Adjuster Privilege

An adjuster’s file is ripe with documents that insurance companies who hired the adjuster would not want to end up in the hands of plaintiffs. For example, adjuster’s files will often contain witness statements, reports of various types, legal opinions, and documents setting out the insurer’s position and strategy.

Some of what is found in an adjuster’s file will be subject to litigation privilege. However, only those documents that can meet the “dominant purpose” test will be subject to privilege; all other documents may be subject to production to an adversary in a lawsuit. The “dominant purpose” test is applicable in most Canadian provinces, including British Columbia, Alberta, Manitoba, Ontario, New Brunswick, and Nova Scotia: Hubbard at 12-47.

Litigation privilege is separate and distinct from solicitor-client privilege. Solicitor-client privilege attaches to all communications made between a lawyer and client where the client is seeking the lawyer’s advice. Litigation privilege is different; it is “broader in scope”: Moseley v Spray Lakes Sawmills (1980) Ltd., [1996] 39 Alta LR (3d) 141 (CA) at para. 18.

Litigation privilege “applies to communications between a lawyer and third parties or a client and third parties, or to communications generated by the lawyer or client for the dominant purpose of litigation when litigation is contemplated, anticipated or ongoing. Generally, it is information that counsel or persons under counsel’s direction have prepared, gathered or annotated”: Hubbard, Magotiaux, and Duncan, The Law of Privilege in Canada (Aurora: Canada Law Book, looseleaf) (“Hubbard”) at 12-3. Thus the “dominant purpose” test means that communications and documents prepared, gathered or annotated for the dominant purpose of either ongoing or anticipated litigation will be subject to litigation privilege: Blank v Canada (Minister of Justice), [2006] 2 SCR 319 (SCC) at para. 60.

The following elements are generally required to establish litigation privilege over communications or documents:

• Documents or communications must be prepared, gathered or annotated by counsel or persons under counsel’s direction;

• Any preparation, gathering and annotating must be done in anticipation of litigation;

• Communications or documents must meet the dominant purpose test;

• Documents and facts contained in the documents need not be disclosed; and

• Documents and facts have not been disclosed to the opposing party or the court: Hubbard at 12-3 – 12-4.

It is not necessary for communications to be made by or to a lawyer for litigation privilege to apply. However, Hubbard notes: “the onus of claiming privilege is unlikely to be satisfied by solely asserting that the document was prepared for the dominant purpose of pending or contemplated litigation. There must be some connection between the communication over which privilege is claimed and legal counsel” [Emphasis added]: Hubbard at 12-50.10.

The case of Moseley v Spray Lakes Sawmills (1980) Ltd. illustrates this point. Moseley involved a motor vehicle accident in which a plaintiff was seriously injured. The defendant’s insurance company sent an adjuster to interview the defendant and conduct an investigation into the accident to decide if there was a possible liability claim against the defendant company. The adjuster prepared a report and gave it to the insurance company. The insurance company then closed its file before the plaintiff brought his lawsuit; the insurance company did not contact its lawyer prior to closing the file.

During the course of litigation, the plaintiff applied for production of the driver’s statement given to the adjuster. The Court of Appeal held that the statement was not subject to litigation privilege, noting at para. 24:

The key is, and has been since this Court adopted the dominant purpose test in Nova, that statements and documents will only fall within the protection of the litigation privilege where the dominant purpose for their creation was, at the time they were made, for use in contemplated or pending litigation. While a lawsuit need not have been initiated, and while a lawyer need not have been retained at the time the statement or document was made, the party claiming privilege must establish that at the time of creation the dominant purpose was use in litigation. The words “by reason of an intention to provide information to solicitors” are not superfluous. The test is a strict one. As has often been stated, it is not enough that contemplated litigation is one of the purposes. So litigation privilege will not automatically apply to statements taken or reports made by insurance adjusters investigating serious personal injury accidents. The converse, however, is also not true. It will not automatically fail to apply in such circumstances, as suggested by the appellant.

The Court of Appeal also noted the importance of the connection between privileged documents or information and legal counsel. Litigation privilege is “intended to permit a party to freely investigate the facts at issue and determine the optimum manner in which to prepare and present the case for litigation. As a rule, this preparation will be orchestrated by a lawyer, though in some cases parties themselves will initiate certain investigations with a view to providing information for the “lawyer’s brief””: at para. 21.

Clearly, there is no blanket statement that adjusters’ files as a whole are protected or not protected by litigation privilege. Each document in an adjuster’s file will have to be subjected to the “dominant purpose” test: Hosanna Enterprises Ltd. v Laser City Audio Video Ltd. (1999), 8 ACWS (3d) 359 (BCSC). Some documents will be privileged and some will not. Documents created with the dominant purpose of determining and adjusting a loss will not be privileged: Ferris v Shell Canada, 2000 CarswellOnt 2886 (ON SCJ). Documents created for the dominant purpose of ongoing or anticipated litigation will be privileged.

What does an insurer or adjuster have to do to establish the “dominant purpose” test? It may not be enough for a party to simply say or depose, “this document was created for the dominant purpose of ongoing or current litigation”, if there is an equally likely explanation that the document was created for some other purpose.

Courts instead will look at all of the facts surrounding the creation of the document and determine the application of the privilege on a case-by-case basis. For example, Courts may look at the way the party claiming privilege treated the document or statement prior to the request for production: Semkiw v Wilkosz (2009), 178 ACWS (3d) 333 (BCSC). Was the document available for anyone to look at or was it kept confidential? Courts may also look at whether the document was created because of a usual policy or practice of a party. For example, if incident reports are regularly completed after incidents on a premises, these reports may not be privileged because they are made as a matter of course: Fred v Westfair Foods Ltd, 2003 YKSC 39 (YK SC).

In conclusion, the “dominant purpose” test is used by Courts in most provinces to determine whether the contents of an adjuster’s file will be privileged or not. In a recent case out of the Ontario Superior Court of Justice, a judge appeared to move away from the “dominant purpose” and fact-specific test when he determined that in third-party or tort claims (as opposed to claims of an insured against his or her own insurer) there is no preliminary investigative phase where privilege does not attach to the adjuster’s notes, files and reports. In these types of cases privilege attaches to the entire adjuster’s file because litigation is always contemplated: Panetta v. Retrocom Mid-Market Real Estate Investment Trust, 2013 ONSC 2386 (ON SC).

It will be interesting to see if this case is appealed and if so, what a higher court would say about this decision, particularly since it seems to run contrary to the “dominant purpose” test applied on a
case-by-case basis. That said, it is imperative for adjusters, in undertaking their duties and dealing with insurers and insureds, to be mindful of the test for privilege and take appropriate steps to maintain privilege, where possible and appropriate. That may include involving counsel at a very early stage, even if only to ensure that privilege can be established and maintained.

Ryan Ewasiuk is partner with Brownlee LLP with over 15 years of experience on a vast array of litigation matters, including large and complex insurance claims.