Canada: Class Actions And The Insurance Industry

Last Updated: September 12 2011
Article by Cheryl M. Woodin, Keith N. Batten and Timothy O. Buckley

Most Read Contributor in Canada, September 2016

Class Action! The words hardly raise the spectre of asbestos, mould or historical abuse, but they are a risk that will not be legislated out of existence or solved by technology. In fact, class action litigation is still expanding in Ontario and many other provinces led by a more developed practice in the Province of Québec.

This article will provide a brief overview of the state of development or maturation of class actions, the issues that drive them and the lines of insurance that may be implicated.

After some celebrated false starts in the 1970s that demonstrated the inadequacy of the rudimentary rules of practice permitting class proceedings, the Province of Ontario followed the lead of the Province of Québec and enacted the Ontario Class Proceedings Act, 1992, which came into force on January 1, 1993.

Simply, the legislation permits a representative plaintiff to ask the court to certify an action as a class proceeding, to appoint the plaintiff to represent the class and to appoint and instruct counsel and to permit the court to decide certain issues in dispute as common issues affecting the entire class. These common issues must be significant enough to move the litigation forward in a meaningful way. For example, common issues may investigate whether a defendant owes a duty of care to a class of plaintiffs or whether a defendant's actions meet the prevailing standard of care.

The class action is designed to provide access to justice for those that would not be able to seek redress because, for example, individual claims are small and the issues are complex and expensive to litigate, to provide judicial efficiency and to achieve behaviour modification.

The motions requesting certification orders from the court are hotly contested, often with legal fees for each of plaintiff and defendant of several hundred thousand dollars. If a representative plaintiff is successful in its certification motion request, the action proceeds to the liability phase with the common issues determined at a common issues trial and the remaining issues, such as individual damages, assessed at a later phase of individual trials or assessments.

The bulk of class action litigation in Ontario has been contested motions for certification. There have been fewer class action trials to judgment. Denials of certification motions usually terminate liability claims, whereas successful certification decisions often result in settlements which must be approved by the courts in what is akin to a fairness hearing.

However, in the last several years, Ontario courts have tried significant class actions to judgment with $36 million awarded in Smith v. Inco (2010) and $455 million awarded in Jeffery v. London Life Insurance Co. (2010), with appeals expected. In Andersen v. St. Jude Medical, Inc. the trial recently passed its one year anniversary and is expected to conclude this year.

These trials represent the next stage of development of the class action practice in Ontario. Insurers have developed an understanding of the cost of defending certification motions and the extraordinary costs that may be engaged in class action settlements such as notice campaigns and claims administration costs. Insurers are now able to assess the cost of defence of class action trials and the indemnity payments that may be required at judgment.

Class actions have also been responsible for the development of novel causes of action or remedies. For strategic considerations, plaintiffs have brought waiver of tort claims as an alternative to damage claims. These claims seek restitution of revenues or profits earned by a defendant on a block of business, such as on the sale of an allegedly defective product. Defence accounting costs to calculate the revenue or profit earned on the block of business can amount to several hundred thousand dollars or more. The viability or existence of the waiver of tort claim is still under legal review. At a minimum, the claim requires significant defence costs and has attracted insurer interest.

Many class actions are brought by an increasingly entrepreneurial plaintiff bar as a result of developments in the United States. For example, the prospect of large scale settlements in class actions or in multidistrict litigation in the United States often results in the initiation of copycat class proceedings in Canada. Regulatory investigations in the United States or product recall in the United States or Europe has also led to the initiation of class proceedings in Canada.

The Canada Consumer Products Safety Act (2010), came into force on June 20, 2011. The Act empowers the Minister of Health to order recalls of consumer products that are a danger to human health or safety and imposes certain incident reporting obligations on manufacturers, importers and sellers of consumer products. Experience in the United States predicts that more class actions will result if the Minister of Health is proactive and the legislation is actively enforced.

The range of actions brought as class actions before the courts is extremely wide, including recent claims for unpaid overtime, claims for property damage or bodily injury from pharmaceutical products, medical devices or consumer products, claims for economic losses including loss of value or claims for extended warranty coverage on consumer products, claims resulting from environmental issues or contamination, claims for price fixing under competition legislation, claims for abuse in schools and custodial institutions, and claims for improper fees and charges against insurers, financial institutions, colleges and universities.

Some of these claims can touch a long list of possible insurance coverages, including commercial general liability, environmental impairment and directors and officers policies (D&O).

Securities claims continue to attract considerable publicity. These claims generate significant exposure for directors and officers who then turn to their D&O policies for defence and indemnity.

As of the end of December, 2010 there were 28 outstanding securities class actions in Canada. NERA Economic Consulting reports that these actions represent approximately $15.9 billion in outstanding claims, inclusive of punitive damage claims. Half of these 28 cases have been filed in the last two years.

The insurance industry itself has been an early target of class actions with mixed results. Class proceedings resulted in settlement of some vanishing premium cases in the life insurance industry. Insurers were successful in ultimately resisting certification of claims for deductibles under automobile policies. Other disputes considered the quality of repair parts replaced under automobile policies. Other actions sought certification of claims for overcharging of management fees on life policies, and most recently, a dispute concerning transactions involving PAR accounts of life insurers.

Of interest to insurers, many claims arise from a discrete event but often claims arise from a course of conduct over an extended period. Examples include products manufactured over seven or eight years, initially undetected, but with progressive property damage over many years, operation of a care facility for a decade or more, or environmental pollution over decades. Claims may be advanced by claimants in a province, across Canada or North America or throughout the world. These claims can implicate insurance policies over many years, multiple policies for the same year, as well as excess policies, and can raise territorial coverage issues and issues of jurisdiction of the courts.

Crisp management and direction of the defence, particularly at the early important stage of an action when decisions concerning the defence of a certification motion must be made, can be hampered by coverage issues preventing insurers from taking final positions on the engagement of cover or defence obligations. Coverage considerations can be particularly complex where multiple policies are implicated.

Insurance broker responsibilities can be complex and are beyond the scope of this brief article. However, insurers and brokers alike will be interested in developments affecting a company or industry, both in Canada and outside Canada, and in considering not only the risk of the importation of a copycat class action into Canada against a Canadian insured, but also the issues of available insurance coverage for what are often novel or innovative claims. Apart from any other coverage considerations, the potential magnitude of judgments or settlements in class action suits raise obvious issues as to the adequacy of available insurance limits, particularly in industries or sectors susceptible to class action activity, and brokers should clearly be addressing this potential risk in the advice and counsel provided to insureds.

This article was first published in the May, 2011 edition of the Canadian Insurance magazine.

To read "Canadian Insurance Law Newsletter - Fall 2011" in full, please click here

About BLG

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.