Flavia Pelaccia v. Wawanesa Mutual Insurance Company, 2015 ONFSCDRS 65

Financial Services Commission des

Commission services financiers

of Ontario de l’Ontario

Neutral Citation: 2015 ONFSCDRS 65

FSCO A13-003113

BETWEEN:

FLAVIA PELACCIA

Applicant

and

WAWANESA MUTUAL INSURANCE COMPANY

Insurer

DECISION ON A MOTION

Before: Alan Mervin

Heard: By written submissions concluded November 12, 2014.

Appearances: J. John Vettese for Mrs. Pelaccia

Derek Yap for Wawanesa Mutual Insurance Company

Issues:

The issues in this motion are:

1. Is the Applicant entitled to production of the Insurer’s log notes from the date of loss, February 17, 2011, to March 7, 2013, the date the Application for Arbitration was filed?

Result:

1. The Applicant is entitled to the redacted Insurer’s log notes from the date of inception of the claim, to the date of the first Application for Mediation, November 17, 2011, which have already been produced.

2. The Applicant is also entitled to the redacted log notes from November 17, 2011 to March 7, 2013, the date of the filing of the Application for Arbitration.

BACKGROUND

The Applicant, Flavia Pelaccia, was injured in a motor vehicle accident on February 17, 2011. She applied for statutory accident benefits from Wawanesa Mutual Insurance Company (“Wawanesa”), payable under the Schedule.¹ Wawanesa refused to pay weekly income replacement benefits and attendant care benefits, as well as certain medical expenses claimed by the Applicant. The parties were unable to resolve their disputes through mediation, and Mrs. Pelaccia 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, the parties indicated that they had agreed on the production of requested documents; among the documents Wawanesa agreed to produce was its complete insurer’s file up to the date of the first Application for Mediation, redacted in the usual manner with respect to reserves, and other items protected by privilege.

The Applicant complains that the Insurer has never paid or calculated Income Replacement Benefits claimed by the Applicant and has not responded to claims with respect to certain treatment plans submitted. The Applicant also complains that there has been no response to repeated requests for the Insurer’s calculation of the quantum of Income Replacement Benefits.

On September 12, 2014, the Applicant received 9 pages of what purported to be the internal adjuster’s file, consisting of log notes and claim notes from the date the claim was opened until November 12, 2011, the date of receipt of the first Application for Mediation, redacted according to the Insurer, for reserves and portions of notes dealing with matters after the filing of the Application for Mediation. Nothing in the produced file pertains to the IRB claim or the disputed Treatment Plan of the Speech Therapy Centres of Canada.

The Applicant now seeks production of the complete adjuster’s file from the date of the accident, February 17, 2011 to the date of the filing of the Application for Arbitration.

More particularly, the Applicant in its submission suggests that, with respect to the internal file already provided covering the period from the date of loss to the date of the first Application for Mediation, November 17, 2011 “the internal file is extremely lacking and it is expected there is more to the internal file than was provided”.²

The Positions of the Parties

Applicant

Ms. Pelacchia seeks production of all log notes up to November 17, 2011, although the Insurer has produced what it claims to be the log notes for that period, redacted for privilege and reserves, that being the date of the first Application for Mediation that deals with issues in dispute in this arbitration. The Applicant implies that the log notes supplied by the Insurer to November 17, 2011 are incomplete.

The Applicant submits that review of the Adjuster’s internal file received shows that the file is limited and “ does not comprise key elements to Ms. Pelaccia’s claim such as correspondence, including but not limited to correspondence with insurer examiners, as well as treatment plans, benefit statements, etc. In addition, various sections of the internal file have been redacted without any explanation for same.”³

The Applicant therefore seeks production of the suspected missing documents (or an explanation as to their absence) and thereafter, production of all log notes relating to the issues identified in the Application for Mediation and the added issues, up to the date of filing the Application for Arbitration on March 7, 2013.

The Applicant suggests that the Insurer has never adjusted the claim for IRB’s, despite several written requests from the Applicant that the amount be calculated as soon as possible. This request was first made on August 23, 2012, in writing, when the Employer’s Confirmation Form was submitted. The Applicant submits there has been no response from the Insurer regarding this benefit; nothing has been paid, nor has the Applicant been informed as to the reasons why the benefit has not been calculated or paid.

The Applicant also submits that these claims were not part of the Application for Mediation filed November 17, 2011, having been added just prior to the actual mediation taking place in January 2013.

Further, the Applicant has submitted that the Insurer has delayed access to treatment by refusing to re-schedule Insurer Examinations at a date and time convenient for the Applicant, despite being provided with multiple letters providing convenient dates and times on which the Applicant could attend. The Insurer did not respond to the letters, failed to reschedule for six months and instead proceeded to hold the client in non-compliance. The Applicant expects that the log notes would shed some light on why this delay occurred.

The Applicant further submits that the Mediation did not take place until January 8, 2013, and that at the time of filing the Application for Mediation, the claims for Income Replacement Benefits and for the Treatment Plan of the Speech Therapy Centres of Canada were not listed in the Application for Mediation as issues in dispute, having been added only shortly before the actual mediation took place; and that in fact, Insurer’s counsel had not yet been retained and did not participate in the mediation.

Nothing in the file produced by the Insurer to date appears to speak to the IRB issue or scheduling of the IE’s.

The Applicant is seeking a special award, and submits that, given the refusal to calculate Income Replacement Benefits, and refusal of the Insurer with respect to scheduling and/or re-scheduling of section 44 assessments, and taking into account the limited information in the produced internal file, “it is clear the information contained in the full internal file will likely continue to be relevant to these proceedings, the issues in dispute and the Special Award being claimed.”⁴

Insurer

Wawanesa maintains that Ms. Pelacchia has failed to demonstrate a reasonable basis for the production of log notes beyond the date of the first Application for Mediation arising from this accident.

The Insurer submits that it has released the adjuster’s file to the date that the Applicant applied for mediation, properly redacted for solicitor-client or litigation privilege, and that any additions to the file after that date are protected by privilege: and that all log notes created after November 17, 2011 were created for the dominant purpose of litigation and are protected by litigation privilege; that any documents not produced to the Applicant prior to the filing of the Application for Mediation were properly redacted or protected by privilege; and documents subsequent to the filing of the Application for Mediation were objected to on the basis of litigation privilege and not produced pending a ruling on this motion.

The Insurer further submits that the request for these documents, which the Applicant has submitted are relevant to the rationale for denying benefits, is nothing more than a fishing expedition, that the Applicant’s submission in this regard was too generalized; and that the documents sought are not relevant for the Applicant to advance its claim for a Special Award.

The Insurer also submits that the Applicant already has sufficient evidence to raise the prima facie arguments with respect to the scheduling of the insurer examinations, and the issue of failure to respond to the Applicant’s income replacement claim, and that access to the internal file is not relevant.

With respect to the issues of the alleged failure of Wawanesa’s scheduling of insurer examinations and failure to respond to the Applicant’s income replacement benefit claim, it is Wawanesa’s position that the Applicant has sufficient evidence to raise these arguments, and that access to the internal file is not relevant.

Wawanesa also submits that the Applicant has failed to provide a sworn affadivit in support of its motion, and without a sworn affidavit, there is no evidence before me on which to base a production order, which should result in a dismissal of the motion.

EVIDENCE AND ANALYSIS:

The Law

Authority to Order Production

Rule 32 of the Dispute Resolution Practice Code⁵ sets out the authority and requirements for document production prior to the pre-hearing. Rule 32.2 states that,

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.

Rule 32.3 gives the Arbitrator authority to order production of any document 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.

Litigation Privilege vs Obligation to Adjust File

Pursuant to the Applicant’s request for the Insurer’s Accident Benefit file, the Insurer produced 9 pages of heavily redacted log notes for the period up to November 17, 2011. According to the Insurer’s factum on this motion, only portions of the notes dealing with matters after November 17, 2011 and reserves were redacted.

The lack of material in these heavily redacted notes apparently triggered the current request of the Applicant for additional material from the log notes prior to the filing of the Application for Mediation, as well as further production of the file up to the date of the filing of the Application for Arbitration.

In order to determine whether a document should be produced, the Arbitrator must consider whether the requested documents are reasonably relevant to the issues in dispute, and whether litigation privilege applies.

When requests for further production are made, it is easy for a party to throw up a shield of litigation privilege as a bar to production. The Arbitrator must, in arriving at his or her decision, balance the concepts of litigation privilege with the Insurer’s ongoing obligation to adjust the file.⁶

Arbitrator Bujold, in Ghaedsharagy and Kingsway General Insurance Company⁷ points out 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.”

Arbitrator Bujold’s decision includes a comprehensive discussion of FSCO practice and procedure with regard to production.

In Phillips and Aviva Canada Inc.,⁸ Arbitrator Sapin states that: “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 . . .’ 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.”

Arbitrator Sapin finds, however, that while the prevailing practice at the Commission is to produce the internal file up to the date of the Application for Mediation, that date is not “graven in stone” and production is to be determined on a case-by-case basis. If the Applicant can establish a basis for further production, the presumption of litigation privilege from the date of the Application for Mediation can be rebutted and further production can be ordered. To do so, however, can be difficult.

Analysis

I disagree with the Insurer’s submission that the requested documents are not relevant, as without seeing the documents in the file to determine their relevance, one cannot summarily dismiss those documents as irrelevant. It is clear that the Insurer has an ongoing duty to adjust the claim, and documentation contained in the internal file as it relates to that continuing obligation would prima facie be relevant.

To what degree the documents are relevant is another issue and one that cannot be determined with certainty without production and examination of the documents.

Nothing in the log notes produced by the Insurer suggests that the claims for IRB’s and Speech Therapy Treatment had yet been considered by the Insurer.

According to the Applicant’s submission, those claims had not yet been advanced; and once put forward, had not been responded to by the Insurer.

In essence, I am being asked to infer that, as the claims were not yet advanced as issues in dispute at the time of the Application for Mediation, they had not as yet been adjusted at the time of filing, and that subsequent entries in the log, if any, would therefore be for the primary purpose of adjusting the claim.

The Insurer’s submission is that, after the date of the filing of the Application for Mediation, the notes were made for the dominant purpose of litigation, and are therefore protected by privilege.

Procedures governing disclosure employed by the Courts, such as affidavits of documents and subsequent cross-examination of same, production of material for vetting by judges, and discovery are costly and time-consuming steps inconsistent with the Commission’s mandate, and should continue to be the exception rather than the norm; while arbitrators have the authority to require similar procedures, these steps are rarely taken.

I agree with the Insurer’s submission, that, generally speaking, litigation privilege trumps relevance in most cases. However, should it be challenged, the party claiming privilege must be able to establish a basis for the assertion of the claim of privilege.

The Insurer claims litigation privilege from November 17, 2011 onward.

In Mamaca v Coseco Insurance Company⁹, the Court recognized that documents in the Insurer’s file served a dual purpose; they could be prepared for the purpose of investigating the claim, and to assist in litigation. The Court found that, if the Master below intended to say that if documents have a dual purpose, that may prevent them from having the dominant purpose of assisting in anticipated litigation, then he erred. The court found that a document could be prepared for a multitude of purposes and, if the dominant purpose is to assist in anticipated litigation, then litigation privilege applies to the document. The Court found that litigation privilege, when properly asserted, will shield an insurer’s claims file from disclosure despite the fact that the documents therein are highly relevant to the plaintiff’s claim.

With respect to the relevance of the file to the aspect of the claim for a special award, the Insurer cites Campeau and Liberty Mutual Insurance Company¹⁰ in which Arbitrator Blackman found that handling of the claim was not an issue before the hearing Arbitrator. It was his view that the claim for a special award is restricted to whether the Insurer has unreasonably delayed or withheld benefits.

Notwithstanding the above, I find the analysis in Claybourne and Gore Mutual Insurance Company¹¹ by Arbitrator Ashby most helpful in resolving the conflict between adjustment and litigation. In that case, the issue was whether the Applicant was entitled to production of the insurer’s internal adjusting file after the date of mediation, similar to the present case.

Arbitrator Ashby found that the Arbitrator must, in order to determine whether production should be ordered, first determine whether the information sought is reasonably relevant to the issues in dispute for the arbitration hearing; and, if so, then determine whether the information requested is protected by litigation or solicitor-client privilege.

Arbitrator Ashby’s comments in that case are most helpful. She stated: “The present practice fails to recognize that the prima facie dominant purpose of an adjusters 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 information it seeks to withhold is not reasonably relevant to the proceedings or is protected by privilege:”¹²

Essentially, this shifts the onus to the withholding party; as the obligation to adjust the file is ongoing, should there be documents in that file that are in fact, primarily created in anticipation of litigation, the party that asserts privilege should be able to back up the claim.

I agree with the approach of Arbitrator Ashby, and find that the documents contained in the Insurer’s file after the date of the filing of the Application for Mediation have a reasonable possibility of being relevant.

Arbitrator Ashby ordered production of the insurer’s internal file from the date of the filing of the Application for Mediation onwards, and put the onus on the insurer to provide a list of documents it was unwilling to provide with its rationale for withholding same.

The Applicant submits that, in this case, counsel was not retained until April 13, 2013 which belies claims of litigation privilege, and submits that there are obviously documents which are created and decisions which are made after the commencement of litigation which are not prepared in anticipation of the litigation.¹³

I find that, looking at the facts of this case, Arbitrator Sapin’s case by case approach offers guidance.

Taking into account the Insurer’s ongoing obligation to adjust the file and bearing in mind that the issues of income replacement benefits and the speech therapy treatment plan were not listed as issues in dispute at the time of the filing of the Application for Mediation, in my view, the circumstances of this case call for departure from the usual “bright line” cut-off date of the filing of the Application for Mediation. I also take into account that counsel was not as yet retained at the time of the filing of the Application for Mediation in determining the primary purpose of the documents. As Arbitrator Sapin stated in Phillips, that date is not “graven in stone.”

I find that the contents of the Insurer’s file after the date of the filing of the Application for Mediation ought therefore to be disclosed as it relates to the issue of IRB’s, treatment plans of the Speech Therapy Centres of Canada, and the issue of the rescheduling of the IE’s, treatment plans and scheduling of IE’s.

I find that the procedure set out by Arbitrator Ashby in Claybourne allows for the Insurer to maintain a claim of privilege if it can establish a basis for that claim. Therefore, following the procedure set out in Claybourne, if there are documents contained in the file over which the Insurer still maintains privilege applies, I will require the Insurer to provide the Applicant with a list of documents to which it is asserting privilege together with its rationale for each document.

The list will be provided to the Applicant within 14 days of the date of this order, and in the event that the parties are unable to agree on the release or withholding of any part of the file, a further motion may be brought before me to determine the issue.

I further find that the Applicant is not entitled to any further disclosure of the Insurer’s file for the period prior to the filing of the Application for Mediation other than what has already been produced. I accept that the Insurer has properly redacted the file as stated, and that the conclusion of the Applicant that other relevant documents may be missing is speculation.

I do not accept the Insurer’s submission that the lack of an affidavit from the Applicant compels me to dismiss the motion as there is no evidence before me. Bearing in mind that this is a tribunal and not a court, I find that, while the usual practice is to supply affidavit evidence, in this procedural motion I can rely on the written submissions of the Applicant in the absence of an affidavit as a factual basis in arriving at a decision in this motion. To dismiss the application on a technical/procedural issue would be contrary to the Commission’s mandate to provide an efficient and cost- effective process.

I find that the circumstances of this case are such that the Applicant is entitled to production of the Adjuster’s file from the date of the filing of the Application for Mediation, November 17, 2011, to the date of filing of the Application for Arbitration, March 7, 2013, but limited to the issues of IRB’s, Medical Benefits of the Speech Therapy Centres of Canada, and the issue of the rescheduling of the IE’s.

EXPENSES:

The issue of entitlement to expenses of this motion is remitted to the hearing arbitrator.

March 26, 2015

Alan Mervin

Arbitrator

Date

Financial Services Commission des

Commission services financiers

of Ontario de l’Ontario

Neutral Citation: 2015 ONFSCDRS 65

FSCO A13-003113

BETWEEN:

FLAVIA PELACCIA

Applicant

and

WAWANESA 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. Wawanesa shall disclose to Ms. Pelacchia the contents of its entire adjuster’s file from November 17, 2011 to March 7, 2013, the date of the filing of the Application for Arbitration, but limited to the issues of IRB’s, speech therapy and scheduling of IE’s.

2. In the event Wawanesa asserts a claim of privilege in respect of any document, communication or note or any other portion or part of the adjuster’s file it shall, within 14 days of the date of this order, provide a list of documents together with its rationale for its claim of privilege. In the event the parties are unable to agree, then a further motion may be brought before me to determine whether the information Wawanesa seeks to withhold is protected by privilege.

March 26, 2015

Alan Mervin

Arbitrator

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule — Effective September 1, 2010, Ontario Regulation 34/10, as amended.
2. 2Tab 1,Page 3, Paragraph 3, Applicant’s Motion Record
3. 3Applicant’s Motion Record, Tab 1, Page 4, Paragraph 1
4. 4Applicant’s Submissions, Page 4, Paragraph 2
5. 5Fourth Edition, Updated – January 2014
6. 6It 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 paragraph 60.
7. 7(FSCO A07-001061, February 12, 2008)
8. 8(FSCO A09-002774, August 30, 2011), referring to Campeau and Liberty Mutual Insurance Company (FSCO A00-000522, March 12, 2001)
9. 92007 CanLII 54963 (ON SC), [2007] O.J. No. 4899
10. 10See footnote 8, supra
11. 11(FSCO A08-000390, December 10, 2008)
12. 12Ibid.
13. 13Applicant’s Motion Record, Tab 1