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

Neutral Citation: 2018 ONFSCDRS 141

FSCO A16-000397 A16-001585

BETWEEN:

NEAL RYAN & TIANA EDIE Applicant

and

INTACT INSURANCE COMPANY Insurer

REASONS FOR DECISION

Before: Anita Idemudia

Heard: March 5, 2018, at the offices of the Financial Services Commission of Ontario in Toronto.

Appearances: Maurice Benzaquen for Mr. Ryan & Ms. Edie John P. Desjardins for Intact Insurance Company

INTRODUCTON

The Applicants, Neal Ryan, and Tiana Edie were both injured in a motor vehicle accident on January 19, 2015. They both applied for statutory accident benefits from Intact Insurance Company (“Intact”), payable under the Schedule. The parties were unable to resolve their disputes through mediation, and Mr. Ryan applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

At a pre-hearing held on May 19, 2016, the arbitrator ordered that both applications be heard at the same time and by the same arbitrator, pursuant to Rule 30.1 (d) of the Dispute Resolution Practice Code (“Code”)

At the start of this preliminary issue hearing, Counsel for the Applicants brought a motion, requesting that counsel on record for the applicants – Regan Desjardins LLP be removed on the basis that Andrew Grayson, one of the firm’s lawyers participated in preparing the report to the denial committee of Intact, which the insurer ultimately relied upon to deny the Applicants’ claims

Furthermore, the applicants contend that Andrew Grayson participated as a claims Investigator/Adjuster in suggesting to Intact, other ways where they may be able to deny the Applicants’ claims including suggesting the policy be invalidated because Tiana Edie’s address was her mailing address and not her home address.

The Applicants submit that defence counsel’s role in participating in the denial of the claim as well as defending the claim at arbitration amounts to a conflict of interest. In support, the Applicants relied on: Darryl Harris v. Wawanesa Mutual Insurance Company [FSCO A04-002032]

Further, the Applicants submit that when a lawyer acts as a claims investigator/adjuster, their opinion is not protected by solicitor-client privilege. They submit that Mr. Grayson would be a witness in this regard and should be removed on the basis that counsel cannot both be a witness at the arbitration hearing and counsel in the same hearing.

The Insurer’s position:

Intact argues that this position is not supported in law. It further argues that solicitor client privilege is not merely a rule of evidence but a fundamental civil and legal right. It referenced Solosky v. Canada in advancing the position that solicitor client privilege is one of the corner stones of our justice system.¹

In Solosky’s case, the court held that the concept of privileged communication between a solicitor and client has long been recognised as fundamental to the due administration of justice. The court quoted Jackett C.J.F.C in Re: Shell Canada Ltd

“in the protection of civil and criminal……. afforded to the individual by our law is dependent upon his having the aid and guidance of those skilled in the law, untrammelled by any apprehension that the full and frank disclosure by him of all his facts and thoughts to his legal advisor might somehow become available to third persons so as to be used against him”

In Re: Shell Canada Ltd., the court suggested that privilege can be traced to the very early reign of the monarchy, the time of Elizabeth I, further suggested that it stemmed from respect for the “oath and honour of the lawyer, duly bound to guard closely the secret of his client and was restricted in operation to an exemption from testimonial compulsion” and from that time, privilege further evolved to include communications exchanged during other litigation and finally, any consultation for legal advice, whether litigious or not.

Intact however concedes that not all communications between a lawyer and client are privileged, but only those which arise from communications between a lawyer and client where the latter has sought legal advice – R. v. McLure.

In McLure, Major J., argues that the danger in eroding solicitor client privilege is the potential to stifle communications between the lawyer and client. The need to protect the privilege determines its immunity from attack.

Intact’s counsel notes further that providing legal opinion is the quintessential example of communication between a solicitor and client for the purpose of obtaining legal advice, adding that it is immune from attack in the absence of an express or implied consent or waiver.

Intact’s counsel cites the appeal ruling in Davies v. American Home Association, where a motion judge ruled that opinion letters of the defence counsel were not protected by solicitor client privilege because they were relevant to allegations of bad faith. It appears that the motion judge did not attempt to make a distinction between the opinion letters and all other information available to the insurer for the purpose of making a decision on the claim. In the end, Blair J. of the Divisional court concluded that a bad faith claim against an insurer does not change what is or not protected by solicitor client privilege. Defence counsel also referenced a statement by Justice Major that:

“solicitor client privilege is nearly absolute, it will only yield in certain clearly defined circumstances and it does not involve a balancing of interests on a case by case basis”.

Counsel concludes that the Divisional Court’s decision end the debate over the admissibility of solicitor client communications.

Applicants’ counsel argues that that the Insurer’s counsel ignored two key issues for the removal of their firm as counsel of record:

1. That counsel participated in investigating/adjusting the claim by participating in preparing the report to the Insurer’s denial committee. Counsel contends that by that act and in representing the insurer at the arbitration hearing, counsel became involved in a conflict of interest. They further argue that a removal is warranted as counsel has received a direct benefit of his firm’s retainer in the arbitration process. Applicants’ counsel relied on Harris v. Wawanesa Mutual Insurance Company [FSCO A04-002032]

2. That counsel for the insurer, Andrew Grayson did not merely give a legal opinion with respect to the insurer’s subsequent denial of the applicants’ claim for material misrepresentation but that he assumed the role of investigator/adjuster in suggesting to the insurer other potential avenue in which their claim may be denied.

Applican’ counsel concluded by stating that when a lawyer acts as a claims investigator/adjuster, their opinion is not protected by solicitor-client privilege, as such, Mr. Grayson would be a witness in this regard and justifiably removed on the basis that counsel cannot be both a witness at the arbitration hearing as part and parcel of the evidence and as well as counsel.

I find that the facts in Harris v. Wawanesa differ from the facts in this case. The Code of Conduct for Statutory Accident Benefits issued by the Superintendent of Insurance, defined conflict of interest as follows:

1. the representative could receive, directly of indirectly, a financial benefit that arises out of the claim, other than compensation for providing a services referred to in subsection 398(1) of the insurance act or for representing a claimant; or

2. anyone related to the representative may receive, directly or indirectly, a financial benefit that arises out of the claim.

For the purpose of clause (1) a financial benefit arises out of a claim for statutory accident benefits where the benefit is related to the claim and would not have arisen if the claim had not been made.

In this case, applicant’s counsel asked that Arbitrator Renahan draw an inference that the evidence shows a business relationship between Mr. Gordon and Dr. Baird and that Mr. Gordon received a financial benefit from referring his clients to Dr. Baird, and on that basis should be excluded from representing the applicant as a conflict of interest had risen in the circumstances.

I am unable to make the same findings in the present case. The facts and evidence in Harris support the arbitrator’s findings. I do not have the evidence to support a finding of a conflict of interest in this case. I am not privy to the full relationship and instructions counsel is tasked with when retained by an insurer, but I am certain that that relationship kicks in as early as when a claim has been denied by an insurer and the applicant files for mediation, the first stage of the dispute resolution process at FSCO. Failing mediation, an applicant then files for arbitration, the second stage of the dispute resolution process.

To draw an inference that counsel received a direct benefit from legal advice provided to her client at the investigation/adjusting stages of a claim, separate and apart from legal fees paid for defending the claim without substantial evidence to support the position is untenable. I am not persuaded that the facts in Harris v. Wawanesa are similar to the facts in this case. I am therefore unable to make the same findings in this case.

In Harris v Wawanesa², Arbitrator Renahan, in applying the test under the definition of conflict of interest as: whether Mr. Gordon, Mr.Harrison’s representative “could have received a financial benefit”, stating that “could” expands the group of people who have a conflict from those that that actually receive a financial benefit to those that “could” receive a financial benefit. Further, the arbitrator in that case referenced the words of Granger J. in Moffat v. Wetstein, where the judge held:

’….the fiduciary must not only avoid a direct conflict of interest but must also avoid the appearance of a possible or potential conflict. The fiduciary is barred from the dividing loyalties between competing interests, including self interest”

As we see in the above cases, the facts differ from the case at hand, to say that counsel on record be removed on the basis that;

1. They participated in investigating/adjusting the claim by preparing the report to the denial committee and further participated as a claims investigator/adjuster in suggesting to Intact Insurance other ways where they could deny the applicants’ claims; and

2. That counsel for the insurer Andrew Grayson did not merely give a legal opinion but assumed the role of a claims investigator/adjuster in suggesting potential avenue in which their claim may be denied does not fit into what could be referred to as a conflict of interest, especially when there is insufficient evidence to support the allegation.

In my opinion, the role above is consistent with the duties of a solicitor to his/her client in a typical accident benefits matter. I do not see evidence of a personal financial benefit counsel stands to benefit by carrying out the functions mentioned above. Once counsel is retained on a file, certain actions are expected of him or her such as these.

This type of privilege is a sacred principle of law. In the absence of fraud, such principle is guarded very carefully in law.

Solicitor/client privilege is recognised as one of the cornerstones of our justice of our system of justice and must be as close to absolute as possible to ensure public confidence and retain relevance. It must not be lightly interfered with and should be deemed waived only in the clearest of cases in order to maintain confidence in a client’s right to communicate in confidence with his solicitor³.

Therefore, given the facts in this case, I do not see how a conflict of interest arises or an overstep by defence counsel in a typical client/solicitor relationship in this industry,

The applicants’ motion is hereby dismissed and any expenses related to this motion be addressed at the hearing of the substantive issues.

Result:

1. The applicants’ motion is hereby dismissed.

2. I defer any issue(s) relating to expenses of this motion to the hearing arbitrator.

August 24, 2018

Anita Idemudia Arbitrator

Date

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

Neutral Citation: 2018 ONFSCDRS 141

FSCO A16-000397 A16-001585

BETWEEN:

NEAL RYAN and TIANA EDIE Applicant

and

INTACT 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. The Applicants’ motion is hereby dismissed.

2. I defer any issue(s) relating to expenses of this motion to the hearing arbitrator.

August 24, 2018

Anita Idemudia Arbitrator

Date

Footnotes

1. 1FSCO No.: A16-001585/A16-000397 – Insurer’s submissions
2. 2FSCO A04-002032 – Applicants’ reply submissions
3. 31207301 Ontario Inc. v. The Zurich Insurance Company