Insurance Adjuster's Documents and Litigation Privilege

Insurance defence counsel routinely put most, if not all, documents created by an insurer in its investigation of a claim in to schedule B of the insurer’s Affidavit of Documents. Defence counsel take the position often that these documents are subject to litigation privilege. Plaintiff’s counsel do not often object, but increasingly are requesting copies of these documents.

A recent motion heard by Justice Ferguson of the Ontario Superior Court of Justice addressed this issue in Kavanagh v. Peel Mutual Insurance, [2009] O. J. No. 4349. Justice Ferguson helpfully reviewed the applicable law of litigation privilege. The seminal case in this area of the law is the Supreme Court of Canada decision in Blank v. Canada in which the dominant purpose test was adopted. Subsequently, judges of the Ontario Superior Court of Justice have applied a two step approach for the assertion of litigation privilege:

1) Whether litigation was a reasonable prospect at the time the document was produced, and
2) If so, whether the dominant purpose for the creation of the documents in question was to assist in a contemplated litigation.

Further, Justice Ferguson summarized the law from earlier court decisions and indicated that litigation privilege cannot be founded on a suspicion of the possibility of litigation. Justice Ferguson went on to consider whether disclosure of documents may be granted if a plaintiff can show actionable misconduct prima facie and concluded, applying the judgment in Blank v. Canada, that it is possible but that the plaintiff must put evidence before the court of such actionable misconduct.

When investigating claims, insurers need to be aware that whatever they put in to their file may be ordered to be produced to the opposing party in later litigation. Their investigation file is not automatically protected by privilege unless litigation was a reasonable prospect at the time the document was produced and if the dominant purpose for the creation of the document was to assist in the contemplated litigation. Of course once legal counsel is retained on a file, the documents created for communication with legal counsel will be protected by solicitor-client privilege which is arguably a higher or stronger type of privilege.