Mai 2012 — “Last March 6, in a unanimous decision, the Court of Appeal reaffirmed the fact that an insurer could not be obliged to disclose to the opposing party the investigation report of the investigators and claims adjusters whose services it had retained.”

Last March 6, in a unanimous decision, the Court of Appeal reaffirmed the fact that an insurer could not be obliged to disclose to the opposing party the investigation report of the investigators and claims adjusters whose services it had retained.

It was about time that this decision was rendered, because two recent decisions had significantly undermined the well-established principle of the confidentiality of communications between an insurer and its claims adjusters.

CONTROVERSIAL DECISIONS

First of all, in June 2011, in the case of St-Pierre and others v. Union canadienne¹ (overturned by a judgement of the Court of Appeal which we will deal with farther on) the insurer was being sued for an insurance indemnity following a fire that destroyed the insured’s facilities. Union Canadienne refused to pay the indemnity, alleging that the insured made false statements when the policy was taken out and at the time of the investigation. The insurer also alleged that the fire was intentional.

In addition to the payment of the indemnity, the insured were also claiming punitive and moral damages based on the insurer’s “arbitrary and unreasonable conduct” and its “reckless and hostile attitude.” The long period of time (eight months) taken by the insurer to notify the insured of its refusal to cover was specifically at the basis of this claim. It was to support this claim that the plaintiffs tried at an examination on discovery to oblige the disclosure of a report which was sent to the insurer by an investigation agency and a claims adjuster whose services were retained to conduct an investigation.

Surprisingly, in an oral decision, the Superior Court had allowed this request, considering that the case law regarding the confidentiality of these reports had to be distinguished because they were not required to prove the truth of the information they contained, but rather to establish the point at which the insurer had knowledge of the facts which had led it to cancel the insurance policy and to refuse to pay the insurance indemnity.

In December 2011, the Superior Court rendered a decision similar to the one in Giroux v. Chouinard².

This was a suit in damages undertaken by the owners of a cottage against tenants following a fire in the cottage in question. The plaintiffs alleged that a cigarette or match which had been thrown away by the tenants had caused the fire. They were trying to oblige their own insurer to disclose to them the content of the claims adjuster’s file whose services it had retained. It seemed that this file contained statements from the tenants to that effect, and even admissions.

The court underlined the fact first of all that in Ciment du St-Laurent v. Barrette and others.³, the Court of Appeal had unanimously ruled that the written statements signed by persons who had been questioned by a third party investigator were confidential and protected under the privilege covering documents prepared for an attorney for litigation purposes.

In this case however, the Superior Court reached the conclusion that the statements obtained by a claims adjuster had not been for the purpose of litigation between an insurer and an insured, but for an investigation of a loss and accordingly, was not protected by a solicitor-client privilege.

We underline that this decision seems to have been influenced by the fact that the defendants, who were objecting to this disclosure, were neither the insurer nor the claims adjuster, and did not therefore have the benefit of the solicitor-client privilege.

These two decisions seem to show an increasing restriction in the conditions for the application of the solicitor-client privilege.

However, in the beginning of 2012, the Court of Appeal⁴ overturned a decision rendered by the Superior Court in St-Pierre and others v. Union canadienne⁵ and reiterated that an insurer could not be required to disclose reports prepared by its claims adjusters.

CONFIRMATION OF THE PRINCIPLE OF THE CONFIDENTIALITY OF REPORTS BY INVESTIGATORS AND CLAIMS ADJUSTERS

Legal Basis of the Principle

The principle applicable regarding disclosure of evidence is specified in articles 397 and 398 of the C.C.P.: a party may obtain any relevant document that is in the possession of the opposing party or a third party, except if that document is covered by an immunity of disclosure in court. This mainly includes professional secrecy or a litigation privilege.

First of all, the Court of Appeal specified that the confidentiality of the reports written by investigators and claims adjusters whose services were retained by an insurer are not covered by professional secrecy, even if the investigators and claims adjusters are bound by an obligation of confidentiality.⁶ The Court of Appeal recalls that the solicitor-client privilege only prevents the disclosure of information exchanged “in a help relationship.” It cites Professor Ducharme who wrote that a help relationship requires that the disclosure be made “with the overriding interest of allowing the confident to properly know the needs of the person disclosing the information to allow him to meet those needs.” It reached the conclusion that investigators and claims adjusters do not have the benefit of this immunity from disclosure, which is called professional secrecy. They “collect and compile information from third parties; they analyze it and give the insurer their findings to allow it to take a position regarding a claim made by its insured or a third party. The idea is not to help the confident but to inform the party retaining their services.” The Court of Appeal also adopted the Supreme Court’s case law according to which only members of professional associations governed by the Professional Code may invoke professional secrecy.

The confidentiality of the relationship between an insurer and an investigator or a claims adjuster whose services it retains is rather based on the privilege of non-disclosure regarding litigation, the purpose of which is to ensure the efficiency of the adversarial process and to allow the parties to “prepare their arguments in private, without interference from the opposing party and without fearing premature disclosure.”⁷

Conditions for the Application of the Privilege

In order to be covered by the non-disclosure privilege, reports by investigators and claims adjusters must meet certain conditions.

Only documents which are prepared “exclusively or mainly for the purposes of litigation” remain confidential. It is not necessary that they be prepared exclusively for that, but they must be mainly prepared for that purpose.

This privilege is not limited to communications between an insurer and its attorney. It also protects communications between an attorney and a third party whose services were retained by his client, as well as communications between a client who is not yet represented and a third party whose services he retained. Accordingly, even a document that is not yet disclosed to the insurer’s attorney may be covered by this protection. On the other hand, the mere fact that a document was disclosed to an attorney does not necessarily mean that it is confidential, if the other conditions for application are not met.

The Court of Appeal specified that the reports written by investigators and claims adjusters meet these conditions “when they are used as a tool by an insurer in managing its case.” This is namely the case with a report ordered by an insurer to decide on its insured’s right to an indemnity and to support its decision not to indemnify, as the case may be.

Lastly, it underlined the fact that the litigation in question does not have to exist when the report is prepared for the non-disclosure privilege to apply. All that is required is that this litigation be foreseeable at that time and that the report be ordered to help the insurer and its attorneys in managing potential litigation.

BEWARE OF WAIVING THE CONFIDENTIALITY OF A REPORT

An insurer, its mandataries and their attorneys must however abstain from doing certain things which would allow an insured or third parties to invoke an explicit or implicit waiver of the litigation privilege, namely by:

• Producing or disclosing a report;
• Invoking the existence and the content of this report in legal procedures;
• Disclosing the content of the report which is favourable to the insurer;
• Invoking the content of the report to justify a decision or the insurer’s good faith.

The following are not a tacit waiver:

• The vagueness of allegations in a defence, without details as to their basis;
• Disclosure of an exhibit which refers to the existence of a report;
• The mere reference to the existence of such a report in testimony.

Although it may be tacit, in all cases a waiver must be “willful, clear and obvious.”⁸

CONCLUSION

Although reaffirmed by the Court of Appeal, the confidentiality of the reports of investigators and claims adjusters is worthy of the attention of the various actors in the field of insurance.

In fact, the litigation privilege being an exception to the disclosure rule, it must accordingly be interpreted restrictively.

The modern tendency for the complete disclosure of evidence, which has been approved by the Supreme Court of Canada⁹, is also the basis for the application of this exception, which, it must be underlined, does not benefit from the same protection by the courts as the solicitor-client privilege does.

The various actors are well-advised to properly know the conditions for the application of this privilege, as well as the rules regarding its waiver, to take all means to protect the confidentiality of communications between the insurer and third parties mandated by it to conduct investigations.

1. t-Pierre and others. v. Union canadienne, Justice André Prévost, S.C. Terrebonne, June 30, 2011 (reversed on appeal, 2012 QCCA 433)
2. Giroux v. Chouinard, 2011 QCCS 6801, Justice Catherine La Rosa, S.C. Montmagny, December 15, 2011
3. Ciment du St-Laurent v. Barrette and others REJB 1997-01469 (C.A.)
4. Union canadienne, Insurance Company v. St-Pierre and others, 2012 QCCA 433
5. Supra, note 1
6. An Act respecting detective or security agencies, C.Q.L.R., c. A-8, sect. 9; Code of ethics of claims adjusters, C.Q.L.R. c. D-9,2, r.4, sects. 22 and 23
7. Blank v. Canada (Department of Justice), 2006 SCC 39, [2006] 2 S.C.R. 319
8. Supra, note 4, para. 51
9. Supra, note 7, paras. 59 and 60