SUPERIOR COURT OF JUSTICE - ONTARIO
COURT FILE NO.: CV-11-418616
DATE: July 18, 2014
RE: 1206953 Ontario Inc. c.o.b. Confederation Place Hotel v. The Dominion of Canada General Insurance Company
BEFORE: Master A. Graham
HEARD: February 18, 2014
COUNSEL:
J. Norton for the plaintiff (moving party)
E. Callery for the defendant
REASONS FOR DECISION
(Plaintiff’s motion for production of documents for which defendant has claimed privilege )
[1] The plaintiff is the owner of a hotel located at 237 Ontario Street in Kingston, Ontario. On April 28, 2010, a collapse occurred in the underground parking garage of the building. The plaintiff’s insurer, the defendant The Dominion of Canada General Insurance Company (“Dominion”), denied the plaintiff’s claims under its insurance policy. The plaintiff claims against Dominion for insurance coverage and indemnity in respect of the collapse as well as for aggravated and punitive damages.
[2] The plaintiff moved for answers to undertakings and questions refused at the examination for discovery of Andrew Lavallee on behalf of Dominion, held August 17, 2012. The motion first came before me on July 16, 2013, at which time it was adjourned to December 11, 2013 to allow for cross-examination of defendant’s counsel Mr. Peloso on his responding affidavit. On July 23, 2013, I released a further endorsement ruling that Mr. Peloso’s affidavit did not amount to a waiver of privilege in respect of the defendant’s communications with counsel and that he was not required to produce his file or copies of communications between his firm and the defendant.
[3] Owing to an appeal of my ruling of July 23, 2013, this motion did not proceed as scheduled on December 11, 2013 and was adjourned to and argued on February 18, 2014. At that time, I ruled on all unresolved questions refused and taken under advisement except for those objected to on the basis of litigation privilege or lawyer-client privilege, on which I reserved my decision.
[4] The refusals in issue are as follows (from the plaintiff’s factum, paragraph 55):
Q. 624: To provide the assessment (minutes of meetings) made by the claims committee where it was decided what would be covered under third party liability and what would be covered on first party coverage.
Q. 74: To provide copies of the reports that were made to the claims management committee, a copy of any notes of telephone calls with the claims management committee and a copy of the notes from any minutes of meetings with the claims management committee dealing with this claim.
Q. 113: To produce any notes made by the claims management committee.
Qs. 386-389: To produce a copy of the notes made by Lavallee from his meeting on July 14, 2010, with Vince Ferraro, Tom Holland, Richard Knechtel and Pat Peloso.
Q. 407: To produce the electronic notes from the claims centre system.
[5] In order to assist the court in making its rulings, counsel for the defendant provided unredacted copies of Dominion’s adjusting notes and its schedule B documents.
[6] The issue on the motion is whether Dominion’s refusal to produce the requested documents is justified on the basis of either litigation privilege or lawyer-client privilege.
[7] Litigation privilege exists to protect from production a communication made or a document created for the dominant purpose of assisting the client in litigation, actual or contemplated. It applies to third party communications made in confidence and for purposes of preparing for trial. It is based upon the need for a protected area to facilitate investigation and preparation of a case for trial by the adversarial advocate. (See: Davies v. American Home Assurance Co., 2002 62442 (ON SCDC), 2002 CarswellOnt 2225, 60 O.R.(3d) 512 (Div. Ct.) at paragraph 34)
[8] The party asserting litigation privilege bears the burden of leading evidence to establish when litigation was anticipated. (See: Mamaca v. Coseco Insurance, 2007 CarswellOnt 8133 (S.C.J.) at paragraph 23) The court’s determination of when ‘the investigative door shut’ and ‘the defence door opened’ is a finding of fact of when the dominant purpose was in contemplation of likely litigation. (See: 1207301 Ontario Inc. v. Zurich Insurance Co., 2003 CarswellOnt 4562 (S.C.J.) at paragraph 18)
[9] Lawyer-client privilege protects communications between a lawyer and client where the client has sought legal advice. The privilege is one of the corner stones of our system of justice and although not absolute, must be as close to absolute as possible to ensure public confidence and retain relevance. (See: Davies, supra at paragraphs 19 and 22) Significantly for the purpose of this motion, the court in Davies also stated (at paragraph 25):
“[A]n insurer may not protect investigative information that it has gathered and that would otherwise be producible, behind the cloak of solicitor-client privilege simply by the expedient of placing control of the claim investigation in the hands of its lawyer. The legal opinion rendered by the lawyer to the client based upon the information obtained in the course of that investigation is another matter, however. It remains privileged, in my opinion, unless the insurer puts its state of mind in issue in the sense contemplated in Bank Leu [1999 CarswellOnt 3365 (Ont. S.C.J.)] and other related cases, or otherwise waives the privilege.”
[10] Because the parties have been litigating the issues arising out of Dominion’s denial of the plaintiff’s claims since 2011, it is clear that at some point, Dominion would have been aware that it would be facing a lawsuit. The question of when litigation privilege would begin to apply turns on the issue of when litigation could reasonably have been anticipated such that the dominant purpose for which documents were created was that litigation.
[11] At his examination for discovery, Mr. Lavallee stated that the ultimate decision regarding insurance coverage for the plaintiff’s loss was made by the claims management committee and that there would be minutes of each of that committee’s meetings. The plaintiff submits that the documents created through the meetings of Dominion’s claims management committee will reflect the means by which Dominion made its decision and are therefore relevant to its claims. Accordingly, the documents should be produced, unless privileged.
[12] Mr. Lavallee’s evidence is that the decision to deny the plaintiff’s first party claim was made on July 15, 2010. A letter communicating the denial of coverage was sent to the plaintiff on July 16, 2010. Mr. Lavallee’s evidence at his examination for discovery (Q. 568) is that Dominion would first have anticipated a lawsuit when it sent the denial letter on July 16, 2010. His answer to the next question (Q.569) “So after sending the denial letter you thought that there was a reasonable possibility that a Claim would be commenced against Dominion?” was “Possibly”, his explanation being (Q. 570) “Because it was a very large loss, and our insured may have used their option or undertaken their option to take legal action”.
[13] Mr. Lavallee’s statements that following the denial letter, a claim would “possibly” be commenced against Dominion and that the insured “may” have taken legal action, indicate that at that point it was still uncertain as to how Confederation Place would respond to the denial. Not every insured to whom insurance coverage is denied commences litigation and there is no evidence of any previous communication from the plaintiff that if coverage were denied, it would sue. I am therefore not persuaded by Mr. Lavallee’s evidence that Dominion could automatically have assumed that litigation would have been commenced as of the date of its July 16, 2010 denial letter.
[14] According to one of Mr. Lavallee’s notes of July 21, 2010, at a site meeting on July 20, 2010, the plaintiff’s representative Mr. Donald Georgevitch said that the plaintiff would be suing Dominion for “bad faith, aggravated damages and other damages to be determined” arising out of its denial of coverage. This was an unequivocal statement that the plaintiff intended to commence litigation against Dominion that would justify the “opening of the defence door” contemplated by 1207301 Ontario Inc., supra. I conclude that the documents in Dominion’s file would be protected by litigation privilege subsequent to Mr. Georgevitch’s threat of litigation on July 20, 2010. All documents created subsequent to that date are privileged and need not be produced.
[15] My rulings on the balance of the refusals are as follows:
Q. 624: To provide the assessment (minutes of meetings) made by the claims committee where it was decided what would be covered under third party liability and what would be covered on first party coverage.
[16] A review of the transcript of Mr. Lavallee’s examination reveals that the question asked of Mr. Lavallee was “I want the assessment that the claims committee made”. This question is followed by a discussion between counsel of whether the plaintiff would be advancing a claim for the cost of removing damaged vehicles from the collapsed garage. An undertaking was given by Dominion’s counsel to advise whether “resulting damages” were covered under the policy, but the question originally asked was neither pursued nor refused. Accordingly, there is no basis for any order to be made.
Q. 74: To provide copies of the reports that were made to the claims management committee, a copy of any notes of telephone calls with the claims management committee and a copy of the notes from any minutes of meetings with the claims management committee dealing with this claim.
[17] As determined above, documents subsequent to July 20, 2014 are protected by litigation privilege so the issue is whether any documents prior to that date must be produced. I have reviewed Dominion’s Schedule B documents to determine whether they contain any of the documents requested. For the purpose of locating documents in the requested categories, I note that the claims management committee consisted of Tom Holland, Richard Knechtel and James McDonell.
[18] Mr. Peloso was retained by Dominion to address the first party coverage issue on June 24, 2010. In his letter of July 12, 2010 to Mr. Lavallee (Schedule B, document no. 8) Mr. Peloso states that he has considered the coverage issues and enquires as to how best those issues could be discussed. Mr. Peloso also deposes in paragraph 10 of his affidavit on this motion that he provided legal advice to the Dominion claims committee members that was shared and discussed amount those members on July 12, 13 and 14, 2010. Mr. Peloso’s preliminary opinion was contained in his email correspondence of July 13, 2010 (document no. 10) which consists of legal advice and is subject to lawyer-client privilege.
[19] Mr. Peloso also met with the claims committee and engineer Vincent Ferraro on July 14, 2010 to review the DFA Engineering report and his legal opinion. Mr. Lavallee’s typed notes of July 14, 2010 (document no. 12) confirm that present at this meeting were himself, Mr. Holland, Mr. Knechtel, Mr. Ferraro and Mr. Peloso. According to this document, Mr. Ferraro provided an engineering opinion with respect to the cause of the collapse. The purpose of the meeting was to make a decision on coverage with the assistance of counsel. Document no. 12 is therefore protected by lawyer-client privilege. Document no. 13 is an internal email from Mr. Knechtel in which he suggests a course of action with respect to coverage based on counsel’s advice, and is also privileged. Similarly, the documents forming no. 17 consist of more internal correspondence considering Dominion’s course of action based on the legal opinion and are also privileged.
Q. 113: To produce any notes made by the claims management committee.
[20] According to Mr. Lavallee, (Q. 110) he enters all of the information into Dominion’s electronic file. No one else would have had any need to enter information into the file, although a manager may make a comment. The contents of the file are reviewed under Q. 407 below.
Qs. 386-389: To produce a copy of the notes made by Lavallee from his meeting on July 14, 2010, with Vince Ferraro, Tom Holland, Richard Knechtel and Pat Peloso.
[21] These notes are contained in document no. 12 which, as concluded in paragraph [19] above, is protected by lawyer-client privilege.
Q. 407: To produce the electronic notes from the claims centre system.
[22] I have reviewed the unredacted adjusters’ notes from before July 20, 2010 to determine whether any of those documents are relevant and if so whether they are properly protected by lawyer-client privilege. My rulings with respect to the adjusters’ notes are as follows:
April 30, 2010 notes re: reserves: An insurer’s decisions on reserves are not relevant to issues of coverage or bad faith. Refusal upheld based on lack of relevance.
May 2, 2010 note re: solicitor assignment email: This is a communication to lawyer Pat Santini referring a new assignment to him. Even though Mr. Santini was not retained with respect to the plaintiff’s first party claim, he was still being asked for legal advice with respect to the collapse and communications with him are protected by lawyer-client privilege.
May 2, 2010 note re: Loss expense reserve: Information on reserves is irrelevant.
May 3, 2010 at 11:28 AM: Information on reserves is irrelevant. However, the portion of this note commencing “From: Andrew Lavallee Sent: Friday, April 30, 201 9:12 AM To: Thomas Holland; Richard Knechtel” until the word “RESERVES” on the fourth line from the bottom sets out information with respect to the circumstances of the loss, is not a communication to a lawyer and shall be disclosed.
May 3, 2010 at 11:31 AM: Relates to reserves and is therefore irrelevant.
May 6, 2010 at 5:17 PM: Relates to legal advice received from Mr. Santini and is protected by lawyer-client privilege.
May 6, 2010 at 6:23 PM: Relates to legal advice received from Mr. Santini and is protected by lawyer-client privilege.
June 18, 2010 at 12:50 PM re: June 17, 2010 site meeting: The bulk of this note relates to the inspection of the site by various experts, contractors and insurance representatives and is both relevant and not subject to any privilege. The last 2.5 lines relate to reserves and are not relevant. The note shall be produced up to the words “PROJECTED DAMAGES LIABILITY”.
June 18, 2010 at 4:15 PM and 4:23 PM: Relate to reserves and are therefore irrelevant.
June 24, 2010 at 2:05 PM: Relates to consultation with lawyer Pat Santini and is subject to lawyer-client privilege.
June 24, 2010 at 2:07 PM: Consists of initial correspondence to lawyer Pat Peloso retaining him to give a coverage opinion and is therefore subject to lawyer-client privilege.
June 25, 2010 at 11:13 PM: Reports conversation with Pat Peloso and is therefore subject to lawyer-client privilege.
June 29, 2010 at 10:27 AM and 10:30 AM: Email message from Pat Santini and record of subsequent telephone conversation with Santini; these notes are therefore subject to lawyer- client privilege.
June 29, 2010 at 4:02 PM: Consists of Lavallee’s forwarding of Pat Santini’s advice to Thomas Holland and Richard Knechtel and their responses. These notes are subject to lawyer-client privilege.
July 5, 2010 at 10:33 PM: Relates to reserves and is therefore irrelevant.
July 12, 2010 at 11:23 AM: This is a note from Richard Knechtel in which he states that he has forwarded the engineering report commissioned by the insured and reviews the contents of that report. None of this is protected by any kind of privilege. Mr. Knechtel refers at the end to an upcoming meeting with Mr. Peloso with respect to a coverage opinion but the note does not refer to any information or advice communicated to or from Mr. Peloso. This note shall be produced.
[23] The balance of Dominion’s system notes up to and including Mr. Lavallee’s note of July 21, 2010 in which he refers to his meeting with Mr. Georgevitch on July 20, 2010 have been produced.
[24] The volumes filed by Dominion containing its Schedule B documents and the unredacted adjusters’ notes shall be sealed.
Costs
[25] Counsel for the plaintiff and for Dominion provided costs outlines at the end of the motion but did not make submissions on costs. If counsel cannot agree to the disposition of costs, they shall make written submissions, the plaintiff within 30 days and the defendant within 20 days following delivery of the plaintiff’s submission. Submissions shall not exceed three pages.
MASTER A. GRAHAM
DATE: July 18, 2014