When does litigation privilege apply in matters involving insured claims?
Rules of litigation require parties to a lawsuit to produce relevant documents to the other side. There are a few exceptions to this general rule, including an exception for documents protected by litigation privilege. Litigation of insured claims often raises questions about which documents an insurer is required to produce, and which are covered by litigation privilege.
In one of the leading cases on this issue, Stevanovic v. Petrovic, 2007 BCSC 1392, Mr. Justice Romilly found that insurance claims almost always start with a preliminary period during which the parties are attempting to discover the cause of the incident, whether the insured fulfilled their obligations under the insurance contract, and whether the incident was an insurable risk. The court held that documents created during this period are usually not protected by litigation privilege. At some point, however, the focus of the inquiry may shift to preparation for the anticipated litigation.
The courts have held that litigation privilege applies where a document in the possession of an insurer meets the following two conditions:
1. Litigation was in reasonable prospect at the time the document was created, i.e. it was unlikely that the matter would be resolved without litigation; and
2. The dominant purpose of the document’s creation was for use in litigation.
If the claim for litigation privilege over a document is challenged, evidence of the two conditions must generally be provided in an affidavit by the handling adjuster.