A growing issue in personal injury litigation has been the propagation of adverse cost insurance, also known as "after-the-event" insurance. This insurance is typically a policy purchased by a plaintiff in a lawsuit to provide protection in the event of a judgment for costs against a plaintiff if they are unsuccessful at trial. The advent of adverse costs insurance has been celebrated in some corners, primarily on the view that it "levels the playing field" and provides access to justice for plaintiffs that would otherwise be facing the risk of a costs award. An insurer that disputes an action to trial may also take some comfort that a successful verdict could result in the recovery of some costs against an otherwise impecunious plaintiff. However, there is a concern that adverse cost insurance will be an impediment to the litigation process, from attempts at settlement to the conduct of the parties throughout the litigation to trial.
A recent decision, Sacks v. Ross, 2016 ONSC 2498, considered whether to grant an order fixing costs in favour of a defendant against the unsuccessful plaintiff. In discussing the principles of awarding costs, Justice Wilson cited the fact that plaintiffs could purchase adverse cost insurance as a form of protection in litigation. In Justice Wilson’s view, this would enable access to justice for plaintiffs by making it easier to advance challenging but meritorious claims.
The decision in Markovic v. Richards, 2015 ONSC 6983, considered whether the plaintiff's premium for their after-the-event insurance was a compensable disbursement. Justice Milanetti did not accept that such a premium should be reimbursed by the defendants, noting that it would not be compensable as a taxable disbursement and that the premium appeared to only be payable if the case was successful. Further, it was noted that:
Existence of the policy may well provide comfort to the plaintiff, it is however an expense that is entirely discretionary, does nothing to advance the litigation, and may in fact even act as a disincentive to thoughtful, well-reasoned resolution of claims. I do not think it fair and reasonable that an insurer be expected to cover the disbursement for this payment of premiums.
In the recent decision in Abu-Hmaid v. Napar, 2016 ONSC 2894, Master Short considered whether a plaintiff was required to disclose a policy of adverse cost insurance. Specifically, the defendant was seeking disclosure of whether such a policy had been taken out for the benefit of the plaintiff; the plaintiff had refused to answer whether they had adverse cost insurance or not. Rule 30.02(3) was specifically considered, which states that a party shall disclose and, if requested, produce for inspection any insurance policy under which an insurer may be liable (a) to satisfy all or part of a judgment in the action, or (b) to indemnify or reimburse a party for money paid in satisfaction of all or part of the judgment, though no information concerning the insurance policy is admissible in evidence unless it is relevant to an issue in the action.
Master Short was of the view that the existence of adverse cost insurance (viewed as "protection") was relevant to the resolution of personal injury disputes, and ought to be disclosed at the same stage as disclosure by a defendant as required by Rule 30.02. However, he was not convinced that the specifics of the policy or carrier were of any probative value in the case before him, leaving it open that there may be factual situations that may justify the coverage quantum details being disclosed in other cases. Using his discretion and principles of proportionality, he thought it was adequate to simply advise whether or not coverage of this nature had been obtained, and to keep that information current by way of implied disclosure obligation to the date of trial.
Master Short noted in obiter that the difference between a policy that provided "indemnification" and a policy that "insures" against an adverse cost judgment was "a distinction without a difference", thus the policy providing adverse cost coverage ought to be subject to the disclosure requirement.
Adverse cost insurance is a growing issue that defence counsel are seeing in more and more cases. Knowing if such a policy exists is crucial when considering whether the parties in a matter can reach a settlement before trial and acknowledging the increasing willingness of Plaintiffs to go to trial.