Blind to Fraud: The OPC’s Guidelines on Covert Surveillance Unduly Inhibit Private Investigators

The Canadian Association of Private Investigators (CAPI) recently made submissions to the Office of the Privacy Commissioner of Canada (OPC) regarding its Guidelines on Covert Surveillance in the Private Sector. CAPI and its members assert the implementation of the Guidelines’ tone and content will serve only to encumber the private investigation of fraud. More specifically, the Guidelines fail to account for the serious nature of insurance fraud and fall short of striking an appropriate balance between privacy interests on the one hand, and the public’s interest in security, crime prevention, and law enforcement on the other.

Costs of insurance and employment fraud

Insurance fraud is estimated to cost the property and casualty insurance industry $1.3 billion annually. The costs of employment-related fraud have never been quantified, but they are known to be significant. CAPI’s submissions to the OPC posit there will be further cost implications as a result of the publication of the OPC’s Guidelines in their current form. For example, the OPC’s suggestion that surveillance should be used only as a “last resort,” would arguably make private investigations less effective. Furthermore, the Guidelines’ onerous provisions, such as the pixilation of third party images, would ultimately increase the costs of providing goods and services, as compliance with the Guidelines would result in higher fraud insurance premiums throughout the marketplace.

Privacy law in perspective

It is the view of CAPI that there is no immediate need for the OPC’s Guidelines. Internationally, Canada’s privacy regime is recognized to be one of the most comprehensive systems in the world. The Personal Information Protection and Electronic Documents Act¹ (PIPEDA) has been lauded for achieving a reasonable balance between privacy protection and the efficient management and use of information in a commercial environment. The Guidelines, however, are inconsistent with PIPEDA² and are out of step with Industry Canada’s acknowledgement of the private sector’s role in the prosecution of fraudulent conduct. ³ This recognition is echoed in Correia v. Canac Kitchens, an employment fraud case, where the Court acknowledged that “. . . many functions that were once the exclusive domain of public police forces are now being performed by private agencies.” ⁴

One of the most effective tools in a private investigators arsenal is covert surveillance. Further, covert surveillance can be conducted with minimal impact on legitimate expectations of personal privacy. The OPC should recognize that organizations, such as insurers and employers, generally do not want to conduct surveillance, as it adds to the cost of claims adjudication and workplace management, and have no interest in collecting sensitive information extraneous to the purpose of the investigation. Rather, the joint objective of a private investigator and his or her principal is to obtain information that would assist in determining if a fraud, breach of contract, or other contravention of the law has taken place. Canadian legal commentator Elaine Geddes states that “[a]n investigation which is discreet and unobtrusive will not be an invasion of privacy . . . Surveillance alone is not actionable; there must be other elements to find an invasion of privacy.” ⁵

Covert surveillance in practice

Covert surveillance is widely considered a common investigative mea- sure, not a measure of last resort. The Ontario courts have stated that “[t]he purpose of such surveillance is either verification or contradiction. A trial is a search for the truth and surveillance is a tool used in pursuit thereof.” ⁶ Moreover, CAPI asserts overt investigation tools such as medical examinations and interviews with neighbours are far more invasive of privacy rights than covert surveillance. In addition, the courts often prefer the objective evidence generated by surveillance, such as video and audio recordings, rather than, for example, medical evidence based predominantly on the subjective complaints of the individual under investigation to his or her doctor.

The Guidelines challenge the ability of businesses to determine the scope and methodology of their investigations. CAPI holds that insurers and employers should be permitted to exercise their discretion in selecting investigative options, including covert surveillance. The proper standard should be reasonableness under the circumstances, which would be consistent with s. 5(3) of PIPEDA. ⁷

CAPI acknowledges that because of the disparity of power between an employer and employee, precautions should be implemented before the employer clandestinely observes its employee. To this end, CAPI recommends the OPC draft separate Guidelines addressing covert surveillance in public places in the employment context and in circumstances where insurers or organizations are investigating non-employment matters.

The relationship of trust that exists in the employer-employee context is absent and inapplicable in the insurance context. The trust element is also not a factor in disputes between businesses, such as disputes concerning intellectual property fraud.

The degree of impairment to privacy rights that may result from covert surveillance should be balanced against the nature of the matter being investigated, and the reasonable expectation of privacy in the place of investigation. In the more serious case of fraud, there should be less expectation of privacy in public places. Further, fraud investigations are necessarily focused and time-limited and, accordingly, the opportunity to gather information does not permit for resorting to other forms of investigation first.

Covert surveillance in the courts

Challenges are being made to contest the OPC’s jurisdiction to regulate covert surveillance in the private sector. State Farm Insurance has made an application to the Federal Court to seek clarity on the scope of the OPC’s mandate. Following an automobile collision involving one of its insured, State Farm commissioned private investigators to conduct surveillance against a party to the accident, who claimed to have suffered injury. This individual sought to obtain the tapes and surveillance reports resulting from the investigation, a disclosure request that State Farm patently refused. Subsequently, the party, adverse in interest to State Farm, lodged a complaint with the OPC.

CAPI and its members eagerly await the Federal Court’s decision on this matter, as it holds potential implications for the role of the OPC in the private investigation industry.

Norman Groot is counsel to the Canadian Association of Special Investigation Units, the Canadian Independent Adjusters’ Association and the Canadian Association of Private Investigators on privacy and investigation matters.

Note: This article is in response to an article which ran in Claims Canada’s December/January 2010 issue entitled: Exemption to Privacy Legislation Unlikely.

Groot’s view is that the OPC’s Guidelines are a consideration, but not a determining factor, as to whether surveillance should be used as an investigation tool where there is evidence of fraud. Surveillance is not an investigation tool of last resort, as the OPC would suggest. The OPC has responded to the challenge to litigate this issue.

1. Personal Information Protection and Electronic Documents Act, S.C. 2000, c. 5.

2 Section 7(1) of PIPEDA states in part that: ” . . . an organization may collect personal information without the knowledge or consent of the individual only if . . . (b) it is reasonable to expect that the collection with the knowledge or consent of the individual would compromise the availability or the accuracy of the information and the collection is reasonable for the purposes related to investigating a breach of a
n agreement or a contravention of the laws of Canada or a province . . .”

Furthermore, with respect to the disclosure of personal information, s. 7(3) states that: “. . . an organization may disclose personal information without the knowledge or consent of the individual only if the disclosure is . . .(d) made on the initiative of the organization to an investigative body . . .”

3 This was addressed in its recommendations for the amendment of the Regulations Amending the Regulations Specifying Investigative Bodies, P.C. 2008-933, May 15, 2008, s. 1(a).

4 Correia v. Canac Kitchens, 2008 ONCA 506 (CanLII) at para. 44.

5 E.F. Geddes, “The Private Investigator and the Right to Privacy” (1989) 17 Alta. L. Rev. 256 at 299.

6 Murray v. Woodstock General Hospital Trust (1988), 64 O.R. (2d) 458 at 463 (H. C.J.).

7 Section 5(3) states that: “An organization may collect, use or disclose personal information only for purposes that a reasonable person would consider are appropriate in the circumstances.”