earlier, Jevco did not establish litigation privilege. In this case, one of the adjuster’s notes produced, which states on its face that it has been edited, states “set reserve moderate to serious.” On the face of it, Jevco would therefore have waived privilege in this regard. For these reasons Jevco is obliged to produce documents which show whether and when reserves were set on this file in relation to accident benefits, with respect to whom, and the dates on which they were adjusted, without disclosing the amounts of the reserves or the basis on which the reserves were adjusted.

Conclusion

In the result, Jevco is to produce a further and better copy of the entire file in its possession in relation to the December 14, 2005 accident by February 5, 2013. In the interest of clarity, that file shall include: all the documents with respect to which Jevco claimed solicitor-client privilege, litigation privilege and irrelevance on this motion; adjusters’ notes redacted only to delete the amount of reserves or the basis on which they were set; a copy of the Autoplus search in relation to Martin Jones, the husband of the Applicant, or, if the search was not requested, written advice that was the case; all of the CGI investigation reports together with the enclosures; documents which show the date(s) on which reserves were set on this file in relation to statutory accident benefits, with respect to whom, and the dates on which those reserves were adjusted. Jevco is not obliged to provide the amounts of the reserves or the basis on which those reserves were adjusted.

January 21, 2013

Suesan Alves Arbitrator

Financial Services Commission of Ontario