Bad Faith & Production of an Insurer’s Business Information - 4 Key Implications of the NBCA's Decision in Wade v. Wawanesa Ins. Co.The Wawanesa Mutual Insurance Company v. Wade, 2015 NBCA 43 (CanLII)
On July 16, 2015, the New Brunswick Court of Appeal ordered an insurer to produce a significant amount of its financial and business information to a plaintiff in a first party claim involving bad faith and punitive damages. The decision may impact how insurers - particularly automobile and disability insurers - defend claims of bad faith.
In Wade v. Wawanesa Ins. Co., 2015 NBCA 43, Ms. Wade sued her insurer for loss of income benefits under NB’s standard automobile policy. Her claim also included fairly boiler plate allegations that the insurer had acted in bad faith and that Ms. Wade was entitled to punitive damages. The insurer subsequently admitted it was liable to pay benefits to Ms. Wade, but the amount of the benefit was in dispute.
In the insurer’s view, there wasn’t any factual support for any of the bad faith allegations. In fact, Ms. Wade’s counsel admitted at oral discovery that the bad faith claim was based largely on her counsel’s own interactions with the insurer and “suspicion” and “innuendo” among the plaintiffs’ bar. Ms. Wade also couldn’t articulate how she herself had been treated other than in good faith. Nevertheless, by way of a motion, Ms. Wade sought production of the following documents or information on the basis that they were relevant to the issues of bad faith and punitive damages:
- the number of policy holders that received income replacement benefits from the insurer for a period of five years;
- the average length of time insureds received income replacement benefits for a period of five years;
- the actual length of time the insurer had paid income replacement benefits had been paid to its other insureds for a period of five years;
- information as to the insurer’s net worth, gross assets, net income or loss and net operating income from the sale of automobile policies in NB for a period of five years; and
- copies of the insurer’s financial statements, annual reports or “documents supporting same” for a period of five years.
The NB Court of Queen’s Bench decided the insurer had to produce this information and the NB Court of Appeal agreed.
4 KEY IMPLICATIONS
Here are 4 key implications of the NB Court of Appeal’s decision on how insurers might defend bad faith claims in NB:
A Very Broad Scope of Production. The motions judge decided Ms. Wade’s requests weren’t a baseless “fishing expedition” - despite the admission that she sought production based solely on innuendo. The Court ordered production on the basis of a very broad understanding of the “semblance of relevance” test: the motion’s judge found the documents or information bore some minimal relationship to the claims of bad faith and punitive damages and so the insurer had to produce everything. Further, the request to produce “documents supporting” the insurer’s financial statements and annual reports, presumably for all of its Canadian operations, may be unclear.
Proportionality & Sedona Canada Principles in NB. It appeared that most of the documents or information the plaintiff sought weren’t readily available to the insurer, and a large amount of work and expense would be required to satisfy the plaintiff’s request. The insurer offered affidavit evidence about the time and expense needed to do so, and argued that both the “principle of proportionality” and the Sedona Canada Principles Addressing Electronic Discovery precluded production. The motion’s judge decided the importance of the issues of bad faith and punitive damages to the plaintiff overwhelmed the insurer’s concerns. The Court of Appeal agreed. This finding may have broader implications for all litigation in NB.
Timing of Production. The decision seems to change the timing at which an insurer may be required to produce its business and particularly its financial information. Courts sometimes ordered production of similar documents but usually only after the plaintiff has proven bad faith. The Court’s reasons may allow production of an insurer’s business information at any time.
- Bifurcation. NB precedent supports a “bifurcation” order separating and delaying the litigation of bad faith from the issues of liability under a policy. In Wade, a bifurcation order was vacated on consent prior to the plaintiff’s production demands. Going forward, insurers dealing with bad faith claims should give careful consideration to the terms of any bifurcation orders involving the production of business information.
Please contact your McInnes Cooper lawyer or any member of our McInnes Cooper Insurance Defence Team to discuss this topic or any other legal issue.
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