Law Times

Law Times • JuLy 24, 2017 Page 9 www.lawtimesnews.com Third-party funding market diversifies BY JUDY VAN RHIJN For Law Times W hat has been a small industry to date is growing as the Canadian liti- gation funding market sees new entrants and the restructuring of existing players. Competitors are embracing starkly different models, which presents claim- ants and lawyers with the chal- lenge of fitting the right type of funding to the right case. "We've been a bit slower than England and the U.S. to get into third-party funding," comments Paul Michell of Lax O'Sullivan Lisus Gottlieb LLP of Toronto. "We have had a few homegrown players, but now there are lots of conferences and promotional materials that show international groups are moving into the area." Lincoln Caylor of Bennett Jones LLP of Toronto has been surprised how aggressively the litigation funders have moved into Ontario, given the size of the market. "There has been an uptick in interest from potential funders. IMF Bentham is physically here and other big players are giv- ing road shows to large firms," he says. "Even leading funders in London and New York say it's still early days there, too, but those jurisdictions have many big cases. We don't have many significant claims to meet their requirements." David Smagata, vice presi- dent and chief legal officer of DAS Canada, welcomes the in- crease in competition. "It is sometimes lonely be- ing the only voice. Having more competitors drives up aware- ness," he says. "People hear a cho- rus louder than a single voice." DAS, as a litigation insurance company, and Bridgepoint Fi- nancial Services Inc., as a litiga- tion indemnity company, have been on the frontlines in On- tario from the beginning, along with private law firms that of- fered financing and indemnities. The market for indemnities has effectively now been closed by an FSCO ruling last year. The ruling said that legal cost protec- tion, a product offered for pur- chase by Bridgepoint Indemnity Company (Canada) Inc., met "the criteria to be classed as in- surance pursuant to the Insur- ance Act." The ruling also said that "no person shall carry on business as an insurer or engage in an act constituting the busi- ness of insurance in Ontario without a licence under the Act." John Rossos, chairman and CEO of Bridgepoint, says the rul- ing has changed the marketplace. "Any private indemnity or legal cost protection must now be tied to a regulated insurance product. Lawyers can't provide an indemnity to their clients because they are not licensed in- surers," he says. Bridgepoint has met FSCO's requirements and is now under- written by Omega General Insur- ance Company. It has redesigned its products as insurance policies. "We have a personal injury prod- uct that offers blanket cover to a law firm, and a similar class ac- tion product that is being intro- duced as we speak," advises Ros- sos. "They offer law firms um- brella coverage that prequalify the firm's cases. If they fit within the parameters of the coverage, they are automatically accepted." Rossos says this approach creates efficiency, particularly for class action litigation. "We do due diligence on the law firm instead of spending six or seven months investigating each un- derlying case," he said. "The law firm has the knowl- edge that it has finance and insurance in place, and we can ensure the lowest rates and full protection." In contrast, DAS offers insur- ance for adverse costs and dis- bursements on individual per- sonal injury cases. "It covers the worst-case sce- nario where the client thought they had a very good case but failed to persuade the judge," explains Dominique Zipper, the ATE manager of DAS Cana- da. "We take the financial blow. The premium is not payable if they lose. They are foolproof products." There are several other firms now offering after-the-event or plaintiff protection insurance. There is also a new player in the market offering a distinct prod- uct called litigation funding. Tania Sulan, chief investment officer of Bentham Canada, dis- tinguishes her firm's offerings from the insurance model. "We operate in a different space. We focus on complex commercial cases and arbitra- tions — big breach of contract matters, breach of duty, intellec- tual property disputes and liti- gation that f lows out of an insol- vency event," she says. "Our pri- mary focus is funding the lawyer fees and lawyer costs through a monthly hourly bill. Ancillary to that, we cover disbursements and court-ordered costs. It's a different beast." Sulan is reporting a lot of in- terest from Canadian law firms. "People are very curious how it fits with their practice." There are also foreign-based litigation funding businesses targeting the Canadian market, mainly oper- ating out of the U.S. or U.K. All this diversity means that claim- ants and their lawyers are now faced with the choice of which model to partner with. For the future, there is a gen- eral expectation of expansion in terms of market size, jurisdic- tions covered and the variety of options, as well as increased pres- sure for regulations and profes- sionalization of the market. LT Paul Michell says Canada has been slower to adopt third-party litigation funding compared with England and the United States. FOCUS Untitled-2 1 2017-07-18 2:03 PM 12th Annual Canadian Lawyer InHouse General Counsel Roundtable Visit canadianlawyermag.com/inhouse to see our video coverage of these topics: Top challenges of managing in-house, online July 10 Managing external counsel, July 17 AlternaƟ ve fee arrangements, July 24 Hiring for tomorrow, online July 31 IH-Roundtable_LT_July10_17.indd 1 2017-06-30 11:40 AM

• Cover