Steven Zuccarelli is a 2012 J.D Candidate at Osgoode Hall Law School
In State Farm v. Privacy Commissioner of Canada, the Federal Court was asked to decide whether an individual injured in a car accident had the right to obtain their personal information collected by a private investigator employed by the insurer of the individual allegedly at fault for the accident. Specifically, the question posed was whether the Personal Information Protection and Electronic Documents Act (PIPEDA) would apply to the collection, disclosure or use of personal information made by an agent on behalf of a principal with whom it is in a commercial relationship.
State Farm, the applicants, submitted that they were under no obligation to disclose the information to the allegedly injured party under investigation, challenging the constitutional validity of PIPEDA. Importantly, State Farm also sought to restrict the scope of “commercial activity” that is required for PIPEDA to apply. It is this latter argument that proved pivotal in the Court’s decision.
PIPEDA governs how private-sector organizations collect, use and disclose personal information in the course of commercial business. Enacted in 2000, one of the statute’s intents was to promote consumer trust in electronic commerce. The Act itself gives individuals rights that allow them to access their personal information, know why their personal information is collected, used or disclosed, and have confidence that the information is handled with care. In the event that an individual believes that their personal information rights are violated, they can make a complaint to the Privacy Commissioner. The Commissioner will investigate the complaint and produce a non-binding report that can then be used by a complainant to take the matter to the Federal Court. The Office of the Privacy Commissioner (OPC) launched such an investigation into State Farm’s behavior at the request of the individual who was the focus of State Farm’s private investigator.
The OPC argued that PIPEDA applies to insurers undertaking the defense of their insured, and that the relationship between State Farm and Ms. Vetter, their client, was entirely commercial in nature. The OPC contended that the investigation into Mr. Gaudet pertained to the commercial relationship, as it was directly related to the financial liability State Farm might have to Mr. Gaudet (the alleged injured party).
The Attorney General of Canada, also acting as a respondent, submitted that State Farm is obligated to participate in the OPC investigation, and that PIPEDA itself is a valid federal statute since personal information privacy in a commercial context impacts gross domestic product, national competitiveness and overall economic growth. This would place it in the general federal head of power over Trade and Commerce.
Mainville J., in his decision, focused on the primary nature of the activity in issue:
“I conclude that, on a proper construction of PIPEDA, if the primary activity or conduct at hand, in this case the collection of evidence on a plaintiff by an individual defendant in order to mount a defence to a civil tort action, is not a commercial activity contemplated by PIPEDA, then that activity or conduct remains exempt from PIPEDA even if third parties are retained by an individual to carry out that activity or conduct on his or her behalf. The primary characterization of the activity or conduct under PIPEDA is thus the dominant factor in assessing the commercial character of that activity or conduct under PIPEDA, not the incidental relationship between the one who seeks to carry out the activity or conduct and third parties. In this case, the insurer-insured and attorney-client relationships are simply incidental to the primary non-commercial activity or conduct at issue, namely the collection of evidence by the defendant Ms. Vetter in order to defend herself in the civil tort action brought against her by Mr. Gaudet.”
Therefore, PIPEDA does not apply to a collection, use or disclosure of personal information simply because it is collected, used or disclosed by an agent on behalf of a principal with whom it is in a commercial relationship. The Court decided that it was not Parliament’s intention to have PIPEDA apply to the collection of evidence by third parties retained by a defendant to assist in responding to a tort action. PIPEDA was instead enacted to balance between facilitating the collection, disclosure and use of personal information by the private sector, and protecting the privacy of individuals, within the context of electronic commercial transactions. “The collection of information in order to properly defend a civil tort action has little or nothing to do with these purposes”, Mainville J. concluded
The Court recognized that commercial business is involved to some degree in nearly all activities, while not necessarily being the dominant character of the activity. Where the commercial character of the transaction is not of primary significance, as in the situation of a private investigator hired by an insurer to collect evidence on an individual to be used at trial on behalf of the insured, it would not fall within the ambit of PIPEDA. Viewed in this light, the constitutional issue put forth by State Farm would not require the Court’s attention, and indeed it was not decided on. The lack of a decision on the constitutionality of the Act may surprise some, as many commentators, including Michael Geist of the University of Ottawa, anticipated far reaching effects for Federal and Provincial privacy law when the decision was rendered (a pre-decision blog post by Michael Geist can be found here).
How does this decision impact future litigation in the context of information gathered in the defense of a claim against an individual? As K. Paige Backman of Aird and Berlis writes, a decision that PIPEDA would apply to litigation would invoke a number of regulations and rules governing consent, access and disclosure that may be nonsensical considering the specialized rules that have evolved for consent, access and disclosure in the course of litigation (that blog post can be found here).
Another issue raised by Backman is whether the Federal Court would have made the same ruling if the information that was the focus of this case was collected by a plaintiff who was initiating litigation. As Backman writes, “Would the FCC afford the same protection to someone who chooses to bring an action and then engages a private investigator to snoop around in the defendant’s life?” Perhaps that invasion of privacy may require limitations.
It is also be useful to review the facts of the case when considering the implications of the decision. Insurance companies must be able to investigate allegations of damage, otherwise damages claimed in the course of litigation may be overly large. However, the examination of damages that may occur during an investigation can be invasive. Therefore, while this decision does not find the investigation to be regulated by PIPEDA, some steps should be taken to regulate a third party’s behavior in covertly investigating an individual for litigation’s sake. As Monika M.L. Zauhar states in her blog (found here), insurance companies can take steps to minimize any invasion of privacy complaints filed during investigations. These steps may include examining the nature of the allegations and required surveillance evidence to provide an adequate defence, or ensuring information gathered is relevant to the merits of the claim. Steps such as these may serve to assure individuals that their personal information, even when relating to litigation, is handled in an appropriate way.
A decision that PIPEDA would apply to the collection of evidence by an insurer acting for one of its insured in the defence of a third party tort action would strike a balance that would potentially complicate the interaction of lawyer, client and adversary in litigation. As Mainville J. writes, “…PIPEDA is a compromise between competing interests, and its provisions must be interpreted and applied with flexibility, common sense and pragmatism.”
