Date: Fri, 17 Sep 2010 12:52:40 -0700
Reply-To: Roger Whittaker <rogerwhitt1@GMAIL.COM>
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From: Roger Whittaker <rogerwhitt1@GMAIL.COM>
Subject: waiting patiently for friday to mention insurance
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From lawyers weekly dot ca ... a canadian legal journal
maybe it would be good for those who are Americans to see if state or
federal insurance laws have this same provision regarding mediation
the link
http://www.thelawyersweekly.ca/index.php?section=article&articleid=1251
the full article
Hardball’ auto insurer hit with $40,000 ‘remedial costs penalty
By Cristin Schmitz
Ottawa
September 17 2010 issue
Auto insurers in Ontario who refuse to participate in mandatory
mediation — or who flout their companion statutory obligation to try to
speedily settle a case — face “significant remedial costs penalties,” warns
the Ontario Court of Appeal.
On Aug. 31, the appeal court slapped auto insurer Aviva Canada with paying
an additional $40,000 of Glen and Heather Keam’s legal costs, on top of the
partial indemnity costs of $110,000 the plaintiffs were awarded last year
after an 11-day jury trial in 2008.
The Court of Appeal’s award of a $40,000 “remedial penalty” increases the
plaintiffs’ costs recovery by a hefty 36 per cent, and sends a strong
message to insurers that they risk serious financial consequences if they
fail to meet their statutory duty to mediate under s. 258.6(1) of the
*Insurance
Act*, says the Keams’ counsel, Lawrence Hatfield of Flaherty Sloan Hatfield
in Hamilton, Ont.
Hatfield told *The Lawyers Weekly *that, so far as he knows, the decision
marks the first time that a court has imposed a costs penalty on an auto
insurer for breaching its statutory duty to mediate.
Commenting that Aviva played “hard ball” with the plaintiffs, Justices Marc
Rosenberg, Stephen Goudge and Kathryn Feldman held that “although the
insurer’s conduct may not have risen to the level required for the
imposition of substantial indemnity costs,…a significant remedial penalty
was required in all the circumstances…to reflect the censure of the court
and to provide an appropriately significant recovery for the appellants.”
Hatfield said some Ontario insurers have been refusing to mediate — or
alternatively demanding that plaintiffs’ pay half of any mediation
costs — in violation of the Act and its regulations.
He said the Court of Appeal’s decision makes it clear that insurers who
flout their statutory obligation to participate in mediation — and their
companion duty to “attempt to settle the claim as expeditiously as possible”
under s. 258.5(1) of the *Insurance Act *— now face substantial costs
sanctions, even if the defendant ultimately wins the case at trial.
As Justice Feldman put it “the cost consequences will follow whether the
plaintiff or the defendant has been successful at trial, so that, for
example, where a plaintiff’s claim is dismissed, the trial judge may deprive
the winning defendant — represented by the insurer that refused to accept a
request to mediate — of all or part of its costs that would normally follow
the event.”
“There is no exit for the insurer,” Hatfield emphasized.
However, the statutory obligation to participate in mediation on request
applies equally to plaintiffs. “In theory a cost sanction could be awarded
against a plaintiff for failing to mediate when requested,” Hatfield
acknowledged. “However, in reality, I must admit I have never heard of a
plaintiff refusing to mediate a case.”
Matthew MacIsaac, counsel for the defendants along with lead counsel Robert
Rogers of Hamilton’s Evans Philp, told *The Lawyers Weekly *no decision has
yet been made on whether to apply for leave to appeal.
In the wake of Keam, he queried whether it remains open to an insurer as “a
tenable position” to reasonably argue that a plaintiff’s injuries are not
“serious and permanent” and thus do not meet the Insurance Act’s threshold
for litigation. “Would you be considered to be mediating in bad faith, or
wasting time, if you go to mediation with that position that the injury
doesn’t meet threshold?” he asked. “If the injury doesn’t meet the
threshold, the chances are you are not going to volunteer to pay anything on
it. Could the plaintiff’s counsel then, at the end of the day, say: ‘Well
they attended mediation, and mediated in bad faith because they had no
intention of paying’ — and does that ultimately result in increased costs
against the insurer?”
MacIsaac also queried how *Keam *jibes with the Court of Appeal’s ruling in
*McCombie v. Cadotte*, (2001), 53 O.R. (3d) 70. *McCombie *seems to indicate
that plaintiffs who fail to meet their s. 258.3(1) *Insurance Act *duty to
attend a defence medical before suing should face cost sanctions only if
their failure to attend prolongs the litigation, MacIsaac noted. “It seems
what the Court of Appeal is saying with [*Keam*] is that there will be cost
consequences [for failing to mediate] regardless, so it’s tough to reconcile
the two decision from the same level.”
Hatfield’s client, Glen Keam, suffered chronic pain after receiving soft
tissue injuries to his neck and back in a 2003 auto accident. The
defendants’ insurer twice refused the plaintiffs’ request that the
defendants participate in mediation. This violated s. 258.6(1) of the
*Insurance
Act* which requires the parties to participate in mediation at either
party’s behest. Moreover, O.Reg. 461/96 requires the defendant’s insurer to
pay the reasonable expenses and fees of the mediator (which typically range
from $3,000 to $5,000, Hatfield said.)
The defendants maintained for more than four years after Keam sued, that the
plaintiff’s injuries did not meet the s. 267.5(5) *Insurance Act *litigation
threshold of a “serious and permanent” injury. In light of its position, the
defence said mediation would be futile and it therefore refused two separate
requests from the plaintiffs for mediation.
The plaintiffs ultimately won their case, but the trial judge rejected their
request for substantial indemnity costs of $196,145. Instead he awarded
partial indemnity costs of $110,000. He accepted the insurer’s position that
it was entitled not to participate in mediation because of its belief that
Keam’s injuries did not meet the “serious and permanent” threshold for
litigation.
The plaintiffs based their request for a “remedial cost penalty” against the
defendants on s. 258.6(2) of the *Insurance Act *which stipulates that a
person’s failure to participate in a requested mediation “shall be
considered by the court in awarding costs.” (Section 258.5(5) further
stipulates that an insurer’s failure to attempt to settle a claim as
expeditiously as possible “shall be considered by the court in awarding
costs.”)
“In this case the respondents’ insurer took the position that the claim did
not meet the threshold and therefore there was nothing to negotiate,”
Justice Feldman observed. “However, it is this approach that the Legislature
has disavowed by making mediation mandatory. Rather, the Legislature’s
approach recognizes that participation in mediation could have a salutary
effect on one or both sides, with input from an experienced and respected
mediator.”
Justice Feldman said that in a case where the insurer has not fulfilled its
obligation to mediate, the trial judge must consider the appropriate cost
consequences.
She described the “costs sanction” as a “remedial penalty.” It is remedial
in the sense that it is intended not only to compel insurers to comply with
“an important statutory purpose” of promoting early out-of-court settlement,
but also to give a remedy to the party who was deprived of an opportunity
for early settlement of the claim.
“It is a penalty because it is not intended to be merely compensatory of
costs unnecessarily incurred by the other party or parties, as that
objective is already addressed by other costs provisions of the *Rules of
Civil Procedure*, but to provide a meaningful consequence to an insurer that
elects not to comply,” Justice Feldman explained.
She suggested such meaningful financial consequences could include
substantial indemnity costs against a losing defendant, or depriving a
winning defendant of its full, or partial, costs.
In this case Justice Feldman said the appeal court decided the size of the
$40,000 costs penalty by taking into account: the fact that the insurer
twice refused to mediate (the first time two years before trial, and the
second time, more than a year before trial); the fact that the insurer
“decided to ‘play hardball’ by taking the easy position that the claim did
not meet the threshold”; the fact that shortly before trial, the insurer
served an offer to settle which, while low, amounted to acceptance that
there was a potential claim to litigate — and therefore to mediate; and the
duration of the 11-day trial.
--
roger w
From Proverbs:
Under three things the earth trembles, under four it cannot bear up: a
servant who becomes king ...
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