Nova Scotia (Attorney General) v. Royal & Sun Alliance Insurance Company of Canada

Nova Scotia (Attorney General) v. Royal & Sun Alliance Insurance Company of Canada Court Supreme Court Date 2003-11-04 Citation 2003 NSSC 227 Docket SH 149142 Judge/Registrar/Adjudicator Moir, Gerald R. P. (Honourable Justice) Document Type Decision Relations Library Sheet - Nova Scotia (Attorney General) v. Royal & Sun Alliance Insurance Company of Canada - 2003 NSSC 227 - 2003-11-04 - Library Sheet See also - Nova Scotia (Attorney General) v. Royal & Sun Alliance Insurance Company of Canada - 2003 NSSC 226 - 2003-11-04 - Decision Decision Content IN THE SUPREME COURT OF NOVA SCOTIA Citation: Nova Scotia (Attorney General) v. Royal & Sun Alliance Insurance Company of Canada, 2003 NSSC 227 Date: 20031104 Docket: S.H. 149142 Registry: Halifax Between: The Attorney General of Nova Scotia, Representing Her Majesty The Queen in Right of the Province of Nova Scotia Plaintiff v. Royal & Sun Alliance Insurance Company of Canada, Guardian Insurance Company of Canada, The Halifax Insurance Company, Wellington Insurance Company, General Accident Assurance Company of Canada and Quebec Assurance Company Defendants DECISION ON PLAINTIFF’S INTERROGATORIES Judge: The Honourable Justice Gerald R. P. Moir Heard: October 27, 2003 Decision: November 4, 2003 (Orally) Written Release: November 20, 2003 Counsel: Robert M. Purdy Q.C., Peter M. Rogers and Dale Darling for the Plaintiff, The Attorney General of Nova Scotia George MacDonald Q.C. and Jane O’Neill for the Defendants The Halifax Insurance Company and Wellington Insurance Company Daniel Ingersoll for the Defendant General Accident Assurance Company of Canada Robert Bell and William Augustus Richardson for the Defendants Royal & Sun Alliance Insurance Company of Canada and Quebec Assurance Company Moir, J.: (Orally) [1] The plaintiff has applied for an order directing the defendants to answer interrogatories 2, 3 and 4 from sets of identical interrogatories directed to each defendant on 23 September 2002. The plaintiff alleges breaches of duties to defend and obligations to indemnify said to be owed by the six defendant insurers under liability insurance policies provided between 1960 and 1996. The statement of claim refers to a large number of claims advanced against the Province on account of the alleged physical or sexual abuse of many children by provincial employees at institutions that had custody of the children at times over a number of decades. The insurers defend on various grounds including exclusion of these kinds of claims, material misrepresentation at formation, breach of duties to notify of occurrences and claims, and breach of condition through unilateral admissions and settlements. Interrogatory #4 seeks the identity of all who handled the Province’s claim for coverage within the insurer’s organization. Interrogatories #2 and #3 seek information about unrelated claims handled in the past by the insurers. The Province seeks to know how the insurers have gone about handling claims in what the interrogatories define as “Multiple Claimant Situations”. Each insurer has refused to answer these three interrogatories. I will order them to answer interrogatory #4. With some reservations that I will attempt to clarify in the course of these reasons, I will dismiss the application to compel answers to the second and third interrogatories. [2] The fourth interrogatory reads: Which current and past employees of the Insurer have been responsible for handling the claims which are the subject of the within proceeding? In answering this question, please identify all individuals at the Insurer involved in handling the claims, excepting only secretarial and clerical staff, identifying in each instance whether the employee is a former or current employee, the period of time when that employee is or was involved in the handling of the claims, the title of such employee at the time, along with a brief description of the duties of such employee in regards the handling of the claims. Mr. Ingersoll, one of the counsel for the defendant, General Accident, spoke for all defendants on this application although his remarks were supplemented by those of Mr. Bell. Mr. Ingersoll conceded that the identity of any employee who had input into the decisions to deny coverage or to refuse to defend the claim would be relevant. He said the interrogatory is framed too broadly where it includes anyone who handled the file. (Note that secretaries and clerical staff are excluded.) [3] The interrogatory calls for the identity of anyone who had responsibility in respect of the claim. This would include decision-makers and those who provided information or advice to decision-makers but it would also include anyone who gathered information on account of the claims for defence and indemnification whether or not that information was passed to decision-makers and it would include anyone who spoke on behalf of the insurer with third parties whether or not the communicator was involved in the decisions. The interrogatory calls for the identity of anyone with responsibility for any aspect of the claim above secretarial or clerical responsibilities. In my assessment, such information is relevant or is reasonably calculated to lead to relevant information. Consequently, each insurer ought to answer the question. [4] One needs to take a close look at some aspects of the pleadings to appreciate the argument for the second and third interrogatories, which concern information about each of the insurers’ experience with “multiple claimant situations”. Indeed, the only materials submitted to me in support of this application consist in the pleadings, the interrogatories, the responses and some correspondence between counsel. [5] Paragraph 28 of the statement of claim alleges that the plaintiff received “a large number of Notices of Intended Action, Originating Notices, Statements of Claim, and other documents and claims” for compensation for injuries “arising from physical, sexual, and/or emotional assaults or abuse suffered by the claimants while attending various facilities owned and operated by the plaintiff”. According to paragraph 33 the assaults were claimed to have been “perpetrated by employees of the plaintiff at the facilities” and the grounds of the Province’s liability would be “negligence, breach of fiduciary duty and/or vicarious liability”. Paragraphs 35 and 36 read: 35. Defendants were notified of the Claims by the Plaintiff as soon as reasonably possible after the Plaintiff became aware of the Claims, of the Policies and of the possible applicability of the Policies to the Claims. The Defendants were invited to participate in the investigation, defence, trial and/or settlement of those claims which were brought by way of civil proceedings in this Court. The Defendants have refused or declined to defend or indemnify the Plaintiff in respect of such claims and accordingly have breached the Policies. 36. Following notification to the Defendants inviting their participation and/or inviting the expression of any concerns the Defendants may have had in regards the Plaintiff’s participation in an ADR process, the Plaintiff initiated a comprehensive ADR process to investigate and provide an efficient, cost-effective and humane manner for processing the claims of the nature described in Paragraph 28 above and compensating those claimants who were reasonably ascertained by the ADR process to have presented a valid claim. The Defendants have refused or declined to participate in the ADR process either by way of exercising their duty to defend or to indemnify the Plaintiff in respect of the Claims processed through ADR and accordingly have breached the Policies. As Mr. Purdy makes clear in his brief on behalf of the Province, these pleadings set up a basis for recovery recognized by Chief Justice McEachern (as he then was) in Cansulex Ltd. v. Reid Stenhouse Ltd. (1986), 70 B.C.L.R. 273 (S.C.) at para. 196 and recognized as “well settled” by the British Columbia Court of Appeal in Wright Engineers Ltd. v. U.S. Fire Insurance Co., [1986] B.C.J. 129 (C.A.) para. 37. Where a liability insurer is found to have wrongly denied coverage, the cost of a subsequent settlement is recoverable as damages for breach of the insurance contract if the settlement was reasonable in all of the circumstances. There is no need for a finding that the insured was liable to the settled claimant nor for any assessment of what the claim was worth. All that is necessary is that the settlement was reasonable. The amount of the settlement and the cost of getting it provide a full measure of the peace that was contracted by the insurer and wrongly denied, if the settlement was reasonable in all the circumstances. [6] The defences engage this pleading. Paragraph 8 of the Guardian defence and 9 of the Halifax and Wellington defence states that those insurers were “not given an opportunity (or, in the alternative, any effective opportunity) to participate in the ADR process”. They were “notified of the ADR process either after it had already begun or only shortly before it commenced.” These insurers plead further that the ADR process was not reasonable. It “was one undertaken by the plaintiff in a negligent and inefficient manner resulting in invalid claims being paid and other claimants being over compensated.” They plead that the ADR process was grossly prejudicial to the insurers’ rights under the policies. The Quebec Assurance and Royal & Sun Alliance defence pleads, at para. 5 “that the validation of the claims within the ADR process referred to in the Statement of Claim was fundamentally flawed and that any payments made were unreasonable.” The General Accident defence states, in paragraph 8, that a compensation fund and the program to compensate victims was set up in 1995 and, in paragraph 9, that General Accident was first contacted by the Province regarding claims or potential claims in 1996. [7] Against the backdrop of those pleadings, the plaintiff seeks information about the insurers’ experience with “multiple claimant situations”. The interrogatories define that phrase this way: “Multiple Claimant Situation” means a situation in which 25 or more claimants present claims against a person or entity insured, or alleged to be insured, by the Insurer, in circumstances where the claims are sufficiently similar in their nature and/or in regards the time period when the wrongful act(s) is(are) said to have occurred, that the claims are handled by the Insurer as a group of related claims; Interrogatory #2 reads: Between January 1, 1980 and December 18, 1996, and excepting the Multiple Claimant Situation which is the subject of this proceeding, has the insurer had occasion to receiver and/or handle one or more Multiple Claimant Situations in relation to: (a) Old Claims of Institutional Abuse; (b) Old Claims of any other kind. In answering (a) and (b), please answer affirmatively even if not all of the claims in a Multiple Claimant Situation were received and/or handled during the period between 1980 and December 18, 1996, provided that at least some of the claims were received and/or handled during that period. and interrogatory #3 reads: If the answer to question 2(a) or (b) is affirmative, please provide a brief description of each such Multiple Claimant Situation, identifying the institution or institutions at which the abuse was alleged to have occurred (if applicable, the name of the insured), the range of dates during which the abuse or other wrongful acts or omissions were said to have occurred, the number of claims against the Insurer and the names of the current and past employees of the Insurer responsible for handling the claims (identifying in each case whether such individual is in fact a current employee, their title and their current or last known business or home address). The insurers object to these questions on the ground that they seek irrelevant information. [8] In the decision concerning production of the Kaufman documents, which I read into the record moments ago, I reviewed some of the authorities on the general approach to discovery, disclosure and production under the Nova Scotia rules. There is no need to repeat them. The principles I am applying are as follows. Subject to two qualifications, the information sought must be logically and legally relevant. The first qualification recognizes that relevancy is not adequately assessed outside trial. At this stage, one must find a semblance of relevancy. Secondly, in addition to information that is relevant, we allow questions on discovery or through interrogatories which are reasonably calculated to lead to admissible evidence. Finally, there is a discretion to limit discovery where it would be just to do so, such as were the burdens that would be placed upon the party making answer clearly outweigh the interests of the party questioning. [9] The subject of the interrogatories is relevant if an insurer’s past experience with numerous grouped-together claimants tends to prove or disprove the reasonableness of the process engaged by the Province to settle with the many claims that are the subject of this action. As Mr. Purdy pointed out during submissions, the interrogatories were so broad as to include processes for settling with numerous victims of a single air plane disaster. The interrogatories have in mind any process were many claimants are grouped together, whether by virtue of a single occurrence or where there are many occurrences with some sort of common theme, such as abuse over decades in state institutions for children. The breadth of the interrogatories alone make semblance of relevancy doubtful. I do not see, for example, how a process embraced by an insurer on one occasion for settling claims from, say, a chain reaction pile up on a freeway holds anything for how the insurer might be expected to behave in, say, an historical assault case involving many victims of a single perpetrator. And, as the examples are narrowed more and more closely to the circumstances that concern us here one has to notice that there would always be much debate about the similarities and the differences. If such evidence had any probative value, one would have to question its worth in light of the discretion. [10] In any event, I am of the opinion that the information sought through these interrogatories has no probative value. I see no semblance of relevancy. The issue of the reasonableness of the Province’s process for settling the claims is not to be determined according to what some other party would have done. It is a question to be answered objectively in light of all the circumstances surrounding the claims and the failure to defend. If in situations of multiple related claims the insurers adopt a process with more stringent methods of validation, they would not be permitted to present evidence of such because the question is the reasonableness of the Province’s process in the circumstances, in which the Province, not the insurer, found itself. We do not determine reasonableness by taking evidence of the behaviour of others in similar circumstances. It is an utterly individual and circumstantial assessment. [11] Mr. Purdy suggested that the information sought through the second and third interrogatories would assist in proving a standard. I agree that if there is a standard relevant to the matters in issue then proof of that standard may include proof of its application in practice. The problem is that I have not been made aware of any relevant standard. Some defences described the Province’s ADR process as having been negligent, which brings to mind duty of care and standard of care. In negligence cases, evidence going to standards of care is often relevant and admissible. However, as the authorities to which Mr. Purdy makes reference show, this is not a case of the Province owing the insurers a duty of care. This is a case of insurers owing a contractual obligation and of a method for quantifying damages that puts in question the reasonableness of the Province’s settlements. [12] It is in this vein of relevant standards that I understand para. 45 of the decision in Campbell v. Jones (1998), 168 N.S.R. (2d) 1 (S.C.), upon which the Province relies. That decision involved motions for various discovery in a defamation action where the defendants had implied that a police woman was motivated by racism or elitism in the detention and search of three young girls. Justice MacAdam determined that police department policies on arrest, search and dealing with visible minorities were relevant. The difference is that these set standards. To the extent that Constable Campbell deviated from them, any breach of standard went to her motives, which went to a defence of justification as well as to damages. Here there is no indication that any standard exists that would be applicable to the Province. An industry standard applicable to insurers might have a semblance of relevancy as might an insurers experience with reference to such a standard. Nothing suggests to me the emergence of such a standard but I would not preclude the plaintiff from revisiting this issue upon production of evidence that a standard has been adopted by the industry. This is not a catch 22. If there is a standard for dealing with multiple claimant situations any in the industry could speak of it. [13] I agree with Mr. Ingersoll’s submission that the present request is similar to the attempts to discover past practice or conduct as rejected in Kelly v. Burns (1999), 176 N.S.R. (2d) 398 (S.C.) and Granville Sales and Auction Ltd. v. Marex Properties Ltd., [1983] N.S.J. 43 (S.C.). [14] As far as I am able to determine, interrogatories two and three call for information that does not bear a semblance of relevancy to any fact-in-issue and they have no potential for leading to admissible evidence. Consequently, I dismiss the Province’s application as it pertains to those interrogatories and I allow the application as it pertains to interrogatory four. J. Halifax, Nova Scotia 20 November 2003