Courts have long recognized the origin and rationale of solicitor-client privilege as a necessary and essential tool for the effective administration of justice. A related but conceptually distinct protection is that of litigation privilege. While both forms of privilege serve a common cause and have often been thought of as branches of the same tree, they are driven by different policy considerations and generate different legal consequences.1
In Blank v. Canada,2 the Supreme Court of Canada (“SCC”) was required, for the first time, to distinguish between solicitor-client privilege and litigation privilege. In particular, the SCC was called upon to consider, in detail, the concept of litigation privilege, including its origins, characteristics and lifespan.
Unlike solicitor-client privilege, which aims to protect the confidential relationship between a lawyer and a client, litigation privilege aims to facilitate a process – namely, the adversarial process.3 As noted in Blank, litigation privilege is based upon the need for a “zone of privacy” to facilitate investigation, and the preparation of a case for trial by the adversarial advocate.
The Dominant Purpose Test
Litigation privilege is not a class privilege, consequently, there is no presumption that it exists. The onus of establishing litigation privilege rests with the party seeking that protection, and must be proven on a balance of probabilities.
In order for a record to be privileged from production, it must be:
- made in answer to inquiries made by a party, as the agent for or at the request or suggestion of his or her solicitor, or without any such request but for the purpose of being laid before a solicitor or counsel for the purpose of obtaining his or her advice, or of enabling him or her to prosecute or defend an action or prepare a brief; and
- for the purpose of litigation existing, or in contemplation, or anticipated.
Traditionally, privilege would attach to a record if one of the reasons, or a substantial reason for its creation, was contemplated litigation. By formally endorsing the Dominant Purpose test, the SCC followed in the footsteps of the English House of Lords4 and several Canadian lower courts, in requiring a more stringent test before privilege can be successfully invoked. The SCC held that the Dominant Purpose test is more compatible with the contemporary trend favouring increased disclosure, and that litigation privilege should be viewed as a limited exception to the principles of full disclosure rather than an equal partner to the more broadly interpreted solicitor-client privilege.
The threshold for determining whether there is a “reasonable prospect” of litigation is a low one. The test is objective and based upon reasonableness. While certainty is not required, the party claiming privilege must establish something more than mere speculation. The British Columbia Court of Appeal has recently endorsed the following description of when litigation is reasonably contemplated:
… In my view litigation can properly be said to be in reasonable prospect when a reasonable person, possessed of all pertinent information including that peculiar to one party or the other, would conclude it is unlikely that the claim for loss will be resolved without it. The test is not one that will be particularly difficulty to meet …5
Notably, a document does not gain the protection of litigation privilege simply by counsel advising the maker that its sole purpose is litigation and directing the report be sent to counsel.6 “Window dressing” by a lawyer cannot create a purpose and a privilege that did not otherwise exist.7 In all circumstances, the Dominant Purpose test will be applied to determine whether a claim for litigation privilege is appropriately advanced.
Litigation Privilege in the Insurance Sphere
In an insurance setting, questions of litigation privilege will most frequently arise in relation to records obtained or prepared during the investigations following a loss event, such as witness statements, expert opinions, and other records that may be obtained from third parties over the course of an adjuster’s investigation.
A useful discussion of litigation privilege in relation to statements obtained by an insurer is provided inSecurity National v. Edmonton Police Service.8 In Security National, the Edmonton Police Service sought an order requiring Security National Insurance Corporation to produce the statement given by its insured, who faced several charges following a fatal hit and run collision with a pedestrian. When Security had first learned of the accident, it was only informed of a “potential property damage claim,” and took no steps to investigate or assess the potential liability of the insured in relation to the accident. Approximately seven weeks after the accident, the deceased’s sister contacted the insurer to advise of the fatality, which led to an accident benefits file being opened and an independent adjusting firm being retained to, among other things, obtain a written statement from the insured. In support of its claim of litigation privilege, Security argued that litigation was contemplated at the time the statement was obtained, noting in particular that the accident involved a fatality and it was very rare for such an incident to not ultimately result in litigation. While the Court accepted Security’s assertion that one of the purposes for obtaining the statement was to prepare for litigation, it was held that it had not, on a balance of probabilities, established that the dominant purpose of obtaining the statement was for prosecuting or defending litigation. Accordingly, Security’s application was dismissed and it was required to produce a copy of the statement to the Edmonton Police Service.
Losses giving rise to potential subrogated claims will frequently raise potential issues of privilege over records generated during the investigation of the loss. In the recent decision of Hatch Ltd. v. Factory Mutual Insurance Company,9 the Nova Scotia Court of Appeal upheld the decision of a chambers judge, who determined that work carried out by an engineering firm was for the dominant purpose of litigation, and that the materials and reports they produced were therefore protected by litigation privilege. In Hatch, a large portion of a wharf collapsed, leading to an insurance claim against Factory Mutual Insurance Company. Factory assigned an adjuster, who proceeded to retain an engineer to investigate the collapse, as well as legal counsel to pursue litigation against the responsible parties. The designer of the wharf, Hatch Ltd., sought production of certain records prepared over the course of Factory’s investigations, on the basis that they were not properly subject to a claim for litigation privilege. The Court of Appeal accepted the motion judge’s finding that Factory determined, very soon after the collapse, that it would be involved in litigation and that a reasonable person aware of the circumstances of the case would conclude that the claim would not be resolved without litigation. On that basis, the Court upheld the lower court’s decision that preparation for litigation had started almost immediately and that the dominant purpose of the adjuster’s reports had been to prepare for anticipated litigation.
As demonstrated in the cases discussed, it is not enough that litigation was secondary or equal to another purpose. In order to successfully claim litigation privilege, the court must be satisfied that, at the time of creation, the dominant purpose of the record in issue was for litigation, contemplated or existing.
Tips to Maintain Claims of Privilege
While each case will be determined on its own facts, here are some useful suggestions to assist in maintaining successful claims of litigation privilege over records prepared or obtained during the adjustment of a loss.
- It is essential that careful note-keeping occurs in order to assist in determining when litigation was contemplated. Claims handlers should carefully document and date all discussions with claimants, taking particular care to note suggestions of litigation or a desire to retain counsel.
- Adjusters should label reports “privileged and confidential.” While confidentiality is not determinative, this will help to not only minimize the risk of inadvertent disclosure, but will also lend support to the Dominant Purpose test, should the validity of a claim of litigation privilege be challenged at a later date.
- Where appropriate, legal counsel should be retained early and if an independent adjuster has been utilized, his or her reports should be sent to counsel and to the insurer. Similarly, if investigators or experts are engaged, consider having legal counsel, rather than the insurer, retain them.
- As claims are adjusted, separate reports should be considered for privileged and non-privileged information. It may also be useful to consider separate reports addressing liability and quantum, and subrogation, if contemplated, should be reported separately.
Insurers must be mindful of the scope of protection offered by litigation privilege throughout the claims-adjusting process, and the risk that disclosure will be ordered if the Dominant Purpose test is not met. Confidentiality, no matter how earnestly desired or clearly expressed, does not make a communication privileged from disclosure.10 Once litigation is reasonably contemplated, insurers should immediately ensure that all steps taken in the investigation process reflect an understanding that litigation is on the horizon.