Insurance Litigation and E-discovery

The computer age has revolutionized all aspects of business operations, particularly data production and storage. Studies indicate more than 95 per cent of documents are created electronically rather than in paper form, and at least 30 per cent of these electronic documents are never converted into paper form once created. In addition, e-mail has become one of the principle means of communication in the workplace.

Managing electronic documents and communication is a concern for businesses, not only in their everyday operations, but perhaps most importantly when confronted with the possibility of litigation. This is because the way discovery obligations are handled has changed due to the increased use of computers. This information is discoverable and referred to as e-discovery.

No business is immune from the possibility of litigation and, as such, should evaluate how quickly and easily it can comply with all discovery requests. This matter is of particular relevance for the insurance industry — the most litigated industry.

Discovery is a fundamental component of any civil court proceeding and the rules for discovery are codified by each province or territory’s rules of civil procedure or court. The general principle of discovery is full disclosure and production of relevant non-privileged documents. Determining which documents must be disclosed involves balancing the relevance and probative value of the documents against privacy and confidentiality considerations, as well as the time and expense required to preserve and produce the documents.

The definition of ‘document’ is given an extremely broad interpretation. It will generally include any medium that carries information — no longer limited to hard copy. An increasingly large percentage of documents are produced and stored electronically, and e-mail correspondence is predominant in the workplace. The courts recognize these developments and have established that electronic documents and data are discoverable for evidentiary purposes in litigation. Included are many forms of electronic data– e-mail, web pages, word processing files, etc. — on a variety of sources — computer hard drives, palm pilots, cell phones, etc.

While there is an obligation to preserve and disclose electronic evidence, significant differences exist with e-discovery resulting in a different discovery process. To account for these differences, standards have been drafted in Ontario and British Columbia, including best practice recommendations specific to each province. In addition, The Sedona Canada Principles have been developed to provide a set of principles for e-discovery that are compatible with the discovery rules in all the Canadian provinces and territories. These principles were developed by Canadian lawyers, judges, in-house counsel, court staff and law society representatives, in collaboration with The Sedona Conference, an organization that developed American e-discovery guidelines. While there are no ‘official’ national standards in Canada, growing case law in this area provides helpful guidance.

The first difference between electronic and paper evidence is that electronic evidence is created at a much greater rate. For example, vast amounts of e-mail correspondence can be generated daily in a business. Technology such as e-mail archiving should be implemented to allow businesses to quickly retrieve relevant information. Manually searching e-mail correspondence will add unnecessary expense to the discovery process. A system should also be in place to adequately preserve relevant e-mails. Courts have held that it would be oppressive to order a party to search its entire e-mail system for relevant documents. However, a more specific request would likely be granted and businesses need to be prepared for such a request.

Second, electronic evidence is more difficult to dispose of than paper evidence. Deleting a document from a hard drive does not necessarily mean it is irretrievable. A document can be retrieved by computer forensic experts despite being deleted and courts have accepted restored data as a reliable source of evidence. Deleted e-mail, in particular, can be a vital source of information in litigation. E-mail can reveal more damaging information for litigants due to its more ‘casual’ nature than traditional correspondence. Employees and colleagues should be warned that all work-related e-mail correspondence is potentially discoverable and retrievable. It should be treated as possible litigation evidence rather than private conversation.

Third, electronic evidence can be easily altered or destroyed, often without the user intending to change the document. A potentially valuable and often overlooked source of evidence is metadata, the information pertaining to the documents itself. This can include information such as the date the file was created, the name of the person who created the file, and document revisions including deleted text. Metadata may be vital to litigation as it could authenticate a document or establish material facts, such as when an e-mail was sent. This information can be lost or altered by simply opening or printing a document or e-mail. Due to the vulnerability of metadata and other electronic evidence, it should be sent and received in its electronic form for discovery purposes.

Establishing a clear, well-documented and reasonable electronic data retention, destruction and recovery process is imperative for insurance corporations to meet their e-discovery obligations. Despite the added expense of managing greater volumes of evidence, parties are generally expected to have implemented records management policies to deal with discovery requests. Courts will generally not look favourably upon parties, especially large corporations, who are unable to produce documents due to lack of organization. Courts have held it is acceptable for documents to be deleted in the ordinary course of business. However, this finding does not relieve a corporation of their discovery obligations if policies of immediate and complete document destruction are implemented.

Implementing an e-discovery management process is also extremely beneficial to the corporation. Studies indicate that businesses without a records management and e-discovery response process spend up to twice as much on discovery costs. This is partly due to the belief that a party with an effective system will likely have fewer documents preserved when a request is made. Ideally the party will have already segregated privileged, confidential or irrelevant materials and purged the irrelevant documents. In the event of litigation, a business must also immediately suspend its destruction policies as they might delete relevant documents. It may prove quite difficult to suspend destruction of only relevant electronic documents or data. It is therefore critical to ensure a system is in place to identify documents relevant to the potential litigation and preserve it without requiring a complete suspension of the purging process.

Careful consideration should also be observed when requesting e-discovery. Broad requests for electronic evidence can be extremely costly and time-consuming for the opposing party. Unless a litigant is willing to comply with an equally burdensome request, such requests should not be made. If the opposing party does comply with an unnecessarily broad request, the requesting party may be overwhelmed by the sheer volume of electronic evidence. Therefore, it is best for all litigants to make requests for electronic evidence as specific as possible.

Legal counsel for insurance corporations are undoubtedly aware of discovery obligations in the event of litigation. However, waiting for litigation to address current discovery obligations in the digital age is ill-advised. Advances in technology are ever-increasing the sources of potential evidence. It is therefore imperative that ins urance corporations and their counsel are aware of all current sources of potential evidence and keep apprised of innovations in anticipation of litigation. Implementing an effective e-discovery management process to deal with all potential electronic evidence now will save both time and money when litigation inevitably hits.

Melanie T. Hodges has recently been called to the bar and plans on practicing insurance litigation at Robertson Stromberg Pedersen LLP, in Regina, Saskatchewan. Robertson Stromberg Pedersen LLP is a member firm of The ARC Group Canada Inc.