COURT FILE NR. CV-15-65711

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: Barbara Lynn Carroll, by her litigation guardian Shannon Luknowsky, Plaintiff

AND:

Aviva Canada Inc. and Pilot Insurance Company, Defendants

BEFORE: Master Kaufman

COUNSEL: Joseph Y. Obagi, for the Plaintiff

Lawrence E. Thacker, for the Defendants

HEARD: September 22, 2020

REASONS FOR DECISION

[1] Aviva Canada Inc. and Pilot Insurance Company (the “defendants”) bring this motion to compel the plaintiff to serve a further and better affidavit of documents. They contend that the plaintiff must include the complete contents of her counsel’s litigation file in her affidavit of documents.

[2] Some background is required. The plaintiff was catastrophically injured when she was struck by a car driven by Robert McEwen and owned by Caroline McEwen on March 28, 2009. Because the plaintiff’s damages exceeded the one million dollar coverage available under the McEwens’ insurance policy, the plaintiff also made a claim under her own automobile insurance policy, which included coverage for an “inadequately insured motorist” (OPCF 44R Family Protection Endorsement). Aviva Canada owns both Traders and Pilot Insurance. For the sake of simplicity, I will refer to the plaintiff’s OPCF 44R insurer as “Pilot” and the McEwens’ tort insurer as “Traders”.

[3] It is undisputed that Traders and Pilot offered to settle the action in early September 2015 for $1,757,500 plus costs. On September 10, 2015, the plaintiff indicated to counsel for Pilot that she would be willing to resolve the action against it separately if Traders’ contribution to the joint offer was less than the full amount of its limits ($1,000,000 plus costs). She asked that Pilot confirm if its contribution to the $1,757,500 joint offer exceeded $757,500. Pilot and Traders did not reveal their respective contributions towards the joint offer. On September 11, 2015, the insurers offered to settle the claim for $2,150,000, inclusive of interest and costs. In the end, the parties never reached an agreement and the matter proceeded to trial.

[4] After a seven-week trial ending in October 2015, the jury determined that the plaintiff and the McEwens were jointly responsible for the accident. The plaintiff was awarded $2,610,774.32 in damages, as well as $375,000 for costs.

[5] The plaintiff commenced this separate action against Pilot and Aviva on September 11, 2015. She alleges that the defendants breached their duty of good faith by colluding with Traders in the litigation of her tort claim. She argues that Pilot breached its duty of good faith when it retained a joint expert, retained the same counsel and made joint offers to settle with Traders. The plaintiff’s central allegation is that Pilot and Traders made joint offers to settle and refused to disclose their individual contribution to the joint offers. She claims damages in the amount of $1,000,000 for breach of the duty of good faith and $1,000,000 in punitive damages.

[6] In this motion, the defendants argue that the plaintiff’s counsel’s entire litigation file should be listed in her affidavit of documents because the plaintiff puts directly in issue her willingness and intention to settle, as well as the reasons for, and consequences of, her tactical and other litigation choices. Accordingly, they ask that the plaintiff list and produce in her affidavit of documents:

(a) the complete contents of the file of the law firm Connolly Obagi LLP, including all documents or other information in the power, possession or control of Connolly Obagi LLP, or any of its lawyers, law clerks, administrative staff or any other employees, including but not limited to all email or other written or oral communications, notes of meetings, reporting letters, internal memoranda and notes, analysis, advice, recommendations or conclusions, whether stored in hard copy or electronic form; and

(b) all communications between or among any of the plaintiffs in the Tort Action and Connolly Obagi LLP or any of its lawyers, law clerks, administrative staff or any other employees, relating in any way to their litigation objectives and goals, desired or anticipated or expected recovery, willingness or unwillingness to accept any settlement offer and the reasons therefore, and any intention or desire or willingness or unwillingness to engage in settlement discussions with any of the defendants whether joint or individual.

[7] At the hearing, Mr. Thacker conceded that on a motion for a further and better affidavit of documents, the only relief available was an order that the plaintiff list these documents in the appropriate schedule of her affidavit of documents, which would entitle the defendants to challenge any privilege claimed.

ISSUE

[8] The issue in this motion is whether the defendants have shown that relevant documents in the plaintiff’s possession, control or power may have been omitted from her affidavit of documents.[^1] The answer turns on the following questions:

i. Is the plaintiff required to prove damages arising from the alleged breach of the contractual duty of good faith?

ii. If the answer is no, are the documents sought relevant to a matter in issue?

ANALYSIS

[9] The defendants argue that the plaintiff is required to prove damages arising from the alleged breach of the duty of good faith. In their defence, they plead that “a causally related loss is an essential element of the cause of action for breach of duty of good faith” and that the plaintiff “must prove that [she] suffered a loss by the conduct of an insurer that breached the duty of good faith.”[^2] The defendants say that the plaintiff’s counsel’s file would contain documents relevant to quantifying these damages, such as risk assessments, settlement recommendations, and settlement instructions. They argue that these documents are relevant because damages are an essential element of the cause of action.

[10] The plaintiff responds that the defendants have provided no authority for the proposition that a causally related loss is an essential element of a claim for breach of bad faith, and, in any event, she readily admits that she ultimately did not suffer a loss: the damages awarded at trial exceed the combined limits of both insurers.

i) Must the plaintiff prove a loss in an action for breach of the duty of good faith?

[11] The proposition that damages must be proved in an action for breach of the duty of good faith is not supported by the jurisprudence.

[12] Whiten v. Pilot Insurance[^3] (“Whiten”) bears many similarities with this action. In both cases, the plaintiffs made a claim to their insurer for a loss. The plaintiffs in both actions sought punitive damages arising from a breach of the insurer’s duty of good faith. They impugned the insurers’ conduct leading to trial and during trial. In both cases, the plaintiffs alleged that the insurers’ conduct was designed to force them to settle for less than what they were entitled to. The difference between these two cases is that, in Whiten, the action for breach of the duty of good faith was tried at the same time as the claim for the insurable loss, whereas the actions are separate in this case.

[13] In Whiten, the Supreme Court found that a breach of the contractual duty of good faith is independent of, and in addition to, the breach of contractual duty to pay the loss.[^4] It also held that breaching the contractual duty of good faith constitutes a separate actionable ‘wrong’ for which punitive damages could be recoverable. The insurer argued, as here, that even if the plaintiff were able to establish that its conduct constituted an “independent actionable wrong”, she failed to prove any separate and distinct damage flowing from it. The insurer pleads that the claim for punitive damages should have been dismissed accordingly. Justice Binnie rejected that argument, holding that punitive damages arising from a breach of a duty of good faith do not require proof of damages:

As to the respondent’s objection that the pleading does not allege separate and distinct damages flowing from the independent actionable wrong, the respondent’s argument overlooks the fact that punitive damages are directed to the quality of the defendant’s conduct, not the quantity (if any) of the plaintiff’s loss. As Cory J. observed in Hill, supra, at para. 196, “[p]unitive damages bear no relation to what the plaintiff should receive by way of compensation. Their aim is not to compensate the plaintiff, but rather to punish the defendant. It is the means by which the jury or judge expresses its outrage at the egregious conduct of the defendant”. [Emphasis added.][^5]

[14] More recently, the Court of Appeal for Saskatchewan also determined that there could be a breach of the duty of good faith without damages. In Saskatchewan Government Insurance v. Wilson[^6], the insurer purported to terminate the plaintiff’s “no-fault” benefits six months into the future, but it retracted the decision before the plaintiff suffered any damages, and after she had commenced an action for breach of the duty of good faith. The court rejected the insurer’s argument that a breach of the duty of good faith cannot arise in the absence of damages flowing from a breach of an express term of the underlying contract of insurance.[^7]

[15] Based on the foregoing, I conclude that the plaintiff may sustain a cause of action for a breach of the duty of good faith and recover punitive damages even where the conduct it impugns did not cause a distinct loss.

ii) Are the plaintiff’s counsel’s files relevant to a matter in issue?

[16] Even if the plaintiff is not required to prove damages flowing from the alleged breach of the duty of good faith, the court is still required to consider if the plaintiff’s counsel’s litigation file is relevant to a matter in issue. The defendants argue that these documents are relevant to the issue of damages. They point to the fact that the plaintiff pleads that the insurers’ actions were to her detriment. At paragraph 25(b) of the Statement of Claim, the plaintiff pleads that: “[the defendants] wrongfully and in its own self-interest attempted to use the OPCF44R limits of the Policy as leverage in negotiations between the tortfeasors and the Plaintiff, for its own benefit and the benefit of the tortfeasors, to the detriment of the Plaintiff.”

[17] Properly understood, this allegation does not relate to a monetary loss which could be quantified with documents contained in the plaintiff’s counsel’s files. The plaintiff suffered serious injuries and was negotiating with the tortfeasor’s insurer and her own insurer. She was attempting to negotiate the highest monetary settlement possible to cover the costs of her future care.

[18] The plaintiff alleges that, by presenting joint offers and refusing to disclose their respective contributions to the joint offer, she was deprived of the chance to negotiate with the two insurance companies separately. The insurers presented two offers. The first one was for $1,757,500 plus costs and the second one for $2,150,000 including costs. Both offers appear to be close to the insurers’ combined limits. The detriment alleged in the statement of claim relates to the loss of opportunity to negotiate a settlement greater than the insurers’ offers and up to their limits. In those separate negotiations, the plaintiff would have attempted to obtain a settlement that was as close to each insurer’s limits as could be agreed. It is impossible to quantify the hypothetical outcome of these separate negotiations. The detriment referred to in the claim is the loss of that chance.

[19] The plaintiff’s action is novel, and I am not expressing any opinion on whether the plaintiff’s allegations amount to a breach of a duty of good faith. This is a matter for the trial judge. But on the pleadings as constituted, I conclude that the plaintiff is not claiming monetary damages arising from the insurers’ alleged bad faith conduct, and that, accordingly, the documents sought are not relevant to a matter in issue in this action.

[20] The defendant’s motion is dismissed. If the parties are unable to agree on costs, I will entertain submissions in writing. Counsel may obtain further directions on costs submissions from my office within 30 days should that be necessary.

[21] The plaintiff requested an order extending the time to set the matter down for trial to December 31, 2021. The defendants did not oppose such an order. The time for setting the matter down for trial is hereby extended to December 31, 2021.

Master Kaufman

Date: October 20, 2020

[^1]: Rules of Civil Procedure, R.R.O. 1990 Reg. 194, at r. 30.06(b). [^2]: Statement of Defence, at para. 57. [^3]: 2002 SCC 18, [2002] 1 S.C.R. 595. [^4]: Ibid at para. 79. [^5]: Whiten v. Pilot Insurance Co., 2002 SCC 18, [2002] 1 S.C.R. 595, at para. 92. [^6]: 2012 SKCA 106, 405 Sask. R. 8. [^7]: Ibid at paras. 13-15.