What is Adverse Costs Protection Insurance? Adverse cost
coverage is also known as "legal costs protection". It
provides coverage to litigants who face paying costs to a
successful opponent on motions, from pre-examination for discovery
to a trial. It can also protect litigants from potential expenses
not covered by the contingency fee agreement. I know that I now ask
for a copy of the policy from Plaintiffs at discovery, and to date,
have been refused a copy of the insurance policy and declaration
page. This appears to be contrary to the requirements within the
Rules of Civil Procedure but that issue will be addressed
in a future paper. However, in Shah v. Loblaw Companies
Limited, a recent 2015 decision of Lemon J, the issue that was
addressed was whether having Adverse Costs Protection Insurance
negates the need for pursuing an order for Security for costs.
In Shah, the Plaintiff allegedly had a slip and fall in
a Real Canadian Superstore. When the accident occurred, he was a
permanent resident of Canada. However, at the time of the incident,
he had already made plans to fly back to India for a visit. He
alleges that he was not aware that he had fractured his shoulder
and decided not to postpone his trip. However, when he was in
India, he underwent surgery on his shoulder. When he returned back
to Canada, he continued to undergo care and treatment in Ontario.
The Plaintiff's permanent residency card was set to expire and
although he tried to renew it, it was not renewed before the
expiration and therefore, he returned back to India. At the time of
the motion, he was still awaiting to hear about the status of his
permanent resident card. The Plaintiff alleged that he had no
income and was not receiving any pension.
However, when the Defendants and Third Party advised that they
were seeking an order for security for costs, the Plaintiff
obtained a Legal Protection Certificate and Indemnity Agreement.
Although Shah goes through the analysis of what is
required to secure an order for security for costs, I will only be
focusing on the interplay between the Adverse Costs Protection
Insurance and the order for security for costs.
Mr. Shah argued that the Adverse Protection Insurance plan
obtained from BridgePoint would "provide sufficient security
for the defendants". Lemon J. disagreed. The policy contained
a number of exclusions, which Lemon J. outlined:
a) The plaintiff does not accept his
counsel's recommendation to accept an offer to settle;
b) The plaintiff changes counsel and
BridgePoint does not agree with the new counsel;
c) The plaintiff decides to represent
d) Failure to attend a defence medical
e) Failure to advise of an adverse cost award
within 15 days;
f) The contingency fee agreement entered into
between the plaintiff and his counsel will not be materially
amended during the pursuant of the plaintiff's claim;
g) The plaintiff's counsel's
professional opinion must be that there is a greater likelihood
that the plaintiff will have a successful claim;
h) The plaintiff provides BridgePoint
materially mis-leading information;
i) The plaintiff fails or delays to provide
instructions to or fails to cooperate with counsel; and
j) If the plaintiff or counsel abandons any or
all of the plaintiff's claim.
Accordingly, it was found that the policy could be cancelled at
any point in the litigation. The "policy provides no
protection to the defendants in the event of an adverse cost award
should the matter proceed to trial". Furthermore, it was found
that misrepresentations were made about the state of the
examinations for discovery when the policy was secured. The policy
was issued with the understanding that discoveries had not taken
place. However, discoveries had already commenced a year before the
policy was obtained. Therefore, Lemon J was concerned that other
misrepresentations made have been made to secure the policy, which
may negate it.
Therefore, Lemon J found that
1. The Plaintiff resides in India and had no
immediate intention to return to Canada;
2. The Plaintiff had not made full disclosure
of his financial circumstances; and
3. The Plaintiff had an Adverse Protection
Insurance plan that does not appear to be of assistance to the
Accordingly, an order for Security for Costs was granted to the
Defendants. However, the order was not made in favour of the Third
Parties, because it was found that the Plaintiff did not sue the
Third Party and was not responsible for joining them into the
This case supports that Adverse Protection Insurance Plans are
not a "golden ticket" for pursuing litigation, given the
number of exclusions contained within the policies and the
possibility that it could be voided at any time.
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.
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