Executive Summary: Key Legal and Evidentiary Issues

• Dispute centered on whether the insurer waived solicitor-client and litigation privilege through selective disclosure of documents.

• Plaintiffs challenged the adequacy of the insurer's document disclosure and sought production of withheld attachments.

• Court examined the difference between explicit and implicit waiver of privilege and its impact on discovery obligations.

• Defendant voluntarily disclosed 454 privileged documents but maintained privilege over others, leading to a legal clash over scope.

• Plaintiffs argued waiver extended to all related communications due to fairness and consistency principles.

• The court ruled that fairness required broader disclosure and ordered the insurer to produce additional documents and attachments.

Facts and outcome of the case

The case arose from a dispute over an insurance claim related to property damage and delays in construction at the Pacific Sands Beach Resort in Tofino, British Columbia. The plaintiffs, Pacific Sands Beach Resort Ltd. and Pacific Sands Resorts (2007) Ltd., held a policy with Co-Operators General Insurance Company that covered direct loss or damage and related expenses due to construction delays. Following an incident that the plaintiffs believed was covered, the insurer denied the claim, prompting legal action for breach of contract and bad faith handling.

During the litigation, disclosure of documents became a point of contention. The plaintiffs sought broader production, including attachments and communications originally withheld under claims of solicitor-client and litigation privilege. The insurer had disclosed 454 previously privileged documents, moving them from the privileged section (Part 4) to the producible section (Part 1) of its document list. The plaintiffs argued that this partial disclosure constituted a waiver of privilege over the entire subject matter of the communications, namely, the handling of their insurance claim.

Justice Walker reviewed the issue, distinguishing between explicit and implicit waivers of privilege. The court found that although the insurer had not explicitly waived privilege over all communications, it had implicitly done so by selectively disclosing documents that supported its defense against the bad faith claim. This partial disclosure gave an incomplete picture and was deemed unfair. Additionally, statements made during discovery indicated that the insurer had relied on legal advice when assessing the claim, reinforcing the court’s finding of implied waiver.

As a result, the court ordered the defendant to amend its list of documents to include all communications between its former legal counsel and other parties related to the insurance claim. The defendant was also required to produce specific email attachments previously referenced but not disclosed. The judge emphasized that the scope of the waiver was limited to the subject matter of the disclosed documents, ensuring fairness without undermining legitimate privilege claims beyond that scope.

The court awarded costs of the application to the plaintiffs in any event of the cause, acknowledging their diligent efforts to secure full disclosure. No damages were awarded at this stage, as the decision focused solely on document production and privilege waiver in the pretrial phase of the case.