Alexander v Sun Life Assurance Company of Canada, 2016 ABQB 445

Court of Queen’s Bench of Alberta Citation: Alexander v Sun Life Assurance Company of Canada, 2016 ABQB 445 Date: 20160812 Docket: 1303 02192 Registry: Edmonton Between: Caroline Alexander Applicant/Plaintiff - and - Sun Life Assurance Company of Canada Respondent/Defendant _______________________________________________________ Memorandum of Decision of the Honourable Mr. Justice Don J. Manderscheid _______________________________________________________ Introduction [ 1 ] This is an application for the production of records.

The plaintiff seeks an order requiring the defendant insurer to produce the index for the reference material it provides to its case managers to assist them in dealing with disability claims (the Index). The plaintiff also seeks the production of those portions of the defendant’s reference material that are relevant and material under subrule 5.2(1) of the Alberta Rules of Court . Finally, she seeks a procedural order setting timelines for the next steps to be taken in the action. Background

[ 2 ] The plaintiff commenced her action in February 2013. Her statement of claim alleges that: • her employer had a group insurance policy with the defendant providing long-term disability (LTD) benefits to eligible employees (the Policy); • she was an eligible employee; • in March 2010, she became totally disabled within the meaning of the Policy; • she has been entitled to receive LTD benefits from the defendant since June 2010; • the defendant has failed to pay her any LTD benefits; and • in January 2013, the defendant advised her of its decision to deny her claim for LTD benefits.

The plaintiff claims the defendant’s actions have deprived her of peace of mind and security; caused her to suffer emotional, financial and physical stress; exacerbated her health issues; and had a negative impact on her efforts to recover from her illness. She further claims that the defendant breached its duty to consider her claim in good faith. The plaintiff states that she has complied with the Policy’s terms and conditions but asks for relief from forfeiture in the event that it is found that she did not so comply.

She seeks a judgment for LTD benefits from June 2010; a declaration that she was, and remains, totally disabled within the meaning of the Policy; relief from forfeiture; aggravated and punitive damages; and costs on a solicitor/client basis. [ 3 ] In April 2013, the defendant filed a statement of defence denying the plaintiff’s allegations. The defendant admits to issuing the Policy and states that the plaintiff’s entitlement to LTD benefits is governed by the Policy. The defendant pleads and relies on the Policy’s provisions, particularly those imposing time limits on, and requiring proof of, claims.

The defendant states that the plaintiff failed to give proof of her alleged total disability within a time limit under the Policy and, therefore, she is not entitled to payment of any LTD benefits. In any event, the defendant denies that the plaintiff is, or has ever been, totally disabled as defined by the Policy. In the event that the plaintiff is found to be, or have been, totally disabled, the defendant says she has forfeited any entitlement to LTD benefits under the Policy because she has failed to mitigate her loss of income.

The defendant denies that it breached its duty of good faith and states that it adjudicated the plaintiff’s claim for LTD benefits in a fair and objective manner. The defendant seeks the dismissal of the plaintiff’s claim with costs. [ 4 ] The plaintiff was questioned in May 2013 and April 2014. All her undertakings were answered by July 2014. [ 5 ] The defendant’s corporate representative, Cathy Campbell, was questioned in March 2014. During her questioning, Ms.

Campbell explained that the defendant makes an online databank of reference material available to its case managers to assist them in performing their job duties. She further explained that the reference material is broken down into modules by topic. Ms. Campbell said she did not know if there was an Index for the reference material. Counsel for the parties then had this exchange: Q You probably know where I am going with this. Can you undertake to advise me if there is an index and, if so, produce that and then, secondly, can you produce the portions of this material that are relevant to Ms. Alexander's claim?

Ms. Moody [the defendant’s counsel]: I will take it under advisement. This was Ms. Campbell’s first of twelve undertakings (Undertaking 1). [ 6 ] In October 2014, the plaintiff filed an application for an order compelling the defendant to provide answers to Ms. Campbell’s undertakings. The application hearing was adjourned after the parties agreed on a consent order. The consent order, issued in November 2014, required the defendant to provide answers to Ms. Campbell’s undertakings by the end of December 2014. [ 7 ] In late December 2014, the defendant provided answers to all but one of Ms.

Campbell’s undertakings. The defendant refused to answer Undertaking 1. [ 8 ] In January 2015, counsel for the plaintiff wrote to counsel for the defendant regarding the defendant’s refusal to answer Undertaking 1. He said the refusal was “not a proper answer” to Ms. Campbell’s undertaking and amounted to a failure to comply with the November 2014 consent order (that is, civil contempt). [ 9 ] In a March 2015 letter, counsel for the defendant provided counsel for the plaintiff with this answer to Undertaking 1: “There is no index relevant to the conditions Ms.

Alexander is claiming to have suffered in regard to this matter in the Sun Life reference material.” Counsel for the plaintiff took the position that this answer was unacceptable. [ 10 ] In late March 2015, the plaintiff filed an application for an order declaring the defendant to be in civil contempt (for its failure to comply with the November 2014 consent order) and imposing penalties for its contempt. Alternatively, the plaintiff sought an order compelling further and better compliance with the consent order. [ 11 ] Ms. Campbell swore an affidavit in response to the plaintiff’s application.

In her affidavit, she explains that: • the defendant refused to answer Undertaking 1 on the basis that it is not relevant, • the defendant’s employees are not required to refer to any of the defendant’s reference material when adjudicating a claim, and • the employees who adjudicated the plaintiff’s claim told her they did not refer to any reference material when adjudicating the claim. [ 12 ] The plaintiff’s application was heard in April 2015. During argument, counsel for the plaintiff explained that what he really

wanted was to have Undertaking 1 “dealt with”. That is, he wanted the defendant to produce the Index, and the relevant portions of its reference material.

The chambers judge ordered the defendant to produce the Index that was available between September 2010 and January 2013. [ 13 ] The defendant filed an appeal from the chambers judge’s order in May 2015. [ 14 ] In January 2016, the Court of Appeal allowed the defendant’s appeal, holding that the “chambers judge erred in ordering the defendant to produce a document the relevance and materiality of which she had not determined”: Alexander v Sun Life Assurance Co of Canada , 2016 ABCA 2 at para 10 , [2016] AJ No 3 (QL).

The Court of Appeal went on to say: 11 This issue must be resolved in special chambers. 12 During oral argument the Court asked counsel if they envisioned the following procedure as an appropriate protocol to expedite the resolution of this issue: 1. Plaintiff's counsel would arrange the special chambers hearing date. 2. Defendant's counsel would provide plaintiff's counsel with a copy of the index under appropriate trust terms in a timely manner so that the plaintiff could include in her memorandum any argument about the index plaintiff's counsel deems advisable. 3.

Defendant's counsel would provide the Court with a copy of the index in a timely manner so that the Court would be able to review it when preparing for the special chambers hearing. 13 Both counsel agreed that this proposed protocol was acceptable. 14 We explored this procedural point with counsel to ensure that no adjournment of the special chambers application was necessary on account of late disclosure of the index; not to dictate to the chambers judge what procedure was appropriate. 15 ... The existence of an index has been confirmed by counsel for the [defendant].

A chambers judge sitting in special chambers must determine whether the index identified in Undertaking No. 1 is relevant and material under s. 5.2(1) of the Alberta Rules of Court and producible by the defendant. [ 15 ] In February 2016, the plaintiff filed an application for an order confirming that the Index is relevant and material and, therefore, producible. The plaintiff also seeks an order directing that certain portions of the defendant’s reference material are producible.

Finally, the plaintiff seeks a procedural order, setting timelines for the next steps to be taken in the action. [ 16 ] I heard the plaintiff’s application in Special Chambers at the end of June. The Index [ 17 ] In accordance with the Court of Appeal’s instructions, counsel provided me with the Index. That is, they provided me with paper copies of screen shots of four versions of a webpage.

The documents show what the webpage looked like on September 30, 2010, between October 2011 and July 2012, between July and September 2012 and between October 2012 and January 2013. [ 18 ] The four versions of the webpage all contain the same introduction. It reads: Our practices are designed to support Disability in the management of all claims. They are designed to ensure that our case management strategies align with our mission statement, our plan sponsor’s requirements, the needs of our plan members and our performance goals.

Adherence to our practices ensures that our approach to case management is consistent nationally. They are continuously evaluated and improved in order to ensure that we are offering the best services we can to our plan members and plan sponsors. [ 19 ] Each version of the webpage contains a different list of modules, or topics. The first version contains a list of twenty-two topics. The second, third and fourth versions contain lists of sixty, sixty-one and sixty-four topics, respectively.

Counsel explained that, on the webpage, each of the listed topics is hyperlinked to corresponding reference material. [ 20 ] Counsel for the plaintiff has highlighted the sixteen topics he thinks are relevant and material. They are: Telephone Interviewing, Change of Definition, Appeal Practice, Banyan, Access to Personal Information, Canada Pension Plan (CPP), Case Management, Communication (Letters and EMs), Complaints, Documentation, IMEs, Interrupted Periods of Disability, Escalated Complaints/Ombudsman, Surveillance, Plan Revisions, Amendments and Escalated Issues, and Quality Management Review (QMR).

Issue [ 21 ] I must determine whether the Index and the defendant’s reference material on the sixteen topics the plaintiff’s counsel has highlighted (collectively the Records) are relevant and material under subrule 5.2(1) of the Alberta Rules of Court and, therefore, producible. Relevant Rule [ 22 ] The Alberta Rules of Court provide:

5.2(1) For the purposes of this Part, a question, record or information is relevant and material only if the answer to the question, or therecord or information, could reasonably be expected (

a) to significantly help determine one or more of the issues raised in the pleadings, or (

b) to ascertain evidence that could reasonably be expected to significantly help determine one or more of the issues raised in thepleadings.

(2) The disclosure or production of a record under this Division is not, by reason of that fact alone, to be considered as an agreementor acknowledgment that the record is admissible or relevant and material. Parties’ Arguments [23] Counsel for the plaintiff argues that the Records are relevant and material and, therefore, producible because they will helpdetermine the plaintiff’s bad faith claim (that is, her allegation that the defendant breached its duty to deal with her LTD benefits claim ingood faith).

He says the plaintiff is entitled to know whether the defendant handled and assessed her claim properly and the Records willprovide some evidence of how the plaintiff’s claim should have been handled and assessed. [24] The plaintiff’s counsel gave examples of the kind of information he expects to glean from the Records.

He thinks the Recordswill speak to: how the defendant’s case managers were expected to interpret the Policy; the steps case managers were expected to followin investigating and assessing LTD benefits claims; how case managers were expected to conduct telephone interviews; the type ofassistance case managers were expected to provide an insured making a claim; and the impact a successful application for CanadaPension Plan disability benefits (and/or medical retirement) was expected to have on an insured’s LTD benefits claim.

The plaintiff’scounsel says this information will show whether the plaintiff’s claim was handled and assessed in accordance with the defendant’sinstructions and will, therefore, help determine the issue of whether the defendant breached its duty of good faith. [25] The plaintiff’s counsel says he has shown that the Records are relevant and material and, therefore, producible by drawing asufficient nexus between the Records and an issue raised in the pleadings (that is, the plaintiff’s bad faith claim); and demonstrating thathe has a rational strategy for seeking the Records’ production.

He cites these cases in support of his argument: Royal Bank of Canada vKaddoura, 2015 ABCA 154, [2015] AJ No 489 (QL) [Kaddoura] and Weatherill (Estate) v Weatherill, 2003 ABQB 69, [2003] AJ No88 (QL) [Weatherill]. [26] The plaintiff’s counsel also relies on several cases in which insurers were ordered to produce reference material, like trainingand claims practice manuals, on the basis that those documents were relevant to the plaintiff’s bad faith claims (or, in one case, relevantto the plaintiff’s potential bad faith claim): Simpson v Gafar, [2000] OJ No 3351 (QL)(SC); Samoila v Prudential of America GeneralInsurance Co. (Canada) (2000), (ON SC), 50 OR (3d) 65, [2000] OJ No 2746 (QL)(SC); Rex v General AccidentAssurance Co. of Canada, [2001] OJ No 348 (QL)(SC); Alexander v Great-West Life Assurance Co., 2004 NBQB 285, [2004] NBJ No304 (QL); Mamaca (Litigation guardian of) v Coseco Insurance Co., [2007] OJ No 1190 (QL)(SC); and Simair v Manufacturers LifeInsurance Co., 2007 SKQB 477, [2007] SJ No 668 (QL). [27] Plaintiff’s counsel acknowledges that there are at least two cases which did not go his way: Contos v Kingsway GeneralInsurance Co., [2001] OJ No 1327 (QL)(SC) and Micciche v Mittag, [2001] OJ No 3386 (QL)(SC). [28] Counsel for the defendant quite rightly points out that none of these cases are from Alberta and, therefore, they did notinvolve the application of the relevance and materiality tests under subrule 5.2(1) of the Alberta Rules of Court.

Nonetheless, the casesdealt with applications similar to the application before me and contain some persuasive comments and analysis. I appreciated receivingthem. [29] The defendant’s counsel argues that I must look to the parties’ pleadings to determine whether the Records are relevant andmaterial and, therefore, producible. She says the pleadings raise the issue of whether the defendant breached its duty of good faith ininvestigating and evaluating the plaintiff’s LTD benefits claim. Thus, the question to be determined on this application is whether theRecords can “reasonably be expected (

a) to significantly help determine [that issue], or (

b) to ascertain evidence that [can] reasonably beexpected to significantly help determine [that issue]”: subrule 5.2(1). The defendant’s counsel says the Records cannot reasonably beexpected to do either. [30] The defendant’s counsel argues that the plaintiff’s bad faith allegations are insufficient to make the Records relevant andmaterial. More specifically, she says the allegations in the plaintiff’s statement of claim do not contain particulars of any acts of bad faithrelated to the defendant’s policies, claims handling, education or training that would make the Records relevant and material.

She notesthat there is no allegation that the defendant acted contrary to information in its reference material; that the defendant’s case managers’failure to refer to the reference material was

an act of bad faith; or that some aspect of the defendant’s training of its employeesconstituted

an act of bad faith. The defendant’s counsel says the plaintiff’s bad faith allegations do not contain particulars that correspondwith any of the sixteen topics in the Index that the plaintiff seeks reference material on.

According to the defendant’s counsel, in thesecircumstances, requiring the defendant to produce the Records will allow the plaintiff to go on a “fishing expedition” and open thefloodgates to excessive demands for documents. [31] The defendant’s counsel cites these cases in support of her arguments: Franco v Hackett, 2000 ABQB 241, [2000] AJ No 415(QL); Mustard v Brache, 2006 ABCA 265, [2006] AJ No 1137 (QL) [Mustard]; Dow Chemical Canada ULC v Nova Chemicals Corp.,2014 ABCA 244, [2014] AJ No 790 (QL) [Dow Chemical]; Dow Chemical Canada Inc. v Nova Chemicals Corp., 2015 ABQB 2,[2015] AJ No 7 (QL). [32] The defendant’s counsel also argues that the Records are not relevant and material because the case managers who assessedthe plaintiff’s claim were not required to refer to them, and did not refer to them.

She says these facts show that the Records had no

bearing on how the defendant investigated and evaluated the plaintiff’s claim. [33] In response, the plaintiff’s counsel says the fact that the defendant’s case managers did not refer to the Records in assessingthe plaintiff’s claim does not answer the question of their relevance and materiality. He maintains that the Records are relevant andmaterial because they will shed light on how the case managers should have handled and assessed the plaintiff’s claim (from thedefendant’s perspective).

Moreover, he argues that the case managers’ failure to refer to the Records actually increases the Records’relevance and materiality, as it may be evidence of the defendant’s bad faith (that is, evidence that the plaintiff’s claim was not was dealtwith fairly because it was not handled and assessed in accordance with the defendant’s instructions). Analysis [34] The Records will be producible if I determine they are relevant and material under subrule 5.2(1) of the Alberta Rules ofCourt.

Tests for Determining Relevance and Materiality [35] In Dow Chemical, at paragraph 17, our Court of Appeal held that, “[a]s the wording of [subrule 5.2(1)] implies, relevance isprimarily determined by the pleadings, whereas materiality relates to whether the information can help, directly or indirectly, to prove afact in issue”.

Therefore, I must look to the pleadings to determine whether the Records are relevant, and then assess their materiality. [36] In NAC Constructors Ltd v Alberta Capital Region Wastewater Commission, 2006 ABCA 246, [2006] AJ No 1051 at para13 (QL), the Court held: The materiality of evidence refers to its pertinency or weight in relation to the issue it is adduced to prove: Black’s Law Dictionary, (6thed. 1990).

Facts or documents may be relevant within Rule 186.1 [now subrule 5.2(1)], but, either alone or in combination with otherevidence, be of no significant help to the examining party in proving or disproving a fact in issue. [37] Later, in Dow Chemical, at paragraph 19, the Court said, “[t]here is no fixed standard of what is ‘material’. An element ofjudgment is required”. And, at paragraph 21, the Court held: It is not sufficient for a litigant to show some theoretical line of argument in order to establish “materiality”.

The case management judgeis fully entitled to reject lines of pretrial discovery that are unrealistic, speculative, or without any air of reality. ... [However, at] aninterlocutory stage of proceedings, the court should not measure counsels’ proposed line of argument too finely: Weatherill at para 16. [38] Finally, in the more recent case of Kaddoura, the Court confirmed the statements it made in Dow Chemical and held that, atthe production stage of the litigation, a litigant need not “demonstrate conclusively that the discovered records will in fact contain anyevidence of assistance to them”; he or she “need only show a plausible line of argument” regarding the probative value of the records heor she seeks: paras 14-15.

Relevance of the Records [39] The plaintiff’s bad faith claim is contained in paragraph 8 of her statement of claim, which reads: Further, the Defendant owed to the Plaintiff a duty to consider her claim in good faith, which duty of good faith the Defendant hasbreached, some particulars of which include: a. failing to weigh all the evidence on an impartial basis; b. failing to provide any or adequate assistance to the Plaintiff in the preparation, completion, and submission of documentationrequired by it to process the Plaintiff’s claim for disability benefits; c. failing to obtain or solicit additional information or documentation it was contractually entitled to when it had doubts about thePlaintiff’s disability; d. such further and other particulars as well be proven at the trial of this action. [40] The defendant’s response to the plaintiff’s bad faith claim is contained in paragraph 21 of its statement of defence, whichreads: Sun Life specifically denies the allegations in paragraph 8 of the Statement of Claim; at all material times, Sun Life has adjudicated thePlaintiff’s claim for benefits under the Policy in a fair and objective manner and has at all times acted in good faith. [41] These pleadings clearly raise the issue of whether the defendant breached its duty to deal with the plaintiff’s claim in goodfaith.

The statement of claim says it did, and provides some particulars of its alleged breach.

And, the statement of defence says thedefendant fulfilled its duty, by dealing with the plaintiff’s LTD benefits claim fairly at all times. [42] It is well-established that “there is an implied obligation in every insurance contract that the insurer will deal with claims fromits insured in good faith” and that this “duty of good faith ... requires an insurer to deal with its insured’s claim fairly”: 702535 OntarioInc v Non-Marine Underwriters, Lloyd’s of London (2000), (ON CA), 184 DLR (4th) 687, [2000] OJ No 866 atparas 27 and 27 (QL)(CA) [702535].

[ 43 ] In 702535 , at paragraph 29, the Ontario Court of Appeal described the legal standard insurers are held to as follows: The duty to act fairly applies both to the manner in which the insurer investigates and assesses the claim and to the decision whether or not to pay the claim. In making a decision whether to refuse payment of a claim from its insured, an insurer must assess the merits of the claim in a balanced and reasonable manner. It must not deny coverage or delay payment in order to take advantage of the insured's economic vulnerability or to gain bargaining leverage in negotiating a settlement. A decision by an insurer to refuse payment should be based on a reasonable

interpretation of its obligations under the policy.

This description was approved by the Supreme Court in Fidler v Sun Life Assurance Co of Canada , 2006 SCC 30 , [2006] 2 SCR 3 at para 63 [ Fidler ]. [ 44 ] In Fidler , at paragraph 71 , the Supreme Court suggested that, where an insured has been denied benefits and alleges his or her insurer breached its duty of good faith, the question to be asked is “whether the denial was the result of the overwhelming inadequate handling of the claim, or the introduction of improper considerations into the claims process.” [ 45 ] At paragraph 72, the Court said “each case resolves around its own facts” and quoted this passage from 702535 : What constitutes bad faith will depend on the circumstances in each case.

A court considering whether the duty has been breached will look at the conduct of the insurer throughout the claims process to determine whether in light of the circumstances, as they then existed, the insurer acted fairly ... in responding to the claim: para 29. [ 46 ] I agree with the plaintiff’s counsel that the Records are relevant (to the issue of whether the defendant breached its duty to deal with the plaintiff’s claim in good faith) because they will show how the defendant expected its case managers to deal with the plaintiff’s claim.

That is, they will show how the defendant interpreted its duty of good faith and what best practices it developed for its employees to adhere to, in investigating, assessing and deciding whether to pay a LTD benefits claim. The Records will show how the plaintiff’s claim should have been dealt with, from the defendant’s perspective. [ 47 ] I also agree with the plaintiff’s counsel that the fact that the case managers who dealt with the plaintiff’s claim were not required to, and did not, look at the Records does not make the Records irrelevant.

It may well be that the case managers should have sought guidance from the Records in dealing with the plaintiff’s claim. Materiality of the Records [ 48 ] The next issue to consider is whether the Records can help prove that the defendant breached (or fulfilled) its duty to deal with the plaintiff’s claim in good faith. As I previously said, the Records will show how the defendant expected its case managers to deal with the plaintiff’s claim. Other records (for example, the defendant’s claims file on the plaintiff) will show how the defendant’s case managers actually dealt with the plaintiff’s claim.

With both sets of records available to her, the plaintiff will be able to evaluate whether her claim was dealt with in accordance with the defendant’s best practices. For example, she will be able to evaluate whether the defendant’s efforts to obtain the documentation it needed accorded with the best practices outlined in its reference material (particularly the modules on Access to Personal Information, Case Management, Communication [Letters and EMs], Documentation, and IMEs).

Consequently, the plaintiff will be in a better position to assess the merit of, or prove, her allegations that the defendant failed to provide her with “adequate assistance ... in the preparation, completion, and submission of documentation” it required; and failed “to obtain or solicit additional information or documentation” it was entitled to: Statement of Claim at paras 8(

b) and (c). [ 49 ] As my example demonstrates, the Records can reasonably be expected to significantly help determine the issue of whether the defendant breached its duty of good faith because they will permit the plaintiff to evaluate whether her claim was dealt with in accordance with the defendant’s best practices. If her claim was dealt with in accordance with the defendant’s best practices, the plaintiff might reconsider the merits of her bad faith claim. If her claim was not dealt with in accordance with the defendant’s best practices, the plaintiff can rely on that fact in support of her bad faith claim.

In my view, the plaintiff’s counsel has met his onus of disclosing a rational strategy, or plausible line of argument, in which the Records play a material part. This is sufficient to establish the Records’ materiality: Kaddoura at para 15 and Weatherill at para 16 . Conclusion [ 50 ] I am not persuaded by the argument (made by the defendant’s counsel) that requiring the defendant to produce the Records will allow the plaintiff to go on a “fishing expedition” and open the floodgates to excessive demands for documents.

The case law the plaintiff’s counsel provided demonstrates that, in other Canadian jurisdictions, it is not unusual, nor considered overly onerous, to require an insurer to produce its reference material (like training and claims practice manuals) in cases where an insured claims the insurer breached its duty of good faith. [ 51 ] I have concluded that the Records are relevant and material under subrule 5.2(1) of the Alberta Rules of Court . Therefore, they should be produced. Procedural Order [ 52 ] The plaintiff also seeks a procedural order setting timelines for the next steps to be taken in the action.

At the application hearing, counsel proposed these timelines: i. the defendant’s counsel will advise the plaintiff’s counsel whether she wants the plaintiff to submit to another independent medical examination within two weeks of this decision;

ii. the Records will be produced within one month of this decision; iii. any questioning on the Records will take place within one month of the Records’ production; and iv. a Form 37 (Request to

Schedule a Trial Date) will be filed within one month of any questioning on the Records. Result [ 53 ] The defendant must produce the Records, and the parties must meet the timelines listed in the preceding paragraph of this decision. [ 54 ] If the parties cannot agree on costs, they may speak to them within sixty days of this decision. Heard on the 29 th day of June, 2016. Dated at the City of Edmonton, Alberta this 11 th day of August, 2016. Don J. Manderscheid J.C.Q.B.A. Appearances: D.P. Cavanagh Weir Bowen LLP for the Applicant/Plaintiff W. N. Moody Dentons Canada LLP for the Respondent/Defendant