BICO response to Rastin & Assoc Blog on How ATE Insurance can affect Trial Costs

The BridgePoint Financial Group (BICO) has requested the opportunity to comment on two recent posts concerning how ATE premiums affect trial costs. Note that the blog below and the comments therein, are the thoughts and opinions of John Rossos of BICO, and not necessarily of Gluckstein Lawyers.

The BridgePoint Financial Group pioneered legal cost protection in the Canadian market and currently offers both financing and legal cost indemnity protection to over 800 law firms and their clients across Canada. We are uniquely qualified to assist counsel in all aspect of litigation risk management. We wish to address how counsel may address Justice Milanetti's findings in Markovic v. Richards, 2015 ONSC 6983 (CanLII) (Markovic) to successfully recover the indemnity fee.

We believe there are compelling reasons for a claimant to recover the cost of the indemnity fee, or ATE insurance premium, and that counsel should take a fresh approach to litigating this issue.

We raise the following points to challenge Justice Milanetti's decision:

1. Legislative Reform: The absence of legislation requiring a defendant to pay for the cost of legal cost protection is not a valid reason for denying the recovery of this cost either as an assessable cost or a special damage. Legal cost protection is a novel product that requires the law to adjust and adapt to innovation in the market. Where a claimant has been harmed by the actions of another and, as a direct consequence, they are forced to bear a cost to manage risk, conventional legal principles ought to apply to ensure the claimant is made whole.

2. Discretionary Expenditure: Most expenses incurred to advance litigation are discretionary, including the costs of expert reports. Acquiring legal cost protection provides the claimant with a critical form of litigation risk management and, given their unique financial circumstances, may be a key aspect of their litigation strategy.

3. Advancing the Litigation: Legal cost protection not only advances the litigation, it facilitates access to justice. The claimant is often of limited means. An adverse cost award could have a significant financial impact on the claimant even if the claimant is impecunious. This has been seen in Lakew v. Munro, 2014 ONSC 7316 (CanLII) and Leochko v. Rostek, 2013 ONSC 7899 (CanLII) where the plaintiffs were seemingly judgment proof but adverse cost awards were still sought by the defendants. The financial consequences for an insurer are de minimis since they are able to spread the cost across a large population of policy holders. The imbalance in economic resources between the claimant and the insurer puts pressure on the claimant to settle their claim and obtain less than fair compensation. This undermines the principal objectives of our civil justice system and denies the claimant proper access to justice. Accordingly, by acquiring legal cost protection, a claimant is able to fearlessly advance the litigation and obtain fair compensation for their losses.

4. Disincentive to Resolve the Action: There is an inherent contradiction between Justice Milanetti's concern that legal cost protection does not advance the litigation while simultaneously claiming that it acts as a disincentive to resolve the action.

The terms and conditions of legal cost protection agreements exclude protection where a claimant behaves unreasonably by rejecting reasonable offers to settle or otherwise does not prosecute their claim in a timely way causing the claim to fail for want of prosecution. 

What Markovic does not discuss is whether recovery of the indemnity fee can be claimed as a special damage. Whether the fee is sought to be recovered as an assessable cost or as a special damage will depend on the specific facts or circumstances of the claim and whether an evidentiary foundation has been made which supports the claim for recovery.

Markovic may have been too advanced for the claim to be amended to include recovery of the indemnity fee as a special damage by the time the Plaintiff obtained legal cost protection. Therefore, plaintiff's counsel may have had no choice but to seek recovery of the cost as an assessable disbursement.

In our respectful view, Markovic still leaves it an open question as to whether an amendment to the pleading would have changed the result:

1. Were there specific facts or circumstances surrounding the claimant that compelled them to seek legal cost protection?

2. Was there a shift in the risk exposure that the claimant faced during the litigation process that required them to seek greater legal cost protection in order to advance their claim?

3. Was the defendant's behaviour a factor?

4. Are there compelling strategic reasons to seek recovery of the cost as an assessable cost rather a special damage?

Markovic should be viewed as the first, and certainly not the last word, on whether an indemnity fee is a compensable disbursement.

As this area develops in Canada, we will continue to monitor and report on any new developments. Please contact us if you have any questions.