Deemed Waiver of Solicitor-Client Privilege Requires Making Legal Advice a Substantive Issue in a Party's Claims or Defence by Robert Jones

Sep 19, 2017

The decision of Master Barbara McAfee in Cooke Aquaculture Inc. v. Continental Casualty Company, 2017 ONSC 5073 arises due to a dispute regarding the spoliation of fish. Cooke Aquaculture (“Cooke”) operates a fish farming business in the Atlantic Provinces. On June 21, 2013 fish that had been harvested from sea pens in the Atlantic Ocean were spoiled after coming into contact with contaminated ice in the refrigeration holds.

Cooke suffered $298,876.11 in damages as a result of the contamination. They It attempted to claim the losses under an insurance policy with Continental Casualty Company (“Continental Casualty”). Coverage was denied on the basis of an exclusion clause, which stated:

19. Process Exclusion
This insurance remains in full force while the subject matter insured is under any process but in no case shall extend to cover loss and/or damage thereto solely caused by such process or resulting directly therefrom.

Continental Casualty determined the transportation of the fish constituted “a process” as defined in the policy. In coming to this decision the adjuster received a coverage opinion from its legal counsel. 

During the Examinations for Discovery a number of undertakings were refused. One refusal was for the production of the coverage opinion obtained by Continental Casualty when deciding to deny Cooke’s claim. The refusal was made on the basis of solicitor-client privilege. Cooke brought a motion to compel answers to the refusals.

Although Cooke successfully received an Order compelling answers to a number of the refusals, they were it was denied an Order to compel production of the coverage opinion. 

In coming to its decision, the Court relied heavily upon the holding in Creative Career Systems Inc. v Ontario, 2012 ONSC 649 which provided an overview of the case law for compelling disclosure of legal advice. A party can be compelled to produce a legal opinion it received where the Court deems solicitor-client privilege has been waived. It is not enough that a party to an action receive a legal advice, or that the legal advice influenced the party’s state of mind and was relied upon. Rather, the deemed waiver occurs when a party uses the receipt of legal opinion as a material fact in his or her claim or defence. As per Davies v American Home Assurance, 2002 CanLII 62442 (Div. Ct.) the party must attempt to justify its behavior ‘on grounds of detrimental reliance upon the legal advice received.’

The Court in Cooke held Continental Casualty did not seek to justify its behavior on the basis of the legal opinion received. Instead, the crux of the issue at trial was will be whether the facts of the accident were encompassed by the ‘process exclusion’ contained in the insurance policy. The Court held the legal opinion had no bearing on whether the exclusion clause was correctly interpreted, or on the facts surrounding the fish contamination. Consequently, an Order to compel the disclosure of the legal advice was denied.

The decision in Cooke provides a welcome reminder of the importance of solicitor-client privilege, as well as its limitations. Parties involved in litigation must be aware of when and what a Court can compel a party to disclose. Although Cooke confirms that it is a high bar to compel production of a coverage opinion, insurers should remain cognizant of the degree of reliance placed on legal advice when denying coverage. Properly understanding the relationship between counsel and client is vital to allowing the relationship to flourish.

Robert Jones is a member of the Coverage practice group. If you have a coverage-related question about a file or a question about this blog, please contact Robert.