Also known as “adverse cost insurance”, after the event insurance (“ATE”) policies can be purchased by a plaintiff to cover, among other things, the prospect that the plaintiff is unsuccessful at trial and is ordered to pay a defendant’s costs and disbursements. Can a defendant in British Columbia demand that a plaintiff list an ATE policy on their List of Documents?
Pursuant to British Columbia Supreme Court Civil Rule 7-1(3), ‘Insurance Policy’, a party is compelled to include an applicable insurance policy in a List of Documents:
(3) A party must include in the party’s list of documents any insurance policy under which an insurer may be liable
(a) to satisfy the whole or any part of a judgment granted in the action, or
(b) to indemnify or reimburse any party for any money paid by that party in satisfaction of the whole or any part of such a judgment.
Traditionally, this Rule is designed to avoid the situation where a plaintiff incurs substantial cost in obtaining a worthless judgement that is in excess of available insurance coverage available to a defendant, or otherwise to assist in informed settlement discussions. ATE insurance is a relatively new product, however, and no reported British Columbia decision has determined whether an ATE policy is disclosable. The logic behind the traditional application of Rule 7-1(3) is arguably similar in relation to ATE insurance. From a defence perspective, knowing of the existence of an ATE policy can be important. If a defendant knows that a plaintiff with a contentious liability case can go to trial effectively without risk, or that an otherwise impecunious plaintiff will be able to satisfy an award for costs, it can greatly affect a defendant’s strategy in dealing with the claim.
The law in Ontario on the issue is fairly developed and British Columbia courts may well find the reasoning in the Ontario jurisprudence as persuasive. In Abu-Hmaid v. Napar, 2016 ONSC 2894 and Fleming v. Brown, 2017 ONSC 1430, the Ontario Superior Court of Justice discussed the difference between ATE insurance and the typical third-party liability insurance held by defendants. Both cases found that the underlying policy consideration of the rule favoured disclosure, namely that the existence of an ATE policy plays a strategic role in how actions are conducted. The Courts in Jamieson v. Kapashesit, 2017 ONSC 5784 and Robichaud v. Constantinidis, 2020 ONSC 310, however, restricted the scope of the disclosure obligation to ATE policies which are held by plaintiffs themselves. In those cases, the ATE policy at issue was a blanket policy held by plaintiff counsel’s law firm, and therefore not within the custody, care, or control of the plaintiff.
The Ontario Rule 30.02(3) is nearly identical in wording to the British Columbia Rule 7-1(3), although one difference is that the term “judgment” is defined in the Ontario Rules as “a decision that finally disposes of an application or action on its merits and includes a judgment entered into as a consequence of the default of a party”, whereas “judgment” is not defined in the British Columbia Rules. Still, there is a compelling argument that the term “judgment” as used in Rule 7-1(3) includes an award of costs. Costs can be assessed against an unsuccessful plaintiff and entered as a Certificate of Judgment.
The British Columbia and Ontario Rules are substantially similar, and the underlying policy rationales favouring disclosure exist in both jurisdictions, so one might expect that a British Columbia Court would follow the same reasoning. That is no guarantee, however, as evidenced by differing treatment of the issue as to whether premiums for ATE insurance can be recovered by a plaintiff in an award for costs. In Wynia v. Soviskov, 2017 BCSC 195 and Belknap v. Hicks, 2023 BCSC 172 the BC Supreme Court disallowed premiums for ATE insurance as a disbursement recoverable by a plaintiff, holding that the expense “does not arise from the exigencies of the proceeding and relate directly to the direction, management, or control of the litigation used to prove a claim against the defendant”. There was also some discussion in Belknap, with reference to the “risk premiums” at issue in the Supreme Court of Canada’s decision in Walker v. Ritchie, 2006 SCC 45, about the potential that recoverability may incentivise defendants with meritorious defences to settle and encourage plaintiffs to pursue unmeritorious claims. Recoverability of ATE premiums as a disbursement was disallowed in Ontario in Markovic v. Richards, 2015 ONSC 6983 and Foster v. Durkin, 2016 ONSC 684, however the disbursement was more recently allowed in Stewart v Wood, 2019 ONSC 3931 where recovery of ATE premiums was viewed as an access to justice issue. This is to illustrate that there is disagreement concerning the policy rationales for the involvement of ATE insurance in litigation generally, and due to its relative novelty in litigation, its treatment is still developing.
Demands made by defendants for disclosure of ATE policies in British Columbia are currently being met with varied responses, and the time is ripe for a reported decision on the issue.
For more information, or if you have a question about this article, please contact a member of our Insurance Law Group.