Law Times

Law Times • JuLy 23, 2018 Page 11 www.lawtimesnews.com Should cost protection insurance be mandatory? BY DALE SMITH For Law Times A s cost protection in- surance becomes more common as part of litigation financing in Canada, lawyers have noted that, in the United Kingdom, lawyers are required to let com- mercial litigation clients know about its availability or they can be found negligent. Lawyers say it is already becoming good practice in Ontario to discuss cost protection insurance with clients. Cost protection insurance, which is sometimes known as "after-the-event" insurance or "adverse-cost insurance policy," can protect plaintiffs from cost awards if they lose their case. Some firms have policies that will cover their entire book of business, which ensures a lower premium for clients who opt for it in their cases. While the market for this insurance is still fairly new in Canada, it has been used longer in the U.K. — since 1999. "Is this going to become something [that we have] to have a waiver from a client that it has been discussed, similar to how we discuss the risk of costs in general?" asks Charles Gluck- stein, partner with Gluckstein Personal Injury Lawyers in To- ronto. "There's a suggestion from the U.K. that it's a trend that will only increase the onus on law- yers to be aware of what's out there and to offer it to their cli- ents at the appropriate times." Gluckstein says that, in the U.K., the code of conduct does have a positive obligation for the lawyer to discuss all available in- surance options with their litiga- tion clients and discuss whether it should be obtained. "As costs and the risks of liti- gation go up, these products be- come more important to protect yourself," he says. Gluckstein says it's important for lawyers to discuss the insur- ance with clients from the out- set, as the cost of it will increase the longer they wait. "We've also put in our re- tainer the availability of cost protection insurance and that it has been discussed," says Gluck- stein. "[Clients] know that's a way to minimize costs. We put in an example of what it costs to get $100,000 protection, and there should be an ability to opt in or opt out of that coverage, but at least it's been discussed and you've done your due diligence." Patricia Sim, managing law- yer with Grillo Barristers PC in Toronto, says cost protection in- surance is becoming a standard of care in Ontario and it should be offered to all plaintiffs be- cause of the prohibitive costs of litigation. Sim says making it manda- tory to offer cost protection in- surance may dissuade smaller claims, which would please de- fendants. She says the cost of a premium may act as a disincen- tive for a small claim launched by plaintiffs, particularly once disbursements are considered. Sim says that because most firms are moving toward blanket coverage for their whole book of business, making it mandatory to offer cost protection insur- ance to clients wouldn't change the way lawyers do business. She adds that cost protection insur- ance levels the playing field for plaintiffs, taking away the disin- centive of cost awards when go- ing to trial. "When there is an imbalance in resources between the par- ties, usually whatever settlement arises favours the party with the greater resources," says Sim. "This insurance results in fairer settlements, because if you have a plaintiff that's too scared to proceed to trial, they may well settle for something less than what their case is worth." Sim says this is essentially calling the bluff of insurance de- fence lawyers. "If they proceed with trial, both parties are forced to come to a settlement that ref lects what the case is worth," she says. With the increasing avail- ability of the insurance comes demands that it be produced as part of discovery in the litigation process, says Gluckstein. "My advice would be don't disclose [the cost protection policy] if you don't have to," says Gluckstein. "Once the other side knows you have the cost protection, they know that there is a policy in place if they go to trial." Gluckstein says this could make for tougher negotiations between parties, with defence counsel knowing they can get their costs paid in the event that the plaintiff is being too difficult in their negotiating. Sudevi Mukherjee-Gothi, a partner at Pallett Valo LLP in Toronto, who heads the firm's insurance defence group, says that when cost protection in- surance first became available in Canada, it was common for plaintiffs' counsel to refuse to disclose whether they had even obtained the insurance, as there was still a "grey area" in the ju- risprudence as to whether dis- closure was required. She says that, nowadays, counsel will ad- vise, but they won't produce the policy. Mukherjee-Gothi says the case law "right now is a bit murky," but she relies on Flem- ing v. Brown, 2017 ONSC 1430. In the case, Justice A. Duncan Grace stated that the existence of a policy and its terms may play a role in how the action was con- ducted, even if only strategically, and that was enough to trigger the obligation to produce un- der Rule 30.02(3) of the Rules of Civil Procedure. Defence coun- sel was allowed to inspect the policy. This decision has been mod- erated somewhat. Sim points to Jamieson v. Kapashesit et al. 2017 ONSC 5784. In that case, Justice Dan Cornell ruled that while Flem- ing stated that individual poli- cies could be turned over, the policy in this particular case belonged to the law firm, as it had taken out a blanket policy, not the plaintiff. As such, be- cause the policy was not in the plaintiff 's possession, control or power, they had no ability to produce it. Mukherjee-Gothi says it's only fair that defence counsel be allowed to see the policy be- cause under Rule 30.02(3), she is required to produce any policy that is responding to any claim, and she always produces it in her affidavit of documents. "I don't see why the opposite wouldn't be required as well," says Mukherjee-Gothi. "If I have a plaintiff in a case that has cost protection insurance, I should be entitled to know what type of a policy is going to be respond- ing in that instance, so that I can take that into consideration. That's clearly being taken into consideration by the plaintiff in their litigation against me." Mukherjee-Gothi says that because the likelihood of a plaintiff that has cost-protection insurance is significantly higher, that has to be taken into consid- eration when she is advising her client and making their calcula- tion about litigation risk. "If I know there is that type of insurance, that lets me know what kind of risk we have to push it to trial and how to advise my client," says Mukherjee-Gothi. "It's making sure that everybody has a clear understanding of all of the factors throughout litiga- tion." Sim disputes this claim of fairness and says things such as what amount is fully cov- ered and the terms of the policy that might trigger an exclusion are not relevant to the heads of damage at issue in the underly- ing case. "If defence counsel has access to the complete policy, they can use it in ways that are not fair," says Sim. "If they have the details of just how much it is, perhaps they might try to raise the stakes to get over that limit and use that as an advantage." LT FOCUS ONTARIO LAWYER'S PHONE BOOK 2018 Ontario Lawyer's Phone Book is your best connection to legal services in Ontario with more than 1,400 pages of essential legal references. You can depend on the accuracy of this trusted directory that includes the most up-to-date names, phone numbers, mailing addresses and emails so you don't have to search anywhere else. More detail and a wider scope of legal contact information for Ontario: • Over 26,800 lawyers listed • Over 8,500 law firms and corporate offices listed • Fax and telephone numbers, e-mail addresses, office locations and postal codes Includes lists of: • Federal and provincial judges • Federal courts • Ontario courts and services • Small claims courts • The Institute of Law Clerks of Ontario Order your copy today. Visit www.store.thomsonreuters.ca or call 1-800-387-5164 for a 30-day, no risk evaluation Perfectbound Published December each year On subscription $85 One time purchase $88.50 L7798-7858 Multiple copy discounts available Plus applicable taxes and shipping & handling. (prices subject to change without notice) Your instant connection to ONTARIO'S LEGAL NETWORK Untitled-2 1 2018-07-12 4:13 PM Charles Gluckstein says it's important for lawyers to discuss cost protection insur- ance with clients from the outset, as the cost of it will increase the longer they wait. When there is an imbalance in resources between the parties, usually whatever settlement arises favours the party with the greater resources. Patricia Sim In-class and online programs recognized by Law Societies Executive Education to Navigate the Canadian Legal Landscape Visit Lexpert.ca to find out more

• Cover