On November 16th the Nova Scotia Supreme Court ordered the plaintiff in an action for LTD benefits to produce correspondence he had sent and received in the course of settling a claim against his former employer.
The plaintiff settled a wrongful dismissal action and a human rights claim brought against his former employer for $65,000. The amount was expressly allocated as general damages in the settlement agreement. The plaintiff continued his action against the LTD insurer for non-payment of benefits, which raised the issue of whether any portion of the $65,000 would be deductible under the LTD plan as “earnings recovered.” To address this issue, the insurer requested production of the settlement correspondence. The plaintiff resisted by raising settlement privilege and claiming that the settlement document itself (which had been produced) was proof that none of the damages were deductible.
The Court ordered the documents to be produced, noting that the plaintiff could still raise a parole evidence argument at trial. It rejected the plaintiff’s argument that the express allocation to general damages weighed against production, noting that the plaintiff had a duty of good faith to the insurer:
There may not have been a contractual right to control the settlement process, but the plaintiff does have good faith obligation in dealing with the LTD Fund, in circumstances where lost earnings may have been a significant factor in arriving at settlement.