Source: https://www.mackesysmye.com/articles-resources/publications/claims-of-privilege
Timestamp: 2019-04-24 10:08:21+00:00

Document:
A breach of duty to act in good faith gives rise to a separate cause of action distinct from an action for failure of an insurer to compensate for a loss insured under the policy (Samoila v. Prudential of America General Insur­ance (2000), 50 O.R. (3d), 65 (S.C.O.); 702535 Ontario Inc. v. Lloyd’s London, Non-marine Underwriters (2000), 184 D.L.R. (4th), 687 (Ont. C.A.). Most recently, see Clarfield v. Crown Life Insurance Co., (2000), 50 O.R. (3d), 696 where the court ordered the defendant disability insurer to pay $75,000 in aggravated damages for breaching its duty to deal with the plaintiff’s claim in good faith). This duty to act fairly relates both to the manner in which the insurer investigates and assesses a claim as well as to the decision as to whether or not to pay the claim. In making the decision as to whether to refuse or pay the claim, the insurer has a duty to assess the merits of the claim in a balanced and reasonable manner. Indeed, the courts have held that the insurer must give the same consideration to the interests of the insured as it gives to its own interests.
If an insurer denies payment of a claim, or discontinues payments under a claim, an insured may commence an action for failure to pay the claim and, additionally, for damages for breach of the duty to act in good faith. To prove a bad faith action against an insurer, the insured need prove how the insurer assessed, processed and decided the claim. The insurer’s claim file is a critical source of discovery because it represents a chronology of the insurer’s state of mind in its processing of the claim.
The discovery provisions of the Rules of Procedure speak to the general policy favoring early and complete dis­closure of all relevant documents. That policy can come into conflict with an insurer’s claim that the documents are privileged, either by solicitor and client privilege or litigation privilege. In the context of a bad faith claim, when can an insurer refuse to disclose documents on the grounds of privilege?
In Descoteaux v. Mierzwinski (1982) 70 C.C.C. (2d) 385 and in R. v. Shirose, 133 C.C.C. (3d) 257, the Su­preme Court of Canada adopted Wigmore’s description of solicitor and client privilege as follows: “Where legal advice of any kind is sought from a professional legal advisor in his capacity as such, the com­munications relating to that purpose, made in confidence by the client, are at his instance permanently protected from disclosure by himself or by the legal advisor, except the protection be waived.” (Emphasis added).
As can be seen from the above criteria, not every communication between a solicitor and client is subject to privilege. Communication must be advanced for the purpose of seeking legal advice from the solicitor and the privilege is limited only to those communications which the client either expressly made confidential or which he could reasonably assume under the circumstances would be understood by the solicitor to be intended to be confidential. Privilege would not extend to facts provided by the client to the solicitor if those facts are other­wise discoverable and relevant (see General Accident Assurance Company v. Chrusz (1999), 45 O.R. (3d), 321 (Ont. C.A.)).
In a bad faith claim, the insured plaintiff alleges that the insurer breached its duty to act in good faith. Typically, as part of its defence, the insurer will maintain that it assessed the claim completely and fairly and that, prior to denial, to assist in making its decision, it sought and obtained legal advice. In doing so, the insurer puts its state of mind in issue and waives any solicitor and client privilege to the advice it obtained prior to denying coverage. That is to say, in relying on the fact that it sought and followed legal advice prior to denial of coverage to prove that it acted fairly, an insurer will then waive privilege to that legal advice.
the third party was passing information from the client to the solicitor for the purpose of the former seekinglegal advice (see General Accident Assurance Company v. Chrusz per Doherty J.A.).
If the third party is simply gathering information from sources extraneous to the client and passing that infor­mation on to the solicitor, that information is not protected by solicitor and client privilege. The inquiry is not whether the third party is an agent of the client but what the function of the third party is relative to the relation­ship between the client and the solicitor.
whether, in the circumstances, the privilege was waived.

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