The Plaintiff ("Stevens"), in an action seeking entitlement to long-term disability benefits, brought an application for production of documents and information relating to his allegations of bad faith against the disability insurer ("Sun Life"). The court held that the contract claim relating to benefits should be severed from the bad faith claim, with the contract claim to be determined first.
Here is a link to the decision.
Stevens received long-term disability benefits from Sun Life until September 30, 2002, at which time the benefits were terminated. Stevens sued Sun Life, claiming that the insurer had breached its contractual obligation to pay benefits to him (the "Contract Claim") and that Sun Life had acted in bad faith (the "Bad Faith Claim"). In the application before the court, Stevens sought an order pursuant to Rule 26(4) that Sun Life provide an affidavit stating whether or not documents concerning "a bonus plan for disability claims adjudicators" were or had been in the possession or control of Sun Life. The Plaintiff also sought an order pursuant to Rule 27 that a representative of Sun Life answer questions relating to the Bad Faith Claim and that representative produce documents relating to that claim.
The court reviewed a number of decisions where similar concerns had arisen, including Wonderful Ventures Limited v. Maylam (2001), 91 B.C.L.R. (3d) 319 (B.C.S.C.). In Wonderful Ventures, the court allowed the insurer’s application to sever the insured’s claim for money owed under the insurance contract from its claim for punitive damages for bad faith. In that case, the insurer had argued that if both claims were to be held at the same time, it might have to disclose what would otherwise be privileged communications in the trial of the contract claim, in order to defend the bad faith claim. The court had noted that the prejudice to the insurer of having both claims tried together overrode any inconvenience, cost or expense that might be suffered by the insured as a result of severing the claims. The court in Wonderful Ventures ordered that discovery on the severed paragraphs relating to the bad faith claim be delayed until the conclusion of the contract claim.
In the case at bar, the court rejected arguments by Plaintiff’s counsel that the court should follow the test applied in Ontario and Newfoundland where severance was granted only in "exceptional circumstances". The court held that it was bound by the decision in Wonderful Ventures. In the result, the court ordered that the Contract Claim be severed from the Bad Faith Claim, with the Contract Claim to be determined first. The application relating to the Examination for Discovery and production of documents relating to the Bad Faith Claim was stayed until the contractual claim had been determined.