In the case of Ross v. Bacchus, the Ontario
Court of Appeal was asked to overturn a trial judge's
imposition of a $60,000 penalty on an insurer for failing to
mediate in good faith.
Leading up to the six-day trial, the parties exchanged various
settlement offers. Upon request, the insurer agreed to
mediate. Mediation took place a few weeks before the trial
began. The mediation was unsuccessful. The trial judge
found that despite these efforts, the insurer had attempted to
intimidate the Plaintiff and did not attempt to settle the
action expeditiously as required by section 258.5 of the
Insurance Act. The trial judge found that the
Defendant's participation in the mediation was a
"sham" and that it refused to participate in a
The Court of Appeal overturned the trial judge's decision
and struck down the $60,000 costs penalty.
The Court of Appeal held :
Insurers, like other Defendants, are entitled to take cases to
trial. When an insurer rejects a Plaintiff's offer and
proceeds to trial, the insurer risks both a higher damage award at
trial and the imposition of substantial-indemnity costs after the
date of the rejected offer. Both risks came to pass in this
case. The insurer paid a significant financial penalty for
its decision to proceed to trial. The cost provisions in ss.
258.5 and 258.6 do not address those risks, but instead address the
failure to meet the specific obligations identified in those
provisions. The trial judge's assumptions about the
insurer's motivation for rejecting the respondent's offer
and proceeding to trial had no relevance to the determination of
whether augmented costs should be awarded under the Insurance
... An insurer's statement on the eve of trial that it is
not prepared to settle a claim cannot be equated with an
insurer's failure to "attempt to settle the claim as
expeditiously as possible". Nor can an insurer who
actually participates in a mediation be declared to have failed to
participate simply because the insurer indicated prior to the
mediation that it was not prepared to settle the claim. A
clear statement of the insurer's position going into the
mediation, even a strong statement, does not preclude meaningful
participation in a mediation.
... There is also no evidence that the insurer did not
participate in the mediation in a meaningful way. The trial
judge assumed that because the insurer's counsel advised that
his client was "not interested" in settling the case, the
insurer's subsequent participation in the mediation was "a
sham". This assumption was unwarranted. A firm
position strongly put going into mediation does not preclude
meaningful participation in the mediation. In any event, the
insurer made a settlement offer which was not revoked before
The Court of Appeal's decision is comforting news to
insurers who elect to take meritless claims to trial.
Communicating a denial position before a mediation begins, then
sticking to this position throughout the course of negotiations,
does not render the mediation a "sham".
Of interest, the Appellate court did not address the type of
evidence that would have to be put forward in order to establish
that an insurer did not participate in a mediation in a meaningful
way. Considering the privilege that attaches to mediation
sessions, and the fact that most mediators insist on Mediation
Agreements being signed before the session begins, establishing
this type of evidence will be difficult.
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