By: Deborah Ikede, Associate Lawyer
Litigation privilege is fundamental to the proper functioning of our legal system. It allows for the adversarial process to function effectively as it allows parties to investigate facts and develop strategies knowing that this information is protected from disclosure. The courts have found that litigation privilege is meant to create a “zone of privacy” in relation to anticipated litigation so that litigants can prepare their respective cases in private without adversarial interference.[1]
The Supreme Court of Canada in Lizotte v Aviva Company of Canada[2] differentiated between litigation privilege and solicitor-client privilege as follows:
The purpose of solicitor-client privilege is to protect a relationship, while that of litigation privilege is to ensure the efficacy of the adversarial process; … litigation privilege is not directed necessarily at communications between solicitors and clients – it applies to any document or communication whose dominant purpose is preparation for litigation.
Litigation privilege has a much broader scope and may extend to outside parties such as experts and investigators so long as they are helping within the purview of anticipated litigation.
Test for Applicability of Litigation Privilege
Blank v. Canada (Minister of Justice)[3] is the Supreme Court of Canada’s seminal ruling on the scope of litigation privilege and brought much-needed clarity to how courts determine whether a document is protected by litigation privilege. The Blank decision re-affirmed the two-part legal test for litigation privilege namely that a document must have been created:
Each aspect of the two-part test involves a factual determination, and the onus is on the party claiming privilege to establish on a balance of probabilities that both parts of the test are met with respect to each document that is subject to the claim.[4] Dominant purpose does not mean the sole or only purpose. A claim for privilege will succeed when a party can establish that a document produced for dual or multiple purposes, one of them being litigation, was produced for the dominant purpose of litigation.[5]
Litigation Privilege for Investigative Materials
After having suffered a loss, a risk manager, claims professional or insurer will often begin an investigation in an attempt to determine the cause of the loss and to develop a strategy for the actions to be taken in managing the anticipated risk. These materials are typically prepared at a time where it is too early to determine whether the claim being investigated will eventually lead to litigation or if the report will be communicated to lawyers for their assistance and advice. Are these investigative materials still subject to litigation privilege?
According to the jurisprudence that have considered these matters, it would depend on the nature of the claim. For third party liability claims tort), a primary reason that risk managers and claims professionals become involved is to prepare and assist with the anticipated respond to an eventual claim.[6]
In Panetta v Retrocom Mid Market Real Estate[7], the Court ruled on whether post-incident investigation records are privileged. The action arose following a slip-and-fall accident. The Plaintiff sought production of the statement that the Defendant’s third party liability insurer took from its insured along with the adjuster’s notes that were created before the plaintiff provided notice that a claim was being advanced. The Defendant challenged the production of the requested documents and asserted litigation privilege. At issue was whether the adjuster’s notes and reports which were prepared well before litigation was initiated were subject to litigation privilege.
The Court in Panetta disagreed with the plaintiff’s position that for litigation privilege to arise, there must already be a substantial likelihood of litigation and concluded that in third party claims that there is no preliminary investigative phase where privilege does not attach to notes, reports, and/or files of adjusters. The Court stated that the only reason for any investigation on behalf of the third party liability insurer is for the prospect of litigation. The Court ultimately held that potential third party claims trigger a prima facie adversarial position where litigation privilege will typically apply to documents created immediately following a loss or incident.
The Panetta decision provides a useful primer on the nature of litigation privilege and set out the following important principles that apply to the potential application of litigation privilege:
In order for a document to be protected from disclosure by litigation privilege, it must be prepared with the dominant purpose of defending a claim that is brought;
It is not essential that counsel be retained before litigation privilege attaches to a document;
The document must be created for the dominant purpose of use in existing, contemplated, or anticipated litigation;
Documents and correspondence regarding reserves as well as internal memoranda and work sheets of the adjuster are within the domain of litigation privilege;
Written witness statements, having been prepared for the purpose of litigation, are privileged, and need not be disclosed. However, the facts relevant to the cases (including the names of all potential witnesses whether reflected in the privileged documents or not), are not privileged and must be disclosed if sought by one party through an examination for discovery;
Whether litigation privilege attaches to a document is a case specific inquiry; and
Portions of the file created for investigation, assessment, settlement before claim, and defence are all points along a continuum and are all created with a view to adjusting a claim.
These principles have been adopted by other Courts when contemplating the application of litigation privilege in the domain of risk management documentation created well before litigation has commenced.
Notably, the Plenert v Melnick Estate[8] case provided additional clarity, and served to strengthen the position of third-party liability insurers who find themselves facing an application for production of adjusters’ investigative materials. Plenert reaffirmed that litigation privilege will typically attach to adjusters’ pre-litigation material.
This case involved a motor vehicle accident in which the Defendants commenced third party proceedings against a number of defendants including a road maintenance contractor, Emil Anderson Maintenance Co. Ltd. (“Emil Anderson”). Several defendants sought the production of preliminary reports and witness statements, which had been prepared and obtained by several adjusters on behalf of Emil Anderson. At issue was whether Emil Anderson was required to disclose reports and witness statements prepared by its independent adjuster.
Emil Anderson argued that the documents were prepared at a time when litigation had been reasonably anticipated, for the dominant purpose of litigation and therefore protected by litigation privilege. In support of its position, affidavit evidence from its insurer who stated that the only reason the insurer requires its claims handlers to undertake an investigation – open a file, retain independent insurance adjusters, and obtain witness statements – is to prepare for anticipated litigation against an insured.
The Defendants argued that there is a spectrum to an investigation, and that it is not until the underlying facts of a case have been determined that litigation can be said to be reasonably contemplated. In this case, the documents had been prepared simply for the dominant purpose of investigating the accident, not for the purpose of anticipated litigation. In addition, the leading email had stated the documentation were being created out of an “abundance of caution”.
Applying the dominant purpose test, the Court relied on the decision of Panetta and determined that in third party claims, the main purpose for creating any investigative materials would be for anticipated litigation, to set reserves and to seek legal advice. The Court noted that the type and severity of the accident, together with the fact that an adjuster had requested Emil Anderson’s road maintenance schedule, was sufficient to demonstrate that there was a reasonable belief of imminent litigation when the documents were created.
Thus, while the initial investigative actions were made out of an “abundance of caution”, the overall evidence suggested that litigation was likely. Accordingly, the court held that the documents were protected by litigation privilege. However, the court was clear to point out that preliminary investigations will not attract litigation privilege in all cases and will depend on the particular circumstances of the facts.
If a document is created for a dual or multiple purpose (for example, to investigate the cause of the accident and to furnish information to a lawyer for advice) and none of which is “dominant”, then the document is not protected by litigation privilege because it was not created “wholly or mainly” for litigation.[9]
Practical Implications
The courts have held repeatedly that a determination of whether litigation privilege applies is a fact specific inquiry. When determining whether litigation privilege applies, Courts will analyze each factual pattern on a case-by-case basis paying attention to the type of claim, the nature of the loss and the affidavit evidence of parties retained to investigate the claim.
While there is a prima facie presumption that litigation privilege will apply to any document collected at these earliest stages of a claim by a risk manager or claim professional as litigation is often anticipated immediately following a loss, there is not an automatic right to assert litigation privilege over investigative materials. In order to determine whether litigation was reasonably anticipated, Courts pay meticulous attention to the nature of claim being advanced and whether the investigation was undertaken in anticipation of litigation.
Companies would be wise to have clear policies and procedures for investigating and managing risk that identify the purpose for which documents are created. Such a practice will increase the likelihood of successfully asserting litigation privilege.
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[1] Blank v Canada (Minister of Justice),1999 CanLII 7320 (ON CA) at paras 27-28 and 34.
[2] Lizotte v Aviva Insurance Company of Canada, 2016 SCC 52 (CanLII), [2016] 2 SCR 521 at para 22.
[3] Blank, supra note 1.
[4] Hamalainen v Sippola,1991 CanLII 440 (BC CA).
[5] Hamalainen, ibid. at 25
[6] Panetta v Retrocom et al, 2013 ONSC 2386 (CANLII), see also Plenert v Melnick Estate 2016 BCSC 403 (CanLII).
[7] Panetta v Retrocom et al, ibid.
[8] Plenert v Melnick Estate 2016 BCSC 403 (CanLII).
[9] Hamalainen, supra note 4 at para 22.