Canada: Litigation Privilege Over Adjusters' Files In BC

Last Updated: May 9 2018
Article by Anita Yuk

This article identifies a significant development in 2016 in British Columbia jurisprudence with respect to insureds' claims for litigation privilege over adjusters' reports produced well before the commencement of litigation.

There are different types of privilege. Solicitor-client privilege protects legal advice communications between a lawyer and client, while common interest privilege extends that protection by carving out an exception to waiver of solicitor-client privilege. When documents subject to solicitor-client privilege are disclosed to another party with a common legal interest, those documents remain protected despite disclosure. Settlement privilege protects communications that have been made in the course of negotiations to resolve a dispute. Litigation privilege is meant to create a zone of privacy in relation to pending or apprehended litigation, so that lawyers and their clients can freely investigate in preparation for trial. As the cases described below show, the protection afforded by litigation privilege is an important facilitator of the adversarial process.

The court application that is the subject of this article was for an order that Emil Anderson Maintenance Co. Ltd. ( "Emil Anderson"), a third party in an action, list and produce copies of adjusters ' reports, which were listed as privileged documents in Emil Anderson's amended list of documents. The matter was heard by Master Muir, who issued written reasons for judgement.

The underlying legal action, Plenert v. Melnik Estate 2016 BCSC 403 was one of 6 legal actions resulting from a multi-vehicle accident, which included a fatality, occurring on the Spuzzum Creek Bridge on Highway 1 north of the Village of Spuzzum, on November 26, 2010 at approximately 7:00 am. This area of highway is maintained pursuant to a maintenance agreement between Emil Anderson and the Provincial Ministry of Transportation. In the early hours of the morning a southbound tractor-trailer unit rolled onto its side on the bridge deck. Another tractor-trailer unit collided with it, sending one man to his death in the creek below. As a result a CN rail bridge was damaged, environmental damage occurred to the creek below and the bridge itself was severely damaged. An RCMP investigation ensued, which resulted in the Highway being closed until 8:00 pm that evening.

EARLY INVESTIGATIONS BY INDEPENDENT INSURANCE ADJUSTERS

At the time of the accident, Continental Casualty Company ( "CNA") was the liability insurer for Emil Anderson in its capacity as road maintenance contractor. Under the policy of insurance, the Province of British Columbia was named as an additional insured. The policy required CNA to defend and indemnify Emil Anderson and the Province with respect to claims arising from the maintenance work performed on Highway 1. The earliest independent insurance adjuster's report was prepared at the instruction of CNA on December 15, 2010, 24 days post-accident. Further adjuster's reports listed as privileged were dated March 16, 2011, July 1, 2011, September 28, 2011, June 13, 2012, February 7, 2013 and May 29, 2013. It was Emil Anderson's position that all of the reports and witness statements contained therein were protected against disclosure by litigation privilege as they were produced in anticipation of litigation for the dominant purpose of litigation.

It was Emil Anderson's position that since CNA was a third party liability insurer in the context of this loss, all investigations which took place from the time of the accident onwards could only be for the purpose of assessing risk and preparing for future or prospective litigation.

EVIDENCE SUPPORTING PRIVILEGE

In support of its position, counsel for Emil Anderson produced affidavits from the Vice-President of Claims for CNA, along with affidavits from two independent adjusters retained by CNA to conduct a full investigation of the circumstances surrounding the loss.

In the affidavit of the Vice‑President of Claims for CNA, it was identified that CNA received an email from the Litigation and Claim Service Manager for the B.C. Ministry of Transportation enclosing an article describing the seriousness of the accident along with several photographs of the accident scene. In that email it was relayed to CNA that an adjuster for ICBC had asked the Ministry of Transportation for the schedule for sanding on Highway 1. It was the affidavit evidence of the Vice-President of Claims for CNA that in circumstances where serious accidents are reported, CNA is required to produce a large loss summary report notification, retain an independent insurance adjuster and conduct investigations to obtain statements from witnesses in anticipation of litigation. In this case, CNA immediately retained an independent adjusting firm and advised that firm via email that they required a full investigation with respect to this loss.

As noted above, two affidavits were prepared by the independent adjusters who actually conducted the investigations. Both independent adjusters stated in their affidavits that based on the seriousness of the accident and the fact that an independent adjuster had been retained, they anticipated litigation against Emil Anderson. Both adjusters went on to further state that there was no other reason for an investigation to take place aside from the fact that litigation was anticipated.

LEGAL ARGUMENTS

Counsel agreed that the test with respect to whether documents for which litigation privilege is claimed should be produced in litigation, as set out in Hamalainen (Committee of) v. Sippola (1992), 62 BCLR (2d) 254 at p. 260-261 (BCCA), can be properly summarized in the follow excerpt:

... a document which was produced or brought into existence either with the dominant purpose of its author, or of the person or authority under whose direction, whether particular or general, it was produced or brought into existence, of using it and its contents in order to obtain legal advice or to conduct or aid in the conduct of litigation, at the time of its production in reasonable prospect, should be privileged and excluded from inspection.

Any attempt to apply the rule when determining a claim of privilege with respect to a document necessarily requires that two factual determinations be made:

  1. was litigation in reasonable prospect at the time it was produced; and
  2. if so what was the dominant purpose for its production?

In the B.C. Court of Appeal case of Raj v. Khosravi, 2015 BCCA 49, it is noted that the threshold for determining whether litigation is in "reasonable prospect" is a low one. It does not require certainty, but the claimant must establish something more than mere speculation. Litigation can be properly said to be in reasonable prospect when a reasonable person, possessed of all pertinent information, would conclude it is unlikely that the claim for loss would be resolved without it. With respect to this point, in her reasons for judgment in the subject case, Master Muir wrote as follows (at para. 30):

I agree it was early days, but given the type and severity of the accident and the fact that another adjuster was making inquiries about road maintenance, I am satisfied that litigation involving Emil Anderson was in reasonable prospect at the time the claim was reported to CNA [sic].

THE DOMINANT PURPOSE TEST

In the case at bar, counsel for the ICBC insured, who brought on the application, advanced the position that one of the purposes for the early investigation must have been to investigate the facts of the accident and until those facts are determined it could not be said that litigation was the dominant purpose for the inquiry. It is noteworthy that all the cases relied on to support the ICBC insured defendant's position factually involved a universal insurer discharged with resolving many issues including fault, coverage, Part 7 claims and liability. Traditionally in British Columbia, cases involving a universal insurer have been found by the courts to involve both a litigation stage and an adjusting stage, when adjusters are investigating losses. In distinguishing the case at bar from cases relied on by counsel for the ICBC insured, Master Muir referenced the Ontario Superior Court decision of Panetta v. Retrocom Midmarket Real Estate Investment Trust, 2013 ONSC 2386 and relied on the following passage (at paras. 61 and 62):

I think that, in third party or tort claims (as opposed to claims by an insured against his or her own insurer), there is not a preliminary investigation phase where privilege does not attach to notes, reports and files of adjusters. In third party insurance claims, the sole reason for any investigation by or on behalf of an insurer is because of the prospect of litigation. It is naïve to think otherwise; and the fact that the investigation may be used to arrive at a pre‑loss settlement does not detract from the point that I make. The prospect of litigation inherently includes the prospect of settlement.

... there is no purpose for the creation of documents by an insurer in a tort context other than: (1) for anticipated litigation; (2) for setting reserves; or (3) for seeking legal advice. For completeness, I would add as a corollary to (1): for the purpose of settlement, which I see as inextricably entwined with "anticipated litigation ".

RULING

Master Muir was satisfied in this case that the documents in issue were protected against disclosure under the litigation privilege. She noted that the evidence before her supported the finding that CNA had a limited role as liability insurer, which included the duty to defend and indemnify Emil Anderson and the Province. It is noteworthy that she wrote that she would not go so far as to say that in all circumstance the investigations of liability insurers will be privileged, but that there was no evidence in this case that the subject reports were created for multiple purposes.

SUBSEQUENT JUDICIAL TREATMENT

Panetta, the Ontario case, was cited again by the BC Supreme Court in Drewniak v Law, 2017 BCSC 1565, a slip and fall case in a private home. As was the case in Plenert, an application was made for an order that the defendants disclose an independent adjuster 's report as well as some audio statements that were collected by the adjuster.

The report and audio statements were created after the plaintiff's lawyer invited one of the defendants to contact their home insurer after the alleged slip and fall, indicating to the defendant that an action was being contemplated. The defendant did so, and the home insurer hired the independent adjuster who began interviewing witnesses.

Again, as in Plenert, the applicant argued that the adjuster's report should not be the subject of litigation privilege as, based on the timing and circumstances of its creation, the report was primarily, or even equally, investigative. Though Master Bouck easily dismissed the application, finding it a matter of common sense on the facts before her that the dominant purpose test had been met, it should be noted that a significant part of Master Bouck's relatively short reasons was spent discussing the continuum book-ended by the investigative and litigation-focused stages of an inquiry.

DISCUSSION

The two notable points just discussed suggest that, in cases of third party insurance claims in BC, the bar for finding that litigation was the dominant purpose of an adjuster's activities may be low, but the law is certainly not as clear-cut as it is in Ontario where the Superior Court has stated there is no preliminary investigation phase in such claims.

Thus, we are left with two key practice points to observe in the early stages of investigation after a loss has occurred:

  1. It is important that both insurance examiners and any independent adjusters/investigators involved understand that the investigation is being undertaken in the anticipation of litigation; and
  2. In circumstances where privilege claimed over investigations and reports is being challenged, it is absolutely essential that counsel prepare affidavits from both the insurer and the independent adjuster(s) who produced the reports, setting out all of the information that they had available to them with respect to the purpose of the investigation from the outset.

The ruling in Plenert is a valuable precedent that helps protect the confidentiality of early investigations conducted at the request of insurers in British Columbia. Contested hearings concerning whether documents in an insurance case are protected by litigation privilege will generally be determined on a case-by-case basis, depending on the facts and the specific knowledge and evidence of the insurers and independent adjusters at the time investigations were conducted.

Read the original article on GowlingWLG.com.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Alexander Holburn Beaudin + Lang LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Alexander Holburn Beaudin + Lang LLP
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions