Insurer’s suspicion of potential litigation not enough to allow plaintiff to pierce insurer’s solicitor-client privilege: Ontario court

An insurer’s suspicion about the potential for litigation is not enough of a reason to grant plaintiffs access to insurer documents subject to solicitor-client privilege, the Ontario Superior Court has ruled.
In Kavanagh v. Peel Mutual Insurance Company, the court upheld the law of privilege in Ontario as set out in General Accident Company et al v. Chrusz et al. 
Chrusz states plaintiffs can only pierce the veil of an insurer’s solicitor-client privilege if “litigation, actual or contemplated,” is “the dominant purpose for which the document [sought by the plaintiff] is created.”
Litigation is not the “dominant purpose” of a document if an insurer merely suspects that litigation might take place in the future, the court found in Kavanagh.
“Litigation privilege cannot be founded on a suspicion of the possibility of litigation,” Ontario Superior Court Justice Jane Ferguson wrote in Kavanagh. “However, as the court stated in Klair v. Security National Insurance Co., privilege will come into play at some point between mere suspicion and a conclusion that litigation will result.
“In Chrusz, it was when ‘something arises to give reality to litigation.'”
In Kavanagh, on Oct. 7, 2007, the vehicle of Gwendolyn Kavanagh ran a red light and struck another vehicle. The vehicle was driven away from the scene and found damaged in Gwendolyn Kavanagh’s driveway.
When contacted by the insurer on Oct. 10, 2007, both Gwendolyn Kavanagh and her son, Christopher, said they had not driven the vehicle that night.
On Oct. 11, 2007, Peel contacted Barrie Police who informed them that an independent witness followed the vehicle. The witness told police that the vehicle was parked in the plaintiff’s driveway, both airbags deployed, and there was a red mark on Christopher Kavanagh’s face.
Police told the insurer that the red mark was consistent with the deployment of an airbag.
Peel Mutual hired an independent adjuster to investigate the loss.
The adjuster interviewed both Gwendolyn and Christopher on Oct. 23, 2007, at which time Christopher attempted to pass off an expired driver’s license to the adjuster as being valid. Five days later, a forensic locksmith reported to the adjuster that the vehicle’s lock had not been tampered with and was started with a proper key.
On Nov. 12, 2007, the adjuster submitted a report of his findings to Peel Mutual.
In a motion before the court, Gwendolyn Kavanagh asked for production of all of the adjuster’s communications with the insurer as of the time of the accident. The insurer argued the documents were protected by solicitor-client privilege.
The court agreed with the insurer.
Only on Nov. 12, the date when adjuster submitted his report to the insurer, had the “reality of litigation…crystallized,” the court ruled. Prior to that, “the insurer had the good faith obligation to investigate and adjust the claims and nothing suggests that the dominant purpose of the communications was in anticipation of litigation and not for the purpose of fulfilling this [investigatory] obligation.”