• Claiming Litigation Privilege Before a Lawsuit Starts
  • June 23, 2015 | Author: Daniel W. Barber
  • Law Firm: Singleton Urquhart LLP - Vancouver Office
  • In the early stages of handling an insurance claim, an adjuster always wants to discover as much as possible about it. If a claim arouses any doubts about its veracity, the adjuster will often engage an outside investigator to undertake a more detailed investigation.

    However, if a claim proceeds to litigation, the parties have an obligation to disclose the documents in their possession that could be used to prove or disprove a material fact. In many instances, this obligation makes investigative reports producible, even over the protestations of the adjuster who commissioned the investigation.

    A scenario that broadly fits this outline was recently presented to the British Columbia Court of Appeal in Raj v. Khosravi. In its decision, the Court reaffirmed the legal test for a party being able to claim litigation privilege over a document. The Court explained litigation privilege as:

    . . . a form of privilege that provides a protected area in which communications and documents created for and used in the process of preparing for and engaging in litigation are free from “adversarial interference” and “premature disclosure”. Its object is to carve out a protected space in which those engaged in the adversarial process of litigation can investigate, prepare and develop their respective positions and strategies, free from the intrusion of their adversary. Its purpose is “to create a ‘zone of privacy’ in relation to pending or apprehended litigation.”

    To maintain a claim of litigation privilege over a particular document, the Court reaffirmed that the following two-fold test applies:
    1. Was litigation a reasonable prospect at the time the document was produced?
    2. If so, what was the dominant purpose for the document’s production?
    The first step of the test generally has to overcome a low threshold although a bare assertion that litigation is a “reasonable prospect” is insufficient. The test is determined objectively on a standard of reasonableness.

    The second part is more challenging. It requires the party claiming privilege to prove that the dominant purpose of the document, when produced, was to obtain legal advice or to conduct or aid in the conduct of litigation. The particular factual context in which the document was produced is critical in making this determination.

    In Raj v. Khosravi, Rajan Kumar Raj presented a bodily injury insurance claim to the Insurance Corporation of British Columbia. The handling adjuster had doubts about the veracity of the claim and engaged an investigator to conduct surveillance of Mr. Raj and prepare a report in anticipation of an expected litigated claim from Mr. Raj. In a supporting affidavit and subsequent cross-examination, the handling adjuster maintained that the sole purpose of the investigator’s report was to assist in anticipated litigation.

    In B.C. Supreme Court Chambers, the Master found that the defendant had met the onus to establish litigation privilege. On appeal, the Chambers Judge set aside the Master’s order, finding that litigation was not in reasonable prospect at the time of the report’s production and that there were multiple reasons for the production of the report.

    The Court of Appeal reversed the Chambers Judge’s decision and affirmed the Master’s decision. The Court held that litigation may be a reasonable prospect at any time during information gathering and the start of litigation. The Court referred to the Master’s acceptance of the defence’s evidence that there was no other purpose for the report than to defend a possible tort claim.

    Raj v. Khosravi provides reassurance for adjusters that, where there is a reasonable prospect of litigation occurring and an adjuster creates or commissions the creation of a document whose dominant purpose will be to defend that litigation, the adjuster can maintain a claim of privilege over that document.