After the Event Insurance (ATE) is rapidly growing in popularity in Canada. As this happens, case law regarding different aspects of it becomes more readily available. One of the more “contentious” topics when it comes to legal expense insurance is premium recoverability. While there is not abundant case law on this topic, recently there have been a few cases that are worth discussion.
Even the strongest of claims has litigation risk and may or may not be successful depending on how a judge or jury perceives the evidence. The knowledge of this can often translate into a client settling for less than they deserve, or could potentially be awarded, due to fear of financial loss.
When you offer your clients Redress After the Event (RATE) insurance, you are removing the risk of having to pay costs, and giving your clients the proper access to justice. In fact, recent conversation with lawyers has told us that the presence of RATE during litigation can actually have an impact on the nature of discussions with the defense, and can change the course of a case.
So, while it’s clear that a RATE policy is a significant benefit to clients who are not successful in their claims, or who for whatever reason are ordered to pay costs to the defendant, what happens when a claimant is successful?
Case Law Regarding ATE Recoverability
Many lawyers and clients have questioned whether the RATE premium is recoverable as an assessable disbursement in successful settlement outcomes. While case law in Canada on this subject is fairly sparse, there has been a recent development regarding it.
Previously, the defense personal injury bar relied on a 2015 decision by Madam Justice Milanetti in Markovic v. Richards in which it was found that ATE premiums are not recoverable. As reasoning for this, Madam Justice Milanetti stated that the premium was “nothing more than a discretionary expense.”
However, recently in Armstrong v. Lakeridge Resort Ltd.2, Ontario Superior Court Justice Salmers made a different decision. In finding that the costs of advancing even the claims on which the plaintiffs were successful were very large, Justice Salmers rejected the previous case law and ordered the defendant to pay the ATE premium.
“It is in the interests of justice that plaintiffs be able to pursue meritorious claims without fear of a potentially devastating adverse costs award. Additionally, I am satisfied that it was reasonable for the plaintiffs to have advanced their claims as they did because there were genuine triable issues on all claims that were advanced. Accordingly, the claim for the costs insurance premium will be allowed.”
In this case, Justice Salmers identified that the fear of potential adverse cost awards may prevents plaintiffs from gaining access to justice and pursuing their legal claims. Though, as of the publishing of this article, the decision in this case has yet to be appealed, it is certainly noteworthy for the legal expense insurance in Canada.
If this decision becomes the one relied on for case law, it will only further rationalize the need to advise all litigation clients of the benefits of, and their options regarding, RATE insurance.