Litigation Insurance Does Not Prevent an Order for Security for Costs

The fact that a plaintiff obtains litigation insurance does not prevent a court from making an order for security for costs.

In Shah v. Loblaw Companies Ltd., 2015 ONSC 5987 (S.C.J.), the plaintiff claimed he slipped and fell on a mat at a grocery store in 2012.  At the time of the incident he was a permanent resident of Canada, but his permanent resident card expired in 2013.  He returned to India and did not returned to Canada.  The defendants brought a motion for security for costs.  In response, the plaintiff secured a Legal Protection Certificate and Indemnity Agreement.  He opposed the motion for security and argued that the insurance plan was sufficient security for the defendants.

The Court rejected the plaintiff's argument.  The policy contained a number of exclusions where the insurance proceeds would not be paid, such as where the plaintiff does not accept his counsel's recommendation to accept an offer to settle, decides to represent himself, fails to attend a defence medical examination, provides materially misleading information and so on.  The defendants had no control over the circumstances and if the policy were cancelled, the defendants would have no security in the event of an adverse costs award against the plaintiff. 

Justice Lemon comments that other judges have considered the existence of insurance as a factor in determining whether security for costs should be awarded, but that the circumstances of the case and terms of the policy should be considered.  It would seem important to obtain production of such a policy in the event that the plaintiff raises such an issue in response to a motion for security for costs.

Another view

Randy Maniloff's  article on Bridge of Spies in Coverage Opinions is way better than mine.  Of course, Maniloff is addressing the actual facts -- James Donovan, the person on whom the Tom Hanks character was based in the movie, argued in court that a multi-vehicle accident is one occurrence.  Tom Hanks argued in a bar that plaintiffs' counsel should accept a low settlement offer because of that then-undetermined question of law. 

(Maniloff doesn't mention it, but Donovan also argued in court that the Russian spy he defended should not be executed because the spy might be useful in a trade if the USSR ever captured an American spy.  In the movie Tom Hanks argued it as an ex parte communication in the judge's living room.)

Incompetent insurance defense lawyers make good spies, apparently

I just saw Bridge of Spies, the much-praised Steven Spielberg movie in which Tom Hanks plays an insurance defense lawyer who ends up negotiating a spy-swap with the Soviet Union. 

In Hanks' first scene in the movie, he demonstrates an incompetence that should get a real lawyer fired.

Hanks is negotiating settlement of a claim.  Apparently the sticking point is how many occurrences there are in a multi-vehicle crash for the purposes of a per occurrence limit.  Typically the starting point for this type of discussion would be the policy definition, followed by legal research on both sides.  If the issue is still open for debate, there might be some analogizing.  Hanks' character, perhaps anticipating his future role as a bit player in the cold war, decided to do the equivalent of Khrushchev banging a shoe on the table at the United Nations. 

Sure, that'll work.  (Not.)

In the same scene, Hanks says repeatedly that he does not represent the tortfeasor, but the insurance company.  Huh?  Any second year insurance defense associate should have a thorough understanding of the tripartite relationship--a cornerstone of an insurer's duty to defend that  says that an insurance defense lawyer fully represents the insured in all cases assigned to that attorney.  It's true that the attorney also fully represents the insurer -- that's the third "partite" in tripartite -- but generally that only comes into play as a reason that insurance defense counsel can't advise on coverage issues, or when there is a possibility of an excess judgment.

The response of any competent personal injury attorney to Hanks' negotiation strategy:  See you at trial.

Which brings us to the courtroom scenes in the movie.  During them I kept forgetting I was watching Tom Hanks in a Serious Movie About Serious Matters and thought I was watching James Spader in Boston Legal.  Same apparently senile crazy old coot judge who made rulings he admitted from the bench were wrong but he made them because he felt like it.  Same utterly inappropriate over-the-top goading of opposing counsel.  Same ex parte communications with the judge that could get both attorney and judge disbarred.  

Spoiler alert:  Hanks succeeds in negotiating the hostage exchange.  He uses the same tactics he uses in his insurance defense negotiations:  No research whatsoever and a lot of bluster.  The fact that he does succeed is a testament not so much to his skill as to the fact that when both parties really want a settlement , and what they are each willing to give is within the other side's settlement parameters,  a settlement will generally be reached.  That doesn't take heroics; it takes a telephone call. 

Plaintiffs Who Settle for Less than Tortfeasor's Limits May Not Pursue Underinsured Claims

A claim against an insurer pursuant to the underinsured provisions of the policy has been rejected since the plaintiffs settled against the tortfeasor for less than his limits.

In Kovacevic v. ING Insurance, 2015 ONSC 3415 (S.C.J.), the plaintiffs were injured in 2004 in a motor vehicle accident in Florida.  At the time, the plaintiffs were insured by ING; the policy had a $2 million limit and included the OPCF 44R - Family Protection Endorsement.  The Florida defendant had a policy of insurance with a $1 million limit.  The insurer, Lincoln General, elected to go into a "voluntary solvent run-off" in 2009 which resulted it in ceasing to write new policies but it continued to pay its existing obligations and liabilities.  There was no evidence that Lincoln had become insolvent at the date of the settlement or thereafter.

In 2010 the plaintiffs settled their Florida action for $300,000 without ING's knowledge or consent and then sought to recover under their own policy's underinsured driver provisions.  ING brought a motion for summary judgment.  The plaintiffs argued that settling at less than the policy limits did not disentitle them to recovery under the OPCF 44R.  They also argued that the case was unique as the possibility of Lincoln becoming insolvent meant the limits of the policy were unavailable and a settlement for less than the limits was provident.

Justice MacKenzie granted summary judgment and dismissed the claim.  The plaintiffs were not entitled to settle the Florida action for less than the limits then pursue an underinsured claim.  The claim that Lincoln was not solvent or that the policy limits were not available was not accepted.

Appellate Division holds that release of uninsured motorist benefits did not release PIP claim

Chiropractic Care Centers, Inc. provided medical treatment to Rafael Jimenez after he was injured in a motor vehicle accident. 


Chiropractic sought payment of medical bills from Allstate Insurance, the patient's PIP insurer.  Allstate asserted that Chiropractic's claims were extinguished when the patient signed a release of his uninsured motorist coverage arising from the same accident. 


In Chiropractic Care Centers, Inc. v. Allstate Ins. Co., 2015 WL 5783605 (Mass. App. Div.), the Massachusetts Appellate Division held that Jimenez did not have authority to release the PIP claim because he had previously assigned the claim to Chiropractic and Allstate had notice of the assignment. 


Allstate asserted that Jimenez falsely claimed in the release that there were no outstanding medical bills and that any such bills would be paid from the proceeds of the uninsured motorist benefit settlement.  The court held that any recourse Allstate has for such statements is against Jimenez and does not affect the rights of Chiropractic. 


The court also held that the release did not encompass PIP benefits because the release was  specific to uninsured motorist benefits. 

Ontario Rate Approvals Fall in the Third Quarter

FSCO approved 45 private passenger automobile insurance rate filings during the third quarter of 2015.  A total of 40 insurers submitted the filings.  These 40 insurers represent 77.45 percent of the market based on premium volume.  Approved rates decreased on average by 0.50 percent when applied across the total market.  For the first three quarters of 2015, approved rates have decreased by 0.85 percent.

Rate approval decreases since 2013 now total 6.95 percent.  The government rate reduction strategy calls for a 15 percent reduction by August of this year.

Finance Minister Charles Sousa reminded drivers this week that auto insurance discounts will be introduced on January 1, 2016 for consumers who drive with winter snow tires.  The discount amount is still unknown.  Additional reforms are being implemented on June 1, 2016 which is also expected to further reduce premiums.

Strong Position at Mediation Does Not Result in Increased Costs After Trial

Sections 258.6 and 258.6 of the Insurance Act impose an obligation on insurers to settle claims as expeditiously as possible and to participate in mediation.  Failure to do so shall be taken into consideration when a court is awarding costs.

In Ross v. Bacchus, 2015 ONCA 347 (C.A.), the jury awarded the plaintiff $248,000.  The trial judge awarded the plaintiff $217,000 plus HST in costs, including an award of $60,000 on the basis that the insurer failed to comply with ss. 258.5 and 258.6. 

The action was commenced in 2010 and the defendant offered to settle the claim for $40,000 in 2011, although the offer was revoked in 2012.  Three weeks before the trial was scheduled to commence, the plaintiff offered to settle the action for $94,065 plus interest and costs, and requested mediation for the first time.  Defence counsel responded the next day with an offer of $30,001 plus interest and costs, and agreed to attend mediation, but advised that his clients were "not interested in settling this case".  The mediation took place four days before trial.  The trial judge described the insurer's participation in mediation as a "sham" based on counsel's statement.

The Court of Appeal allowed the costs appeal and held that the $60,000 award was not appropriate.  Justice Doherty held that a clear statement of the insurer's intent does not mean it has failed to settle expeditiously or participate in a mediation:

[46]      The costs sanctions in ss. 258.5 and 258.6 can only serve their intended purposes if the facts justify the imposition of those sanctions. An insurer’s statement on the eve of trial that it is not prepared to settle a claim cannot be equated with an insurer’s failure to “attempt to settle the claim as expeditiously as possible.” Nor can an insurer who actually participates in a mediation be declared to have failed to participate simply because the insurer indicated prior to the mediation that it was not prepared to settle the claim. A clear statement of the insurer’s position going into the mediation, even a strong statement, does not preclude meaningful participation in a mediation.

 Although ss. 258.5 and 258.6 make mediation mandatory, it is important to remember that the insurer is still entitled to take strong positions without being subjected to an additional costs penalty.

Insurance News - Wednesday, October 14, 2015

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Wednesday, October 14, 2015:

• Finance Minister Charles Sousa appoints David Marshall as auto insurance, pension advisor.  Are more reforms coming?
• Can a self-driving car maneuver through a moral maze?
• State Farm has plans to use biometrics to price auto insurance.
• Volvo says it will take the full liability if one of its self-driving cars crashes.
• Hands-free technology not keeping drivers hands-free.

At least Jezebel commenters understand insurance

Jezebel, like several other online magazines and newspapers, is running an article today shaming a woman for suing her young nephew who accidently broke her wrist by hugging her too hard.

I was pleased to see that many commenters chimed in to point out that, contrary to the article's assertion, this does not appear to be a situation where a crazy, hateful, greedy aunt is suing a kid and breaking a family apart; it is more likely a case of someone trying to achieve a fair settlement with a homeowner's insurer where she was injured due to the negligence of an insured under the policy.  Negligence does not mean bad intentions, and a broken wrist is not less injurious because it was caused by a hug. 

Or, who knows?  Maybe she is a crazy, hateful, greedy aunt who is breaking a family apart -- that's why we have jury trials. 

Pre-Judgment Interest in Auto Claims

We previously blogged on Cirillo v. Rizzo, where the Court held that s. 258.3(8.1) of the Insurance Act should be applied retroactively (the section provides that pre-judgment interest should be calculated in accordance with s. 127 of the Courts of Justice Act). 

Perhaps unsurprisingly, another judge has come to the opposite conclusion.  In El-Khodr v. Lackie, 2015 ONSC 4766 (S.C.J), Justice Toscano Roccomo held that s. 258.3(8.1) is substantive law, therefore it cannot be applied retroactively.

Until there is appellate authority on this issue, it may be that the calculation of PJI in motor vehicle actions is a matter for negotiation in settlement discussions.

First Circuit holds that pro rata allocation does not apply to attorney's fees in long tail loss

In a case with odd facts, the United States Court of Appeals for the First Circuit has held that under Massachusetts law, in long tail losses attorney's fees are not subject to pro rata allocation. 


I'm not going to go into great detail of the facts of the case.  Suffice it to say that the First Circuit's recitation of those facts and the procedural history fairly drip with disdain for the insurer's actions and litigation strategy.  Rather than stating a straightforward prediction that the SJC would not apply pro rata allocation to defense costs (a subject of debate among insurance coverage attorneys), it chided the insurer for removing the case to federal court where new state law cannot be made. 


The reasoning of the First Circuit that the duty to defend is a broad duty that should not be subject to pro rata allocation is sound.  But in the context of the case the court has left room for insurers to argue that bad facts make bad law and that Massachusetts state courts should ignore the decision for that reason.




A substantial oil spill occurred on property owned by the Peabody-Essex Museum, and eventually migrated off-property to land owned by Heritage Plaza.  Heritage Plaza discovered the oil in 2003 and made a claim against the Museum.  The Massachusetts of Department of Environmental Protection issued a Notice of Responsibility to the museum.

The museum sought coverage from U.S. Fire Insurance Company, its insurer from December, 1983 to December, 1985.  U.S. Fire denied a duty to defend the private demand from Heritage Plaza, but accepted defense of the DEP claim with a reservation of rights.

The museum retained legal counsel and an environmental consultant and tendered the bills to U.S. Fire.  It received no payment for the defense of the public claim even though U.S. Fire had agreed to defend that claim.  It finally sent a payment totaling $611.41, which it calculated by unilaterally reducing the hourly rate of counsel to $200 per hour and unilaterally reducing the bills to what it considered to be the percent spent on the public claim.  It made no payment for the environmental consultant,

The museum sued U.S. Fire and, in 2013, was awarded judgment of over $1.5 million in the United States District Court for the District of Massachusetts. 

In Peabody Essex Museum,Inc. v. U.S. Fire Ins. Co., __ F.3d__, 2015 WL 5172841 (1st Cir. 2015), the United States Court of Appeals for the First Circuit held that US Fire's persistent failure to make any payment towards defense costs "despite having nominally accepted that duty may be treated as a wrongful refusal to defend upon receipt of notice of a claim." 

The court then turned to the issue of how the costs and fees should be divided between the insurer and insured. 

The court first held that the US District Court did not abuse its discretion in finding that the beginning of the 1983-1985 policy period was the start date for the allocation period even though that date "has a make believe quality." 

The District Court had applied a fact-based allocation rather than the default time on the risk method set forth in Boston Gas Co. v. Century Indem. Co., 454 Mass. 337 (2009).  In a fact based allocation, costs are attributed to a policy period based on the percentage of damage that occurred during that period.  Courts generally agree that a fact-based allocation is best, but it is often impossible to produce facts indicating how much damage occurred in one 12-month period versus another of a 30 year long undiscovered contamination.  Some courts have applied it in sexual abuse cases, where an institution allowed sexual abuse of many minors over a period of time, because in that instance it is possible to determine how many allegations of abuse occurred in one year over another.

The time on the risk method, as set forth in Boston Gas, allocates damages based on the percentage of time a particular insurer provided coverage out of the entire period of the loss.

The District Court apparently allocated loss based on a finding that 9,000 square feet of oil damage occurred during the two year policy period.  (The total square feet damaged is not clear from the opinion.)

The First Circuit affirmed the holding of the District Court that time on the risk proration of Boston Gas Co. v. Century Indem. Co., 454 Mass. 337 (2009) does not apply to defense costs.  It held that the arguments of U.S. Fire "appear diminutive next to the long-standing state precedent on the broad and formidable contractual duty to defend that heavily favors insureds and hat stands apart from indemnity obligations."    It tempered its holding by adding, "we have warned, time and again, that litigants who reject a state forum in favor of federal court under diversity jurisdiction cannot expect that new state-law trails will be blazed" by the federal court.


Thanks to Mike Tracy for bringing this case to my attention. 

Robert Von Dohlen's answer to How Do I Submit a Fire Insurance Claim? - Quora

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Houston Insurance Lawyer’s insight:

Quick Q&A on Quora regarding the top factors to consider when your home or property is damaged by fire.

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Fire Insurance Claims - Attorney Robert Von Dohlen (avec tweet) · InsuranceLawyer

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Houston Insurance Lawyer describes important fire insurance claim considerations

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Fire Insurance Claims - by Attorney Robert Von Dohlen

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Important factors to consider if your home or property has been damaged in a fire and you must submit a fire insurance claim. Houston Attorney Robert Von Dohlen

Houston Insurance Lawyer’s insight:

Excellent article regarding fire insurance claims in Houston, TX.

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Fire Insurance Claim Facts - Insurance Lawyer Robert Von Dohlen - YouTube

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http://www.vondohlenlaw.com/about/ What should you know about fire insurance claims? The Von Dohlen Law Firm helps insuranance policy holders in Houston, TX….

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