Containing the Spread of Fire(wall)

April 7, 2016 | Hermina Nuric

Implementation of internal firewalls between accident benefits and bodily injury departments has been a struggle for automobile insurers since the publication of the Insurance Bureau of Canada’s Bulletin 184, called “Internal Transfer of Information from Accident Benefits Adjuster to Tort Adjuster”[1]. The type of information that a firewall protects and the direction in which it blocks the flow of information is not always clear. Caution and privacy concerns have at times hindered vital communications between different departments of an insurance company, particularly when dealing with positive results of fraud investigations.

Arbitrator Alves addressed some of these concerns in the recent Financial Services Commission of Ontario decision in Al-Taee and West Elgin Mutual Insurance Company[2]. She was asked to considered whether a firewall restricts the transmission of information both to and from the accident benefits file, and whether the claimant can have an expectation of privacy that extends to preclude disclosure of liability information that undermines the merits of his accident benefits claim.

Mr. Al-Taee reported that he was injured in a motor vehicle accident with an unidentified motorist on September 17, 2011. He claimed and received first party statutory accident benefits from West Elgin Mutual. He also commenced an action against West Elgin Mutual for inadequate insurance coverage, pursuant to the OPCF 44R endorsement on his insurance policy.

West Elgin Mutual secured two engineering reports within the context of the unidentified driver lawsuit. The reports strongly suggested that the accident did not occur in the manner described by Mr. Al-Taee. West Elgin Mutual disclosed the reports to its counsel in the accident benefits claim, which prompted a denial of Mr. Al-Taee’s accident benefits claim on the basis of misrepresentation.

Mr. Al-Taee brought a motion to have the engineering reports excluded from evidence at the hearing of the accident benefits dispute. His counsel argued that West Elgin Mutual breached its firewall and violated Mr. Al-Taee’s reasonable expectation of privacy by sharing the engineering reports between its departments without Mr. Al-Taee’s consent.

Firewall is a One-Way Street

Arbitrator Alves was not persuaded that the firewall had been breached. She accepted West Elgin Mutual’s argument that a firewall operates in one direction only, by protecting the claimant’s accident benefits file from the same insurer’s bodily injury adjusters. A firewall does not stop the flow of information from the bodily injury claim to the accident benefits file.

Reasonable Expectation of Privacy Only Exists in a First Party Relationship

Arbitrator Alves was also not persuaded that Mr. Al-Taee would have had a reasonable expectation of privacy in a tort action. His expectation of privacy was, however, reasonable within the context of his inadequate insurance claim. In Arbitrator Alves’ view, the inadequate insurance action was a first party claim because it was based on the insurance contract between Mr. Al-Taee and West Elgin Mutual.

Privacy is Important, but Not Unassailable

Arbitrator Alves concluded that West Elgin Mutual breached Mr. Al-Taee’s privacy when it disclosed the engineering reports to its accident benefits counsel. She nevertheless refused to exclude the reports from the hearing in the interest of ensuring that all relevant evidence was available to her in the determination of the merits of Mr. Al-Taee’s claim. Arbitrator Alves also acknowledged the principle that a privilege or privacy interest is waived when there is a need to defend against a claim.

Why Care?

Arbitrator Alves’ decision will be helpful to those hoping to contain the spread of the firewall to its most basic purpose, which is to protect a claimant’s accident benefits file from the same insurance company’s bodily injury adjusters.

The decision also highlights the practical implications of disclosing information that goes to the merits of the case and raises questions regarding the claimant’s credibility. This may, by extension, include surveillance documentation. The decision arguably illustrates that information of this nature does not warrant the same degree of protection that is typically afforded to medical documentation.

This decision is currently under appeal.

Read the full case.

[1] January 22, 1997.

[2] FSCO A14-001776, March 4, 2016.


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