Law Times

Law Times • January 11, 2016 Page 9 www.lawtimesnews.com Courts starting to weigh in Litigation protection products get more elaborate BY JUDY VAN RHIJN For Law Times O ntario courts are in the process of consid- ering the security and treatment of "aer- the-event" legal cost indemnities and insurance. ese products al - low litigants to protect themselves from the risk of a cost order, giv- ing them the security to proceed to trial. ey can also be provided as a blanket policy for a law firm that needs protection for its dis - bursements. While still relatively new in Ontario, a view is emerg- ing that there is a duty on lawyers to advise clients of the availability of this protection. In the last few years, there has been some attention given to liti - gation cost insurance as an access to justice tool, with most products available as "before-the-event" (BTE) blanket coverage. ere are now several companies in Ontario who are offering "aer-the-event" (ATE) insurance or indemnities that people can purchase once a case has been instigated. Law firms can purchase it on behalf of clients and recover the cost from them later or maintain it as an ex - pense for the benefit of the client, as a marketing exercise. In other parts of the world, ATE insurance is a mature main - stream product, most notably in the United Kingdom. In Ontario, it has only entered the market in the last two or three years. In fact, there are two types of product — aer-the-event insurance and adverse-cost indemnities. Legal expense insurer DAS Canada offers such products and believes it has an upper hand in the embryonic market because it is a regulated insurance company, as opposed to other financial com - panies offering adverse-cost pro- tection or settlement loans. "It's a comfort knowing that insurance companies have huge requirements to have enough capital to cover all risks," advises David Smagata, vice- president and chief legal officer of DAS Canada. His colleague, Nick Robson, manager, ATE & Special Initiatives, points out that the Trial Lawyers Association of British Columbia has placed some restric - tions on the providers of settlement loans and cost-protection indem- nities, and that the Ontario Trial Lawyers Association is draing a code of conduct in relation to the use of indemnities. With an ATE insurance policy, the policyholder is always the liti - gant. e firm can be delegated to accept certain risks to get standard coverage of $100,000, which can then be changed as litigation pro - gresses. Smagata explains that it is not an intrusive product in terms of directing the litigation. "You don't have to worry that someone's going to come in and tell you how to run your case. It is not heavy-handed." Darryl Singer of Singer Barris - ters of Markham, Ont. has chosen to use the indemnity product from BridgePoint Indemnity Company. He has a blanket policy that cov - ers every personal injury file he opens. "I pay $200 to cover up to $10,000 in disbursements with a rider that allows me to increase coverage to $50,000 without any review. If I decide that I am going to trial in a couple of weeks and the $50,000 is not enough, I can increase it to $100,000 or higher." He knows of firms with a higher blanket policy. "My practice has a high volume of small files. Some firms have blanket coverage of $50,000 to $60,000." e indemnity covers the ad - verse costs, including defence legal fees and the plaintiff lawyers' dis- bursements. It does not cover the plaintiff lawyer's legal fees. John Rossos, chairman and CEO of BridgePoint, explains that because legal fees are on a contingency ba - sis, in a downside case the court could say that you shouldn't get a contingency fee because the lawyer has essentially borne no risk. Rossos refers to the situation in the U.K. "In 1999, the Access to Justice Act mandated a situation that where ATE insurance, as it is known in the U.K., is purchased, a defendant had a duty to pay the pre - mium. It then became ubiquitous in the legal community and evolved to be a standard of care. If counsel is not advising their clients that it is available, they are negligent." Rossos believes that a similar phenomenon is occurring here. "It is becoming the standard of care for personal injury lawyers launching a lawsuit to advise claimants of the products' avail - ability. If an unprotected client subsequently finds out about pro- tection, the next question to the lawyer will be, 'Why didn't you advise me about it?'" Rob Findlay, a Hamilton per - sonal injury lawyer, agrees that there is a standard of care concern. "In our regulations, we are mandated to talk to clients about cost exposure. You're certainly going to include this in that discussion. If it becomes routine enough in everyday practice and the client goes to trial and is hit with $100,000 costs, they may be looking for a pocket to recover from." Singer thinks the importance of the product weighs in at the negotiation stage. "Aer-the-event insurance has levelled the play - ing field for plaintiffs who might not otherwise be able to risk an adverse costs award by going to trial. Cases which would not settle at mediation because the plaintiff would be intimidated by poten - tial costs consequences now stand their ground and get the case resolved. In addition, cases that would get dropped on the eve of trial by the plaintiff can now pro - ceed to trial." Singer recalls that, in a typical scenario, before DAS and Bridge- Point came on the scene, the in- surer or the mediator or the judge would remind clients that they might win, but if they don't, a two- week trial can cost $100,000. "e clients would fold like a pack of cards. is allows me as a lawyer to sit there, slap the certificate on the table, and say, 'You don't care if you lose and have to pay costs. Well, neither do we.' Now the single big - gest leverage they've got is off the table. It has taken a major weapon away from the defence side." ere are now several court decisions addressing the use of the products. Recently, a master ordered a plaintiff to purchase ATE insurance instead of paying into court, finding that the policy would provide sufficient security. ere have also been several cases where a pre-existing policy has been raised as a defence to a secu - rity for costs motion, sometimes successfully and sometimes not. e more vexed question is whether a successful plaintiff can claim the premium as a disburse - ment. Markovic v. Richards, rendered on Dec. 12, 2015 by the Ontario Superior Court of Jus- tice, produced a finding that the premium paid for ATE is not pay- able by the insurer. James Greve of Camporese Sullivan Di Gregorio of Hamilton, Ont., who represent- ed the insurer, says this is the first case in Canada to consider the is- sue, but he does not expect it to be the last. "My argument was that it is not consistent with the rules of civil procedure relating to the cost consequences of failing to accept offers to settle. It would insulate parties from that risk." Findlay, who represented the plaintiff, points out that the deci - sion was not based on the repre- sentations of either party, which were minimal, and refers to the wrong product. He takes issue with the judge's finding that the product was purchased as a vol - untary option and did nothing to advance the litigation. He refers to the obligations imposed by the Automobile Insurance Rates Sta - bility Act to try and affect resolu- tion and encourage settlement. "How is it not consistent with that? If you have insurance, it will prolong efforts at resolution and make it more likely...." LT FOCUS ON Insurance Law It's fast, It's free, and it's available to you 24 hours a day. legal expertise? Looking for Find exactly what you need at www.CanadianLawList.com Starting a business, making a will or buying a house? Declaring bankruptcy, dealing with a personal injury, insurance claim or job loss? If you're in the midst of one of life's big events, help is as close as your smartphone, tablet or computer. Simply go to www.CanadianLawList.com to find the right lawyer for your particular legal need. www.CanadianLawList.com is Canada's most comprehensive online directory of lawyers and law firms. And it's easy to use! You can search by city, legal specialty, or name for listings and contact information. Find the legal expertise you need at www.CanadianLawList.com. 'We are mandated to talk to clients about cost exposure,' says Rob Findlay.

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