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Monday Morning Case Bites for April 8, 2019

Last Week’s Court Rulings from the Alberta Court of Queen’s Bench, Court of Appeal and SCC.

Edited by Amanda Kostek & Christie Dewar

Moussi v TD Home and Auto Insurance Company, 2019 ABQB 242
Section B Benefits | TMD Treatment | Dental IME

Tokio Marine & Nichido Insurance Company v Security National Insurance Company, 2019 ABQB 205
Duty to Defend | Dealership Courtesy Vehicle | Renter or Leassor

Statt v SGI Canada Insurance Services Ltd, 2019 ABQB 170
Litigation Privilege | Insurer’s File

Moussi v TD Home and Auto Insurance Company, 2019 ABQB 242 

The Plaintiff sued his Section B benefits insurer for failing to pay for TMD treatment, which the insurer refused to provide unless the Plaintiff underwent an IME with a dentist. The Court ultimately sided with the insurer, finding that it was entitled to an IME by a dentist. The Plaintiff refused on the basis that there was no right to be examined by a dentist; the policy only permitted examination by a qualified medical practitioner, which the Plaintiff argued was a physician.

The Court commented that the insurer could have their medical expert review the Plaintiff’s dental report and treatment estimate.  If the Insurer’s advisor disagreed, then it should set out detailed reasons why the treatment was not reasonable.  The Court directed that an IME may occur where the insurer reasonably requires a physical exam, and if needed, the insurer must set out reasons why:

[36]           As I have described above, it would be reasonable to expect TD Insurance to have Dr. Thomas’s report and treatment estimate reviewed by their medical advisor prior to demanding Moussi, a child, be physically examined. There is nothing in the Agreed Statement of Facts to indicate whether or not that step took place.

[37]           If after review of the report and documents submitted, the insurer’s medical advisor did not agree with Dr. Thomas’ estimate of the cost of treatment necessary to remedy the TMJ injury caused by the accident, it would be incumbent upon TD Insurance to respond with detailed reasons as to why they were not going to pay for the treatment. These reasons might have included that a different treatment modality was suggested by their medical advisor or that the estimated costs were out of line with other dentists, as examples. That would give the insured an opportunity to discuss the appropriate treatment with the insurer. In the Sutherland decision, Judge O’Ferrall commented “it goes without saying that a contract of insurance is founded on open and complete communication and cooperation between insurer and the insured.”

[38]           A request to have the insured examined by a duly qualified medical practitioner named by the insurer may be made when the insurer reasonably requires a physical examination. In the spirit of open and complete communication, the insurer must give reasons for why it requires the examination at the time of the request. For example, the insurer could take issue with the causation of the injury, the diagnosis or the necessity of the treatment given the nature and severity of the injury. If the treatment is ongoing, the insurer might reasonably require a further physical examination at a later time to assess the duration and prognosis of the injury.

The Court concluded that the definition of “duly qualified medical practitioner” must expanded to include a dentist.  As a result, the insurer did not act in bad faith:

[50]           I adopt the reasoning of Justice McFadyen in paragraph 8 of her decision in finding that where the injury giving rise to the claim for Section B accident benefits involves the plaintiff’s temporomandibular joint which falls within the expertise of a doctor of dental medicine rather than the medical profession, the definition of “duly qualified medical practitioner” must be extended to include a dentist as a highly trained medical professional who deals with health issues restricted to that portion of the human body.

[51]           In the circumstances, TD Insurance has not acted in bad faith in requiring Mohamed Moussi to attend Dr. Hernandez before considering payment of the expenses for dental services. The insurer has provided in written and oral argument in support of this application, although not in its direct communication with the insured, that it reasonably requires a second opinion on the assessment, diagnosis, prognosis and treatment of the plaintiff’s condition through an independent dental exam for the purpose of considering the payment of the dental services required for TMJ treatment under Section B of the SPF-1 Policy.

Tokio Marine & Nichido Insurance Company v Security National Insurance Company, 2019 ABQB 205

This was an Application by a dealership’s insurer for a finding that the customer’s insurer had a duty to defend. Both the Master’s decision and the appeal concluded that there was no duty to defend. The customer sent another individual to drive his personal vehicle to the dealership, and advised the driver that the dealership would provide her with a courtesy vehicle:

[2]               The facts of the case are relatively straightforward and generally agreed upon by the parties. On June 4, 2016, Gurpreet Sran drove a vehicle owned by Harjit Gill to the Northwest Acura dealership in Calgary Alberta with his permission. She was not a named insured under his policy, nor could she be considered a spouse of Mr. Gill as she did not reside with Mr. Gill. He had requested that she take his vehicle to the dealership for servicing and had told her that the dealership would provide her with a courtesy vehicle. The dealership did provide her with a courtesy vehicle, after she signed an agreement. It was this courtesy vehicle, provided by the dealership, which Ms. Sran was operating when she collided with a skateboarder.

[3]               Mr. Gill’s vehicle was insured by Security National Insurance Company. The courtesy vehicle was owned by Honda Canada Finance Inc. and leased to Honda Canada. Honda Canada then loaned the vehicle to Northwest Acura pursuant to the Acura Courtesy Car Program Agreement. The courtesy vehicle was insured by Tokio Marine & Nichido Insurance Company Limited. Tokio Marine sought an order declaring that Security National is required to defend Ms. Sran in the action commenced by the skateboarder. Master Birkett denied Tokio Marine’s application, and found that Security National did not have to defend the claim. Tokio Marine now seeks to have the decision Master Birkett overturned.

The Court noted that the dealership was not required to provide the driver with a courtesy vehicle.  As a result, Security National was required to defend the action:

[11]           Mr. Gill was not in a position to provide consent to the release of the courtesy vehicle to Ms. Sran. Although it may have been expected by Mr. Gill, there was no guarantee that it would happen. I find that giving his consent to Ms. Sran to operate his vehicle did not result in him providing consent for her to operate the courtesy vehicle. He was not the owner or lessor of the courtesy vehicle and as an uninterested third-party had no ability to give anyone consent to drive the courtesy vehicle.

[12]           If he were driving the courtesy vehicle, it would be a temporary substituted vehicle and subject to coverage under his insurance. If he accepted the courtesy vehicle from the dealership and then authorized Ms. Sran to operate the vehicle, it likely would be a temporary substituted vehicle and subject to coverage under his insurance. I find, however, that Mr. Gill cannot authorize Ms. Sran to operate a vehicle in which he has no interest under terms that he does not know. Consequently, Security National does not have to defend the claim.

[13]           Even if Mr. Gill did have the ability to transfer his consent to the courtesy vehicle, I find that Security National would not have to defend the action.

The Miscellaneous Insurance Provisions Regulation was raised in argument.  However, for the provision to apply, the dealership had to be a renter or lessor, which it was not:

[17]           The agreement presented to and signed by Ms. Sran is titled “Loaner Vehicle Agreement”. It is a one-page document. One small section of that agreement does use the word “rental”, however, in Ms. Sran’s agreement that section is left blank. The space where the rental charge could be entered is blank, as is the space for the driver’s initials. There is nothing else in the agreement to alert Ms. Sran that she was entering a rental contract.

[18]           The loaner vehicle agreement was not prepared by Mr. Gill, Ms. Sran, or Security National. The doctrine of contra proferentem requires that any ambiguity in the document be decided in the favour of the person who did not draft the agreement. As there is ambiguity, the ambiguity should be viewed in favour of Security National. The document does not create a rental agreement.

[19]           Even if a rental agreement were created, Northwest Acura would have to be renting the vehicle as part of its ordinary course of business. Northwest Acura is a standard car dealership. It sells and services new and used vehicles. There is nothing to indicate that it is in the business of renting vehicles. It would fail to pass this step of the test.

As a result, the dealership’s insurer was required to defend the action:

[23]           This is a situation in which the lessor of the vehicle has given permission to a third party to operate the vehicle. It is no different than Mr. Gill giving Ms. Sran permission to drive his vehicle. As stated earlier, if the collision occurred while Ms. Sran was operating Mr. Gill’s vehicle, his insurance would take priority. In this situation, the lessor’s insurance should take first priority under section 187 of the Traffic Safety Act. Honda Canada Inc. is the lessor, consequently its insurance should take priority.

Statt v SGI Canada Insurance Services Ltd, 2019 ABQB 170

This was an application to compel answers to Undertakings, which were of the insurer’s records arguably subject to litigation privilege. The Court agreed that the majority of the records were subject to litigation privilege, except two recorded phone calls between the insurer and the insurance broker, and three recorded phone calls between the insurer and the Superintendent of Insurance. The claim arose out of a house fire, where the insurer had been sued by it’s insured.

[12]           Mr. Taylor was questioned on his affidavit on June 12, 2018. Undertakings to produce all written and electronic documentation from SGI’s file and from its independent adjuster’s file were taken under advisement. SGI subsequently advised that the following documents were subject to a claim of litigation privilege and would therefore not be produced:

(a)               Independent adjuster reports (numbered 11 to 16) dated April 13, 2016 through November 21, 2017;
(b)               Independent adjuster emails and file notes from December 10, 2015 through July 30, 2018;
(c)               SGI internal file notes from December 10, 2015 through June 9, 2018; and,
(d)               Recorded telephone conversations with the ASI, Complete Care Restorations Services Ltd., and the Statt’s insurance broker, all of which took place in the March to June 2016 time period.

The case outlines the extended history of the dispute.   Ultimately, by late 2015 the Insured requested dispute reolution using an Umpire.  On this basis SGI properly claimed litigation privilege over independent adjuster reports after that date:

[69]           Ms. McMillan, and by his adoption of her evidence, Mr. Taylor, have deposed that “commencing on December 9, 2015 [the day Mr. Statt served the DRP demand], the Statts and SGI coordinated the appointment of umpires for the dispute resolution process and other dispute resolution related issues” and that “at this time SGI and DCA engaged in fact gathering to advance SGI’s position at the DRP and further litigation if necessary.”

[70]           As is evident from the sequence of events leading to the present dispute, the parties were indeed entrenched in their respective positions by this point. It had become necessary to involve impartial third parties – the umpires – to decide the dispute.

[76]           The uncontradicted evidence of Ms. McMillan, adopted by Mr. Taylor, is that the dominant purpose of the recorded telephone call with CCR in June 2016 was to collect facts to advance SGI’s position in the DRP and potential future litigation. Mr. Taylor’s acknowledgment that CCR did not take an active role in the DRP and is not involved in the litigation does not detract from the described purpose of this telephone call.

[77]           The communications with the ASI and CCR that Mr. Taylor describes are communications meant to facilitate the investigation and preparation of SGI’s case within the zone of privacy that litigation privilege is designed to protect. These recorded telephone calls properly fall within the litigation privilege sphere.

However, the telephone call evidence with the insured’s broker was not prepared for the dominant purpose of litigation, and needed to be disclosed.

The outstanding issue was whether litigation privilege ended when the dispute resolution process was concluded.  The Court concluded that it did not:

[88]           The parties in this case remain locked in what is essentially the same disagreement. The cause of action now asserted against SGI by the insureds arises from the same issues that led to the DRP. Consequently, I find that the litigation privilege protecting records created for the dominant purpose of the DRP continues, subject to a question of waiver in relation to the recorded telephone conversations with the ASI. I turn to that issue now.

Bad faith was also discussed.  The Court noted some inconsistency in SGI’s communication.  However, the Court was not able to make a determination on the record due to incomplete evidence, and inconsistent communication by the Insureds.

[104]      The lack of clarity in SGI’s communication about what was, and was not, to be determined by the umpires does raise a question about whether SGI may have fallen afoul of its duty of good faith during the DRP or in its refusal to pay for repairs to the kitchen cabinets or for additional lost rent and utilities following the conclusion of that process. The issue is made more serious by SGI’s failure to challenge the umpire rulings in the face of an apparent disagreement between SGI and the Statts about whether one or both of the umpires had decided an issue they were not authorized or asked by the parties to resolve. The Statts argue SGI could have done so with an application for judicial review: Peace Hills General Insurance Company v Doolage, 2005 ABQB 217 (CanLII).

[105]       That said, I do not find that the evidence available to me is, in itself, capable of establishing bad faith against SGI in relation to the proceedings in respect of which litigation privilege is claimed. It falls short of establishing a prima facie case because:

(a)               The Statts’ communication about the issues to be determined by the umpires also lacked clarity. Both Mr. Statt and Representative Statt referred to the issues requiring resolution as coverage issues, which Mr. Statt understood fell outside the DRP;
(b)               I do not have complete evidence about what representations were actually made by the parties to the umpires; and,
(c)               At least with respect to the kitchen cabinets, the umpire appears to have determined only what the repair costs would be, not whether the cabinets suffered direct physical loss or damage caused by the insured peril. During argument, counsel for the Statts acknowledged that it was fair to say the parties understood there would still be a coverage question to resolve after Mr. Klasson was finished.