The action arises from a very serious motor-vehicle accident that occurred in November 2010. There were at least five actions commenced and in addition to the injuries and vehicle damage, there was alleged damage to the rail line close to the scene of the accident.
Emil Anderson Maintenance Co. Ltd. ("Anderson") was the third party contractor responsible for maintenance of the section of the highway involved. Continental Casualty Company (“Continental”) was the liability insurer for Anderson and the policy required Continental to defend and indemnify Anderson with respect to claims arising from his road maintenance work.
Continental’s evidence is that, in cases of serious incidents, it is required that a loss summary report be produced. Further, when Continental expects litigation against an insured, it is required to open a file and retain an independent insurance adjuster to conduct an investigation and obtain witness statements in anticipation of litigation.
In December 2010, Continental retained an independent adjuster for a full investigation of the incident. The independent adjuster’s evidence is that the sole reason he prepared his report was because he anticipated litigation against Anderson. There were three reports provided to Continental and three to counsel.
Anderson takes the position that the reports and witness statements are protected by litigation privilege. The defendants seek an order that Anderson provide copies of documents that are claimed as privileged on Anderson’s list of documents.
Legal Basis and Decision:
The parties agreed that the test with respect to the production of documents for which litigation privilege is claimed is set out in Hamalainen (Committee of) v. Sippola (1992), 1991 CanLII 440 (BCCA). In short, determining a claim of privilege with respect to a document 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.
Reasonable Prospect of Litigation:
With respect to the reasonable prospect of litigation, the defendants argue that litigation was not a reasonable prospect at the time because Continental did not know who was involved in the accident and there was no evidence from Anderson. They argue that the insurer was clearly “embarking on an investigation that would determine if litigation was in prospect.” Specifically, the defendants say that the claim of litigation privilege was made despite an initial email that reported the incident to Continental as being made out of an “over-abundance of caution.”
Master Muir held that, given the type and severity of the accident, and the fact that the independent adjuster was making inquiries about road maintenance, he was satisfied that the litigation involving Anderson was in reasonable prospect at the time the claim was reported to Continental.
With respect to the dominant purpose, the defendants argue that one of the purposes of the investigation, and the production of the documents as a result, was to investigate the facts of the accident and until those facts were determined, it could not be said that litigation was the dominant purpose for the inquiry. Anderson argues that the only purpose of involving Continental and starting an investigation was in contemplation of litigation and for payment of third party loss.
The defendants rely on various cases to support their argument that if Anderson’s position is accepted, all that a party would have to do is refer an investigation to its liability insurer to guarantee that the investigation draws privileged.
Counsel for Anderson distinguishes the cases relied upon by the defendants on the basis that those cases involved ICBC – “a universal insurer and one that is charged with resolved many issues including fault, coverage, part 7 claims and liability.” Anderson argues that, in this case, there are no such investigations required.
Master Muir held that, although he would not go so far as to say that in all circumstances the investigation of liability insurers will be privileged, he is satisfied that the documents in issue here are protected by litigation privilege. There was no evidence that they were created for multiple purposes and the only reason for the investigation was to defend against potential litigation that was reasonably in contemplation. Further, this is supported by the fact that Continental’s role was limited in this matter to defending and indemnifying Anderson.
This recent decision will undoubtedly assist both insurers, and the insured, who are seeking to claim privilege over early investigative documents, reports, and witness statements that are prepared before litigation is actually started. Having said this, an insurer that has a limited role of defending and indemnifying the insured will be able to have the litigation privilege attach to investigative documents more easily than an insurer that is in charge of resolving many issues at the preliminary stages.