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
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
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
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.
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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