Insurer must produce internal manuals in bad faith claim.

On August 12, 2016, the Alberta Court of Queen’s Bench confirmed that in an action for bad faith denial of disability benefits the insurer must produce details of its internal claims handling procedures to the plaintiff.

In Alexander v Sun Life Assurance Company of Canada, 2016 ABQB 445, the plaintiff conducted an examination for discovery of a representative of Sun Life who explained that Sun Life 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. She was asked to produce an Index for the reference material, but stated she didn’t know if one existed. Of course, an index did exist, and was examined by the Chambers judge.

In analyzing the relevance of the documents, the Chambers judge wrote:

[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.

In ordering Sun Life to produce the records, the Chambers judge wrote:

[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.

This is a significant decision as disability insurers often refuse to produce their claims handling materials on the basis that they are “irrelevant”.

If you have an insurance claim which has been terminated or denied, contact Jan Fishman, a former in-house Manulife lawyer, and put his experience to work for you.