Canada: Mediation In British Columbia: Does Mandatory Mediation Mean Mandatory Attendance For Lloyds Underwriters?

Last Updated: June 22 2017
Article by Karen L. Weslowski

Introduction

While claims against building professionals and consultants are common, very few of those claims ever go to trial. The vast majority of claims are resolved through mediation.

In British Columbia, any party to an action can force the other parties to attend a mediation by issuing a Notice to Mediate pursuant to the Notice to Mediate (General) Regulation, B.C. Reg. 77/2013 (the "Regulation"). This raises an important issue for certain Underwriters at Lloyd's of London ("Lloyd's") who now insure a significant number of building professionals and consultants in British Columbia.

While local insurers have representatives in close proximity to the mediation who can attend at minimal expense, the same cannot be said for Lloyd's. Questions have been raised as to whether the Regulation requires a London-based Lloyd's representative to attend the mediation in person, whether it is sufficient for Lloyd's to have a local representative, such as a claims examiner, attend on their behalf, or whether Lloyd's may simply attend by phone or rely upon attendance by defence counsel, vested with settlement authority, as their representative.

Fortunately for the travel weary, the language of the Regulation and the limited case law to date suggest that, while mediation may be mandatory, in-person attendance at mediation by a London-based Lloyd's representative is not. The Regulation requirements will be met through attendance by a local claims examiner on behalf of Lloyd's.

Mandatory Mediation

The Regulation requires every party who receives a Notice to Mediate to: (1) participate in the pre-mediation conference; and (2) engage in mediation at a mediation session in relation to the action.

A party may be exempted from these requirements if all of the participants agree to excuse that party, and that agreement is confirmed by the mediator in writing. Pursuant to the Regulation, a party is not permitted to unilaterally declare that they will not be attending the mediation, regardless of that party's position on liability or relative liability exposure.

Upon application, the Regulation allows the court to grant a party an exemption from attending a mediation. However, such exemptions will be granted rarely and only where "it is materially impracticable or unfair to require the party to attend", as stated by the British Columbia Supreme Court in Matsqui First Nation v Canada, 2015 BCSC 1409.

The court in Matsqui noted that British Columbia appears to be unique among the provinces in imposing the standard of "material impracticability or unfairness" as the basis for exempting parties from mandatory mediation. This standard has received very little judicial consideration.

In Executive Inn Inc. v Tan, 2008 BCCA 93 ("Executive Inn"), the Court of Appeal noted that the section of the Regulation allowing for exemption from mediation was enacted to ensure that the court in an appropriate case would be endowed with a broad power to make orders to ensure the efficacy of the mediation process. However, pessimism and hostility on the part of parties compelled to attend a mediation are often predictable and, in and of themselves, will generally not justify exemption from the mandatory mediation process.

Definition of "Party" Required to Attend Mediation

The definition of "party" in the Regulation includes "an insurer to a party of record to the action". An "insurer" means an insurer, as defined in the Financial Institutions Act, that has provided a policy of insurance to a party in the action and, under that policy, is obligated to indemnify the party for liability imposed on the party in the action. The definition of insurer also includes a surety of the party in which a claim has been made on a surety bond related to matters in issue in the action.

The inclusion of the indemnity obligation in the definition of "insurer" raises the question as to whether an insurer who is defending on a reservation of rights falls within the definition of an "insurer". That is an interesting question that has not been considered by the courts.

Attendance at Mediation by "Representative"

The Regulation provides that a party may attend a mediation session by "representative" if "the party is not an individual" or "the party is a resident of a jurisdiction other than British Columbia and will not be in British Columbia at the time of the pre-mediation conference or the mediation session, as the case may be."

The Regulation does not contain a definition of "representative". The following provision may suggest that a representative must be someone other than the party's lawyer, as the Regulation states: "[a] party or representative who attends a pre-mediation conference or a mediation session may be accompanied by a lawyer." The alternative interpretation is that where the representative is not a lawyer, they may be accompanied by a lawyer. The issue of whether a representative and a lawyer are mutually exclusive has not been considered by the courts.

Other provisions within the Regulation, along with case law interpreting those provisions, suggest that a "representative" for the purposes of mediation need not be an in-person representative from Lloyd's.

The British Columbia Court of Appeal explained the rationale behind the non-resident provision in Executive Inn, where the court commented that this provision is "designed to ensure that generally a party out of the jurisdiction not be incommoded in purse or in personal circumstances by being required to come from outside British Columbia to attend a mediation session held here." Although not expressly stated as such, this commentary indicates that in-person attendance at a British Columbia mediation by a representative of Lloyd's is not required by the Regulation.

The express requirements for a representative attending a mediation also lead to the conclusion that an in-person representative from Lloyd's is not required. The Regulation states that if a representative attends the mediation, that representative must satisfy the following requirements: (1) be familiar with all relevant facts on which the participant, on whose behalf the representative attends, intends to rely; and (2) have full authority to settle, or have access at the earliest practicable opportunity to a person who has, or to a group of persons who collectively have, full authority to settle, on behalf of that participant. A properly instructed claims examiner can satisfy these requirements.

Mere phone attendance by a London-based Lloyd's representative may not meet the mandatory attendance requirements of the Regulation. For attendance at the pre-mediation conference, the Regulation states that a person entitled or required to attend that conference may do so by telephone "or other communications medium if the person is a resident of a jurisdiction other than British Columbia and will not be in British Columbia at the time of the conference". The Regulation contains no such exception in relation to the mediation. Of course, the parties can consent to allow attendance by phone, and this is often done at mediations without any difficulty.

Conclusion

The mandatory attendance requirements prescribed by the Regulation reflect the legislature's belief that a more effective and successful mediation is likely to result from the parties' personal attendance at mediation. This generally allows the parties to realize the full benefits of the mediation process.

However, to avoid excessive cost or inconvenience, parties not resident in British Columbia, such as Lloyd's, are permitted to attend by representative, which may include a local claims examiner. Practically speaking, many mediations in British Columbia are successfully conducted through attendance by the insured and lawyer vested with settlement authority, which is an acceptable practice provided that all parties have consented to this arrangement. Plaintiff's counsel in particular may be well-served to keep this in mind when considering whether to attempt to compel personal attendance by a Lloyd's representative at mediation. The expense required for such attendance may be better directed to a contribution to settle the Plaintiff's claim.

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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Karen L. Weslowski
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