DATE: 20030714

DOCKET: C39400

COURT OF APPEAL FOR ONTARIO

RE: PETER SEMPECOS and MARY SEMPECOS (Respondents (Plaintiffs)) – and – STATE FARM FIRE AND CASUALTY COMPANY (Appellant (Defendant))

BEFORE: CATZMAN, FELDMAN and GILLESE JJ.A.

COUNSEL: Anthony J. Bedard

For the appellant

Carolyn R. Brandow

For the respondents

HEARD: July 10, 2003

RELEASED ORALLY: July 10, 2003

On appeal from the order of Justice Gordon Killeen of the Superior Court of Justice dated October 26, 2001 and from the order of the Divisional Court (Blair, S.R.J., Epstein and Pierce JJ.) dated October 8, 2002.

E N D O R S E M E N T

[1] The issue on this appeal is whether the appellant insurance company is entitled to have the court order that the trial of the plaintiff’s action on the insurance contract and for bad faith punitive damages be bifurcated in order to protect the insurance company from disclosing privileged communications in the bad faith claim, which could also be used to its prejudice in the contract claim.

[1] The Divisional Court noted that on the evidence in the record, the appellant has not provided evidence that it in fact intends, or will be obliged, to waive privilege in respect of solicitor-client communications in order to defend the bad faith claim. Counsel has explained that when the motion was initiated, several of the important cases in this area were not yet decided, including the Supreme Court’s decision in Whiten v. Pilot Insurance Company, 2002 SCC 18, [2002] S.C.J. No. 19 and this court’s decision in Khazzaka (c.o.b. E.S.M. Auto Body v. Commercial Union Assurance Co. of Canada, [2002] O.J. No. 3110.

[2] We accept that the law in this area has changed since the appellant’s material was prepared. However, on the record before this court, we agree with the Divisional Court that there is no evidence that the appellant will actually suffer the prejudice alleged from disclosing privileged communications. We would therefore dismiss the appeal but without prejudice to the appellant’s right, if so advised, to bring a further motion on the appropriate evidence. The respondents of course will be able to respond as advised.

[3] On consent, costs of the leave motion and of the appeal are to be $9,000 inclusive of disbursements and GST, payable to the respondents.

Signed:_____ “M.A. Catzman J.A.”

_____ “K. Feldman J.A.”

_____ “E.E. Gillese J.A.”