Disclosure of Insurance

The new rules of civil procedure under the Courts of Justice Act (Ontario) were designed to effect broad disclosure of insurance. Rule 30.02 (3) provides for documentary discovery of any insurance policy under which an insurer may be liable.

While rule 30.02 (3) extends to a broad variety of insurance policies including reinsurance contracts, the sub-rule does not extend its reach to self-insured retentions. Where a company has a captive insurance company under enabling provincial legislation, e.g. B.C.’s captive insurance company legislation – insurance policies issued by the captive insurance company would be discoverable.

In K-Mart Canada Ltd./K Mark Canada Ltee v. Millmink Investments Ltd., the Ontario High Court of Justice held that the sub-rules relating to discovery of insurance and examination for discovery of insurance policies are not an unreasonable search and seizure contrary to section 8 and do not constitute discrimination under section 15 of the Charter of Rights and Freedoms. The court held that liability insurance has no value other than to cover a liability and therefore is not an “asset” in the ordinary sense of the term.

Unlike other aspects of documentary discovery, disclosure of insurance does not rest on the test of relevance. The insured party has an obligation to disclose the insurance policy and confirmation of coverage is not required. Where there is agreement or a judicial determination that there is no coverage under the policy, there would be no requirement to disclose.

Section 259(2) of the Insurance Act (Ontario) provides that an insured under an automobile liability policy has an obligation to disclose for the benefit of a judgment creditor particulars of the policy within ten days after demand. In Saini v. Manolakos it was held the subsection does not mean that no disclosure can be made under other circumstances and specifically before judgment. The requirement to produce, in contrast to the duty to disclose, only arises upon request. In Sabatino v. Gunning, the Ontario Court of Appeal held that production of an insurance policy can be ordered even at the appeal stage. The Court of Appeal also held that the purpose of the sub-rule relating to discovery of documents is to assist the making of informed and sensible decisions by parties involved in litigation.

RELEVANCE

The requirement relating to production for inspection of an insurance policy makes no reference to relevance, which is the critical requirement for the disclosure and production of documents under rule 30.02 (1) and (2). As a result, a party need not disclose in the affidavit of documents pursuant to rule 30.03 any insurance policies. A party will therefore not be automatically required to produce any insurance policies for inspection of listed documents at discovery and at trial.

Under rule 30.02 (3), relevance to an issue in the action is the critical determinant of whether the insurance policy is admissible in evidence. The Supreme Court of Canada opined on the test for admissibility into evidence in R. v. Cloutier as follows: “For one fact to be relevant to another, there must be a connection or nexus between the two which makes it possible to infer the existence of one from the existence of the other. One fact is not relevant to another if it does not have real probative value with respect to the latter.”

In contrast, the test of relevancy for discovery of documents generally is a lower standard, which is set out in Compagnie Financiere du Pacifique v. Peruvian Guano Co. as follows: “It seems to me that every document relates to the matters in question in the action, which not only would be evidence upon any issue, but also which, it is reasonable to suppose, contains information which may – not which must – either directly or indirectly enable the party requiring the affidavit either to advance his own case or to damage the case of his adversary.”

Rule 30.02 (3) mandates the insurance disclosure requirement on a party. In Belmont (Village) v. Joe Snyders Construction Ltd., the Ontario Divisional Court held that a non-party cannot be compelled to produce for inspection an insurance policy when it is not relevant to a material issue in the action. The court also specifically referred to rule 30.10 (1) which provides that production for inspection of a document from a non-party will be ordered where the court is satisfied that the document is relevant to a material issue in the action and it would be unfair to the moving party to proceed to trial without having discovery of the document.

As a result, under the Ontario rules of Civil Procedure, insurance companies as non-parties are not required to provide a copy of the insurance policy to the insured. The requirement to disclose an insurance policy by an insurance company may, however, be different in a subrogated action.

EXAMINATION

Rule 31.06 (4) provides that a party may obtain disclosure of the existence and contents of any insurance policy under which an insurer may be liable to satisfy all or part of a judgment in the action or to indemnify or reimburse a party for money paid in satisfaction of all or part of the judgment. The rules of Civil Procedure were amended in 1990 to render the amount of money available under the policy as well as any conditions affecting its availability to be also discoverable.

In Seaway Trust Co. v. Markle, in reference to the conditions affecting the discoverability of the insurance policy, the Ontario Court, General Division, held that the examining party is entitled to the terms of any agreement, understanding, notice or position taken, in writing or orally, which may affect the availability of insurance proceeds. The insurance-related information available under rule 31.06 (4) extends to the “existence and contents of any insurance policy under which an insurer may be liable”. Policy limits, the deductible, whether the policy covers prejudgment interest, costs as well as whether or not the insurer is contesting coverage are discoverable. The discovery of limits will tie in with ongoing enquiries by the plaintiff about any excess insurance if there is a problem with policy limits. If there is denial of coverage because of the period of coverage under the policy, rule 31.06 (4) allows the discovering party to make enquiries regarding other applicable insurance policies. Like rule 30.02 (3), rule 31.06 (5) provides that no information concerning the insurance policy is admissible in evidence unless it is relevant to an issue in the action.

SUBROGATION

Rule 30.02 (1) mandates disclosure by a party to the action of an insurance policy under which an insurer may be liable to satisfy all or part of a judgment. Rule 1.03 defines judgment as a decision that finally disposes of an application or action on its merits and includes a judgment entered in consequence of the default of a party. An order includes a judgment. As a result, where a plaintiff insured brings an action against the defendant that is dismissed on the merits by court order and costs are ordered against the plaintiff, the plaintiff’s subrogated insurer may be liable to pay the costs. As a result, the disclosure of insurance in a subrogated action appears to be contemplated by rule 30.02 (3).

Rule 31.08 (3) specifically contemplates the examination for discovery of a subrogated insurer. In Consumers Glass Co. v. Farrell Lines Inc, the Ontario High Court of Justice held that a subrogated action is for the immediate benefit of the subrogated insurer and as a result the representative of the insurer was subject to examination for discovery. A key component of the examination for discovery of the subrogated insurer by the defendant will be the adjuster’s reports, which will be relevant to the defense.

SIMPLIFIED PROCEDURE

Rule 76.01 (2) provides that the rules that apply to an action apply to an action that is a proceeding under this rule, unless this rule provides otherwise. Rule 76.04 eliminates examination for discovery including the examination of any party to an action as well as a person who is not a
party and the action is brought or defended for the immediate benefit of that person.

Under the rules of simplified procedure, insurance policies are discoverable by way of documentary discovery. Examination for discovery of insurance of a party, or of the subrogated insurer, is eliminated. Justice Wilson stated that “the principle of proportionality underpins the philosophy of the rule” and “the value and cost of each procedural step must be weighed in light of the amount in dispute in the action”. Documentary discovery of insurance in the context of actions governed by rule 76 will achieve the goal of rule 1.04 (1) to secure the just, most expeditious and least expensive determination of the civil proceeding on its merits.