Justice Quinn Clarifies Privilege Issues in Insurance Cases

I was happy to read the reasons of Justice Joseph W. Quinn in Panetta v. Retrocom et al., 2013 ONSC 2386 (CanLII) because, to my mind, they bring a great deal of clarity to what I find is an often-misunderstood topic: privilege issues in insurance cases.

We all know that in the wake of General Accident Assurance Company v. Chrusz, 1999 CanLII 7320 (ON CA), the “dominant purpose” test has become well-established in relation to litigation privilege. It must be shown that the document in question was created for the dominant purpose of litigation, actual or contemplated.

That approach has also been endorsed by the Supreme Court of Canada in Blank v. Canada (Minister of Justice), 2006 SCC 39, [2006] 2 SCR 319.

So far, so good. But it seems to me that in applying the dominant purpose test, courts have sometimes focused inappropriately on whether, objectively speaking, litigation was likely at a given point. In my view, that question is irrelevant in an insurance context, in third party liability situations.

What has, I think, contributed to some confusion about privilege in insurance cases is a failure to differentiate between first and third party claims. Justice Quinn makes clear the distinction between the two and the implications for questions of privilege.

In a first party situation, the dispute stems from a contractual relationship between insurer and insured. Chrusz was such a case. When an insurer begins the process of adjusting a claim, it is rarely the case that documents are being created for the dominant purpose of anticipated litigation. As Justice Carthy said in Chrusz:

In my view, an insurance company investigating a policy holder’s fire is not, or should not be considered to be, in a state of anticipation of litigation. It may be that negotiations and even litigation will follow as to the extent of the loss but until something arises to give reality to litigation, the company should be seen as conducting itself in good faith in the service of the insured.

In a potential third party claim situation, on the other hand, the only reason for the insurance company to become involved and to begin creating documents, is to prepare to respond to a claim of some sort against its insured by a “third party” (i.e., someone outside the contractual relationship between insurer and insured). It might very well be the case that no claim is ever made against the insured but that does not change the fact that the sole reason for the insurer to take statements from witnesses, have photographs taken etc. is its apprehension of litigation against its insured. Whether or not that apprehension is reasonably held is, in my view, irrelevant. The “dominant purpose” test is satisfied in all such cases, by definition.

Justice Quinn understands this. Panetta was a slip and fall action. The plaintiffs were husband and wife and the wife had fallen in the parking lot of a Walmart store. The plaintiffs sought production of various documents on which one of the defendants (the owner of the premises) had claimed privilege.

Justice Quinn reviewed a number of cases, including some that have held that, for litigation privilege to arise, there must be a “substantial likelihood” of litigation or at least a “reasonable prospect” of litigation. His Honour disagreed and, in my view, he was quite correct. He said:

[60] As soon as the female plaintiff fell and was injured on March 5, 2008, she was in an adversarial position with all of those who ultimately were to become defendants and with their insurers.

[61] I think that, in third-party or tort claims (as opposed to claims by an insured against his or her own insurer), there is no preliminary investigative 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 naive to think otherwise; and the fact that the investigation may be used to arrive at a pre-lawsuit settlement does not detract from the point that I make. The prospect of litigation inherently includes the prospect of settlement.

[62] I agree with the submissions of Wahlman that 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”.

This, I think, correctly states the law. For litigation privilege to exist in a third party liability scenario, litigation need not be “likely”, nor need there be a “reasonable prospect” of it. The privilege arises from the circumstances in which the documents come into existence and, in a third party claim situation, the only reason for their creation is potential litigation.

While he was at it, Justice Quinn dealt with a number of other privilege issues that commonly arise in insurance cases. His reasons set out the following principles:

  • It is not essential that counsel be retained before litigation privilege attaches to a document.
  • Documents and correspondence regarding reserves are “clearly something within the concept of litigation privilege”.
  • “The internal memoranda and work sheets of the adjuster [are] privileged . . . and need not be produced”.
  • Statements or information from the opposing party must be produced, but not “notes containing commentary, remarks, observations, etc. . . . [recorded] during an interview or questioning of an opposing party”.
  • Although a statement (in writing or recorded), taken from a party by an adjuster, must be produced, if there are comments or impressions noted by the adjuster as to the credibility of the party, they are not producible.
  •  “[T]he written witness statements, they, having been prepared for the purpose of litigation, are privileged and need not be disclosed. However, the facts relevant to the case [and 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”.
  • The name of the insurance adjuster who investigated the accident and the names of potential witnesses from whom he took statements, written or otherwise, . . . during the course of his investigation just as clearly do not. These names do not reveal anything of the facts in issue that the respondent does not already have, but do reveal details of the appellant’s investigation of the facts in issue. The respondent cannot be said to be seeking facts when he asks for this information; he is seeking details of the appellant’s investigation. That is exactly the sort of information that litigation privilege is designed to protect”.
  • If documents are privileged, so are the contents. “If the privilege is to mean anything, it must apply to the content as well as the physical document. The appellant cannot be compelled to, in effect, copy all parts of privileged documents dealing with facts and to hand the copies over. To rule otherwise would be to penalize the party who first investigated the matter by compelling him to hand over the complete fruits of his investigation of the facts to the other”.
  • “Surveillance of a claimant is not normal procedure. Certainly, by the time the insurer began retaining the services of persons to conduct that surveillance it can be reasonably concluded that litigation was contemplated and a file was being constructed for the dominant purpose of opposing the claim”.

Justice Quinn’s reasons provide a very useful primer on privilege in insurance cases.

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7 Responses to Justice Quinn Clarifies Privilege Issues in Insurance Cases

  1. Joseph Obagi says:


    I have not read the decision but the principle that a party need not disclose the names of potential witnesses who have knowledge of the events is quite troubling and seems contrary to rule 31.06(2). Does this now mean that both plaintiffs and defendants could essentially use litigation privilege to prevent disclosure of witnesses who have key facts relevant to the litigation? This seems to take the privilege too far and encourage parties (both plaintiffs and defendants) to suppress unfavourable facts in their possession.

    It was always my understanding that if one party investigated and uncovered unfavourable facts in that investigation they were nonetheless bound to disclose the “facts” uncovered including the names of potential witnesses. It was always an inherent risk of the investigation that it would uncover both favourable and unfavourable evidence. The thought that a party can now deny disclosure of relevant facts in its possession does not seem to serve the interests of justice.

    Have we just taken a step back to the days of trial by ambush? Query, does a party have to waive the privilege if they wish to call the witness at trial’or can they just include a will-say statement with all the favourable evidence they expect this witness to give and suppress disclosure of all the unfavourable evidence in the hopes of catching the opponent flat footed on cross-examination?

    Joseph Obagi

    • Joseph,

      I was confused on that point too.

      What the Panetta decision appears to be stating at ¶53-54 is that the name and contact information of any witness who gave a statement in the course of investigating the file is producible but that the statements made by the witnesses are not. ¶55 then states that the name of the adjustor who conducted the interviews (and who that adjustor interviewed) is not producible. If you limit ¶55 to “it is privileged as to which adjustor interviewed which witness, but the names and contact information of all witnesses interviewed is producible” it makes sense.

      At least, that’s the only way I can reconcile the decision. Justice Quinn even points out the discrepancy between the statement in ¶55 and Rule 31.06(2) in his footnote.

  2. David Cheifetz says:


    There are instances, even in the liability insurance situation, where the primary purpose for the creation of a particular “document” would be coverage rather than liability. As you know, in general liability coverage, the nature of the reported claim should alert an astute adjuster to coverage issues. This is more likely outside the Canadian form of motor vehicle liability insurance regime. Panetta wasn’t an mv claim. I, too, haven’t yet read it. However, I went to the case and searched for “coverage”. Nothing came up to suggest Quinn J recognized the difference between coverage investigations and liability investigations issue. Did he? As we both know, that problem is made worse when the same adjuster does both.



    • David:

      Yes, that’s true, but even where coverage is an issue, the only reason that an insurer investigates it is because it anticipates that it might be (or has been) called upon to respond to a claim against its insured. It seems to me that even in that situation, the sole reason for a document having been created is contemplated litigation.


  3. David Cheifetz says:


    Sure – sole means dominant. That’s an argument I’d make but suspect there’d be a risk of it losing.

    One way to avoid the problem is by having the coverage investigation and the liability investigation done separately. That protects the liability investigation because its only purpose is the insured’s liability.

    Then one can argue in most cases – or at least those where there’s an overlap between the liability facts and the coverage facts – that the only reason there was a coverage investigation was the liability claim, so that it ignores reality to suggest liability is somehow secondary to the coverage investigation.

    But there might be coverage investigations where the liability issue is clearly secondary: for example, late reporting; whether the event is insured at all; whether it occurred during the policy period at all; the applicability of certain exclusions. Some of these require some investigation into what happened but not necessarily that much.

    Of course, where coverage could be involved, the insurer could always retain outside counsel immediately to handle that investigation. Then one can argue whether counsel was acting as counsel – invoking lawyer-client privilege – or merely as an adjuster.



  4. Tom Ozere says:

    Why have none of you knuckle heads mentioned how funny the case is. Especially the footnotes.

  5. It looks to me like Justice Quinn accepts the Arcola decision out of the Saskatchewan Court of Appeal that says the contents (facts contained) in a witness statement are not privileged even if the document that is an embodiment of those facts is privileged, which I guess is good enough for me, especially as 31.06(2) gets me the name and address.

    I take Joseph’s point about unfavourable facts (uncovered in an investigation) being suppressed, with Panetta being invoked to justify the suppression, but speaking as a plaintiffs’ lawyer I am sure we have all had at least one file where we have uncovered a skeleton or two about a client in an area that defence didn’t (thankfully) go during EFDs, and I wonder how many of us disclosed these tidbits to defence counsel.

    If I think it’s bound to come out, I might, but otherwise it’s privileged and need not be disclosed, albeit perhaps under a different claim of privilege (lawyer-client).

    We have the common law (Conceicao Farms v Zeneca in the CoA) to help us get such unfavourable findings if contained in a draft expert report (if expert called at trial) but beyond that it’s up to us to ask the questions at EFDs that will elicit such unfavourable facts by way of answer (at the time or as per the duty to update answers, [yes it may be naïve to assume this duty is as a general matter assiduously complied with]).

    Not being a knucklehead I won’t respond to Tom’s invitation, but independently of the invitation I will observe that the decision is not devoid of humour: it looks like the Judge was fed some pretty tasty straight lines by counsel.

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