Legal Opinions May be Compellable in Dismissal Suit
By Melynda Layton LLB
As Published in December 8, 2000 Issue of Lawyers Weekly
Legal opinions and corresponding file materials supporting an employers’ decision to terminate for cause may be compellable evidence within a wrongful dismissal action.
Where a former employer alleges cause for termination, and relies upon legal advice when defending the veracity of its cause claim, legal opinions may be compellable despite solicitor and client privilege.
In the recent decision of the Ontario Superior Court of Justice in Samoila v. Prudential of America General Insurance Co. (Canada) [2000] O.J. LEXIS, the insurer was found to have waived solicitor/client privilege when its representative advised, during Examinations for Discovery, that Prudential’s policy was to seek and rely upon advice from legal counsel when it denied coverage to insurers’ on the basis of fraud.
Justice John Brockenshire ordered production of all legal opinions obtained by the insurer relating to the denial of Paul Samoila’s accident benefit claim indicating the opinions were relevant to the Plaintiff’s claim for bad faith damages.
Paul Samoila was injured in a motor vehicle accident. His insurer, Prudential, initially paid sick and accident benefits, but later stopped paying them. It claimed reimbursement for all amounts paid, alleging the insurance policy was obtained fraudulently after the accident occurred.
Mr. Samoila commenced an action for reinstatement of disability benefits and damages for bad faith on account of Prudential’s allegation of misconduct.
Following examinations for discovery, Prudential withdrew its allegation of fraud and misrepresentation reinstating benefits. The claim, having been resolved, the action continued on the sole issue of bad faith damages.
Unlike wrongful dismissal actions, a breach of the duty to act in good faith, within the insurance context, gives rise to a separate cause of action. As in employment law cases, the duty requires the insurer, when refusing a claim for benefits, to act fairly. The court delineated the obligation as follows,
In making a decision whether to refuse payment of a claim from its insured, and 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 duty of fairness, however, does not require that an insurer necessarily be correct in making a decision to dispute its obligation to play a claim. Mere denial of a claim that ultimately succeeds is not in itself an act of bad faith.”
When assessing allegations of bad faith the context within which benefits were denied must be examined. Bad faith damages are not warranted when the insurer can establish an objective basis for its denial of benefits.
While communications with a legal advisor are generally privileged, within the context of seeking legal advice, the privilege may be waived, “when a party places its state of mind in issue and has received legal advice to help form that state of mind...”.
Within the employment law context the obligation of good faith requires employers, in the course of dismissal, to be candid, reasonable, honest and forthright with employees. Employers must refrain from engaging in conduct which is unfair or in bad faith by being, for example, untruthful, misleading or unduly insensitive.
The implications of Samoila, within the employment law context, are far-reaching. Once a plaintiff claims entitlement to an increased notice period because of bad faith the employer’s “state of mind” at the time of dismissal is at issue. Even if the employer withdraws its cause allegations, legal opinions may be compellable in order to assess whether there was an objective basis upon which the cause allegations were initially raised. The wary legal practitioner will be cognizant of the potential compellability of legal opinions when advising a client that they have cause to terminate employment.
To ask a question or for further advice please contact Melynda at melynda.layton@careerlaw.ca or by telephone at 613-225-4400
