Tt should also be borne in mind that ATE also serves important needs within the community by facilitating access to justice for persons and entities who might otherwise be denied this.
After-The-Event (ATE) insurance can mitigate the clients’ remaining financial risks of litigation after their own lawyers’ fees (which have been taken care by way of a contingency fee retainer); namely the risks of their own disbursements and adverse costs in situations such as: 1. Failure to win at court 2. Failure to beat a Rule 49 offer 3. Abandonment or withdrawal of the case (e.g. any shortfall in outstanding disbursements) 4. The premium itself if the case is unsuccessful
Not all policies are the same, and not all provide the same coverage. It is best to consult a specialist broker for advice (and thereby avoid any potential errors & omissions exposure) before choosing a policy that is right for your firm.
Do I have to mention it?
`ATE insurance gives peace of mind to my clients knowing that they now have the same protection as the defendant thereby enabling me to focus on the fight” — Jasmine Daya2
Unlike the jurisdiction of its invention, England & Wales, the Law Society of Ontario does not offer formal guidance on the adoption, use, or recommendation of ATE insurance. Hence, offering ATE coverage to clients is generally not considered to be a professional requirement. Yet, the rules of professional conduct referring to Title Insurance could be a guide to how a lawyer should consider ATE insurance; one should be knowledgeable and take all steps to mitigate a client’s financial Some insurers offer ‘firm wide coverage; ie. the ftrm itself is the policy holder. This means that the client may lose coverage if he changes firms. Although untested in Canada, these policies may face uncertainty. England’s Financial Ombudsman has interpreted the rules there’ to mean that the client must have the choice of solicitor.’ Where the options presented to the client are ‘stay and keep your coverage, or switch and lose it it is unclear whether such an arrangement would be considered reasonable and just. Even for personal policies, the insurance should be discussed with the client. The lawyer should speak to her insurance broker about the disclosures, terms and conditions that need to be communicated to the client at the outset to negate the occurrence of any future conflicts. There are many options in the market, and a program should be tailored to fit the requirements of the firm.
How much is it, and how much would I need to obtain?
“-failure to pay the premium to ATE is bizarre and nonsensical. For approximately $1,500.00, the plaintiff would have had some piece of mind’-Mr. Justice Whitten’
Premiums are generally deferred and contingent; only being paid when the case is successful (which is usually defined as receiving enough money to cover all outstanding disbursements and the premium combined). The premiums generally equate to a small percentage of the level of indemnity insured (say 1-2%), meaning a premium of $1,500 for SIO0k is readily available, with prices fluctuating on the terms of coverage (you get what you pay for – if it looks ‘cheap: expect less coverage!). Premiums, like the terms of the policy itself, should always be discussed up front with the client if it is the client who will ultimately be paying it. Selecting the amount of coverage for a file can be difficult, as invariably there will be scenarios where a client is under-insured. However, it can still be a comfort to a client to have a ‘safety blanket’ of protection should the unthinkable happen. A policy holder may later apply for an increase in coverage; however such ‘top ups can be expensive (as the case selection is by it’s very nature the epitome of negative selection), and not always readily available. Case law will be discussed below, but under most policies the clients themselves have the right to choose how their policies respond, giving them a good degree of certainty in their coverage.
Can the insurer influence the case?
ATE insurance is a great help to my client; but I run my own file” – Paul Cahill’
A common misconception is that the ATE insurer can somehow influence the decision-making of the lawyer or in some way ‘control’ the case. This is not so. The client-lawyer relationship is privileged and, as such, the insurer could not know how to get involved even if it wanted to do so, unless there are terms and conditions provided (and then this would beg the question of how a lawyer would ever accept such terms…). The lawyer must always act in the best interests of the client, not the insurer. As discussed previously, conflicts of interest can generally be avoided by communication with the client. If concerned about any particular term of a policy. discuss it with your broker first. but if the lawyer deems it necessary and acceptable, disclose it to the client and obtain her consent from the outset. There are often terms within the policy that, if the prospects drop below a 51% chance of success, the insurer is to be notified. This term is to guard against the insurance being used to encourage otherwise ‘bad’ files going to the courts. Depending on the policy, the insurer may suspend coverage (i.e. everything up to that point in time will remain covered), meaning the client may continue, but at her own risk. This is a rarely-used term, and it should be noted that it is up to the lawyer to inform the insurer, and only then if the prospects of success (‘success usually being defined as obtaining a monetary result) have dropped to a level where the lawyer no longer has faith in obtaining a successful outcome.
Are there any other benefits of using ATE insurance?
There are benefits that are accessible outside the standard policy terms. As using the insurance essentially de-risks the file (from an outside investors point of view), the policy can be recognised as good security to some finance companies. A firm is able to release a large amount of otherwise locked-in capital by liquidating its disbursement accounts. Further, some Canadian banks also recognise the extra security, giving their law firm clients better or further draw-down facilities.
Also some disbursement providers, such as medical report services, can offer deferred and contingent reports for files where such reports would be insured under an ATE insurance policy, thereby freeing up that initial cost to a client and the firm.
What are the courts saying?
*lheltidge’s ATE insurance options are critical to ensuring my clients have access to justice and can go toe to toe with the defence insurance companies” – Kris Bonn’
If we look at the development of Canadian case law, we can see some interesting developments. Almost as soon as ATE insurance was introduced into Canada, the courts started to examine it, and how it could be used. Is ATE insurance a recoverable disbursement? Not yet. There have been several cases heard in the Ontario Superior Court, but all come back to two different. conflicting, decisions:
The later case of Stewart et al”, Justice Tausendfreund referred to both the Macovic and Armstrong matters and stated that adverse costs insurance is an “access to justice” and decided that the premium be a compensable disbursement to be included as a costs obligation payable to the Plaintiffs. Does the policy’s existence have to be disclosed to the opponent? Probably. The caselaw has evolved over time on this question; however looking further afield to the jurisdiction of England & Wales (where ATE insurance originated), the following information must be disdosec112 upon issuing of proceedings:
a. Who the underwriter is
b. What the level of indemnity is, and if staged
c. What the premium is, and if staged
In Ontario it appears the graduation of case law is heading in the same direction: 2015 Cobb:” Request for disclosure premature and perhaps unnecessary until post trial
|NO — ATE IS NOT RECOVERABLE||YES, ATE INSURANCE SHOULD BE RECOVERABLE|
|The Markovic’ case is the often-cited authority on the ‘no’ side, here Justice Milanetti stated: |
“I can think of no policy reason that such should be compensated as a taxable disbursement. 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.”
|Opposing the Markovic decision is the decision of Armstrong.’° Here Justice Salmers disagreed with the Markovic decision: |
“Without costs insurance, the fear of a very large adverse costs award would cause many Plaintiffs of modest means to be afraid to pursue meritorious claims. It is in the interests of justice that Plaintiffs be able to pursue meritorious claims without fear of a potentially devastating adverse costs award. Additionally, I am satisfied that it was reasonable for the Plaintiffs to have advanced their claims as they did because there were genuine triable issues on all claims that were advanced. Accordingly, the claim for the costs insurance premium will be allowed.”
2016 Abu-Hmaid:” Only the existence of the policy ought to be disclosed. Further ratified by Paulin.
” 2017 Remingt1* Policy ought to be produced;
Further, in 2017 there was the curious case of Jamieson’? where the law firm itself was the named insured; therefore, the court found that by producing the policy the court may inadvertently breach solicitor-client privilege of other clients named in the policy. As discussed above, this type of policy has been found to be illegal in other jurisdictions)*
Is ATE insurance adequate security for costs? Yes, depending on the policy.
Not all ATE insurance policies are the same, and there have been a number of cases where the court has found that some ATE policies are not able to provide adequate security. To date, all unsuccessful cases have involved the same underwriter, whereas the successful cases have used alternate policies, drafted with security in mind, and by different insurers.
Who has priority over the proceeds of an ATE policy? The insured.
In the Cozzi decision, the insured client was underinsured, so whilst the client’s own disbursements were able to be satisfied by the ATE policy, there was not enough to cover all the defendant’s costs. The defendant challenged the right of priority and was unsuccessful. The court in Cozzi found that the insured client (who held a personal ATE policy as opposed to a ‘firm wide’ program) is the only beneficiary under the policy, so has the right to determine how the funds are used.
As lawyers and the courts are starting to understand the use of ATE insurance, and clients also see the way that it mitigates their possible exposure to substantial costs outcomes, it is likely that talking to your client about the policy would be a prudent step to take.
If a lawyer was to discuss ATE insurance with a client, his recommended that he seek the assistance of a specialist insurance brokerage to avoid any conflict of interest between the coverages, including own disbursements vs adverse costs, and the differences in the current policy wordings on the market today.
|UNSUCCESSFUL CASES :||SUCCESSFUL CASES :|
|. Alary: ATE insurance is not adequate substitute for payment into court |
. Shah: ATE insurance not adequate security for costs
. Daigneault: ATE insurance not adequate security for costs
. Boudreau: ATE insurance not adequate security for costs; the ATE insurance obtained was also inadequate for the coverage needed.
|. Grotz: ATE insurance adequate security for costs|
. Frantz: ATE insurance adequate security for costs
. Hontaru: ATE insurance adequate security for costs: the policy addressed Security for Costs specifically.
ATE insurance is well worth the discussion with your client.
Nick Robson is the Vice president and General Counsel with The Judge
1.Greenclean Waste Management Ltd v. Leahy pia Maurice Leahy of Co. Solicitors (No.2) (20141 IEHC 314
2. Managing Principal of Jasmine Daya & Co.
3. ISO Rules of Professional Conduct ‘Title Insurance in Real Estate Conveyancing’ at 3.2-9.
4. Regulation 6 of the Insurance Companies (Legal Expenses Insurance) Regulations 1990 [SI 1159
5. https://www.fittancial-ombudsman.org. uk/publications/technical_notes/kgal-expenses.html
6. Mr. Justice Whitten in Bukshtynov v. McMaster University, 2018 ONSC 4819, para 1
7. Partner, Will Davidson LLP
8.Partner, Bonn Law
9. Markovic v. Richards (2015 ONSC 6983)
10. Armstrong v. Lakeridge Resort Ltd. (2017 ONSC 6565)
11. Stewart et al. v. Wood et at, 2019 ONSC 3931
12. N251 form
13. Cobb v. Long Estate (2015 ONSC 7373) “
14. Abu-Hmaid v. Napar (2016 ONSC 2894)
15. Paulin v. Singh (Unreported, Peterborough Court File no. 13-15)
16. Fleming v. Brown (2017 ONSC 1430
17. Jamieson v. Kapashesit et al (2017 ONSC 5784)
18. Regulation 6 of the Insurance Companies (Legal Expenses Insurance) Regulations 1990 (SI 11591 19
19. Alary v. Brown (2015 ONSC 3021):
20. Shah v. Loblaw Companies Ltd. (2015 ONSC 5987)
21. Daigneault v. Canjet eta! (2016 ONSC 78
22. Boudreau v. TMS Lighting Ltd. (2017 ONSC 6188)
23. Grotz v. 1392275 Ontario (2016 ONSC 2688)
24 Frantz v. NB Thrilling Films 4 lNC eta! (2017 ONSC 4637)
25. Hontaru v. Doe (2018 ONSC 1014)
26 Peter B. Cozzi Professional Corp. v. Szot, (2019 ONSC 1274)