Insurers lose privilege bid after mill’s internal explosion investigation

Six insurance companies and a pulp and paper manufacturing company, Fortress Specialty Cellulose, have lost their bid to have a PowerPoint presentation about the cause of a commercial explosion protected under litigation privilege.

In rejecting their argument, the Superior Court of Quebec found that only documents exclusively made for the purpose of preparing for litigation are subject to privilege.

“The tribunal is of the opinion that the purpose of the internal investigation [at Fortress] and the related documents was to find a solution, as mentioned, to remedy the situation [after the explosion] and modify future practices,” Quebec Superior Court Justice Dominique Goulet ruled. “It was not intended to prepare for litigation.

“This is a type of internal investigation carried out by the employees and triggered automatically after an incident in order to elude in a contemporary way the potential causes to it and to issue possible solutions.”

To further prove the Power Point presentation was not prepared “in anticipation of litigation,” Goulet found “the defendant Lundberg [an engineering firm] was even involved in the investigation process….This last implication demonstrates that the approach was not intended to prepare for future litigation.”

The plaintiff, Fortress, owns and operates a pulp and paper processing plant in Thurso, QC. The defendant, AH Lundberg Systems Ltd., bought Andritz Inc. and Valmet Technologies and Services Ltd. The Lundberg-owned companies either participated in the design and/or provided certain elements of one or more of the components of the system under investigation.

Fortress and Lundberg are involved in a legal dispute arising from an explosion that took place on Sept. 20, 2017. In November 2019, Fortress and six insurers filed an appeal against Lundberg to compensate for the damage allegedly suffered as a result of the explosion. The claim covers property damage as well as business interruption costs and professional fees.

Fortress launched the claim to privilege along with the insurers Zurich, Westport (Swiss Re), Temple (Munich Re), Royal and Sun Alliance (since bought by Intact), and Chubb Insurance Company of Canada (ACE INA-Starr Marine). They allege a construction defect in one of the components of a system designed by Lundberg was the cause of the explosion. This allegation has not been proven in court.

On Oct. 27, 2021, Lundberg prosecutors questioned a representative of Fortress, Christian Ledoux.

“Mr. Ledoux is an employee of Fortress and describes himself as a black belt in problem solving; he is involved in big problems according to his words,” Goulet’s ruling observes. “During his interrogation, Mr. Ledoux explained that immediately after the explosion, Fortress began a super investigation in order to find the cause. He specifies that this type of investigation is triggered automatically when there is an explosion like the one in question.”

As part of their work, they met with employees, extracted raw data from the system in question and prepared a PowerPoint presentation.

While questioning Ledoux, the Lundberg prosecutor requested production of the PowerPoint document, as well as the documents prepared and/or used in the context of this internal investigation. Fortress and the insurers filed a claim in court, saying the PowerPoint presentation and other documents related to the investigation were protected by litigation privilege.

“The court is of the opinion that the information does not have the confidential nature resulting from the professional relationship between Fortress and its law firm,” Justice Goulet found. “This is not information that the client wanted to keep confidential in the context of a solicitor-client exchange….

“[L]et us recall that Fortress involved Lundberg in the process and that it communicated the information to all of its employees. In this context, the objection based on professional secrecy is also rejected.”

Feature image courtesy of iStock.com/hxdyl