December.8.2017

Divergent case authority on whether ATE insurance premiums can be claimed against an opposing party in Ontario and British Columbia litigation

Providers of After The Event (ATE) insurance have been marketing in British
Columbia extensively as of late. Until recently the availability of this coverage
against adverse costs awards was not widely known but that is changing
rapidly.

Since Milanetti J.’s ruling in Markovic v. Richards, 2015 ONSC 6983, judges in
both Ontario and British Columbia have followed its reasoning and denied
claims by plaintiffs for the cost of premiums for After The Event (adverse
costs) insurance coverage (e.g., Valentine v. Rodriguez-Elizalde 2016 ONSC 6395
& Wynia v. Soviskov 2017 BCSC 195).

More recently however, Salmers J. of the Ontario Superior Court reached the
opposite conclusion in Armstrong v. Lakeridge Resort Ltd., 2017 ONSC 6565
and ATE providers are referencing this case in their marketing materials. The
court noted that counsel for the defendant had cited Markovic for the
proposition that the disbursement claim for the premium should be denied. At
paragraph 21 the court responded:
With respect, I disagree. In this case, the costs of advancing even the
claims on which the plaintiffs were successful were extremely large.
Also, in general, even the strongest claim of a plaintiff may not be
successful depending on how the evidence comes out and how it is
perceived by a trier of fact. Without costs insurance, the fear of a very
large adverse costs award would cause many plaintiffs of modest
means to be afraid to pursue meritorious claims. 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.

Unfortunately prior to reaching this conclusion, the court did not address the
criticism set out by Milanetti J. in Markovic regarding access to justice and
claims for ATE premiums. Consider the following commentary found in
paragraph 7 of that case:
While it is clearly the plaintiff’s prerogative to obtain ATE insurance, I
do not accept that such premium should be reimbursed by the
defendants as a compensable disbursement. Such disbursements have
not, as far as I am aware, ever been entertained in Canada and have
certainly not been the subject of legislative reform as was the case in
the UK. I can think of no policy reason that such should be
compensated as a taxable disbursement. Existence of the policy may
well provide comfort to the plaintiff, it is however an expense that is
entirely discretionary, does nothing to advance the litigation, and may
in fact even act as a disincentive to thoughtful, well-reasoned
resolution of claims.

As the court in Armstrong was ruling in a manner contrary to prior binding
authority, the failure to address the reasoning above is problematic. Appellate
review of this decision would therefore be welcome in order to clarify whether
access to justice can trump the deleterious effects on the litigation process
noted by Milanetti J.

In British Columbia, a party’s disbursements may be recoverable if they were
necessarily or properly incurred in the conduct of the proceeding. The BC
Court of Appeal in MacKenzie v. Rogalasky 2014 BCCA 446 stated that a party
can recover disbursements:
[T]hat arise inherently and directly from the issues in the case which
relate … to the direction, management, or control of litigation and
which pay for materials and services used to prove a claim or defence
… expenses [that] do not arise from the nature of the allegations or
the conduct of proceedings … from unrelated causes including the
financial circumstances of a party … do not fall within the meaning of
the word “disbursements” in the context of a costs rule … To be
recoverable a disbursement must arise directly from the exigencies of
the proceeding and relate directly to the management and proof of
allegations, facts and issues in litigation, not from other sources.

The BCCA went on to note that the costs regime is not designed to provide
full indemnity to litigants for their expenses but rather to provide predictable
and consistent awards that would allow for rational risk assessment
throughout the litigation process. Parties who may be required to pay for a
disbursement would need to be in a position to know what it might be and
not subject to private financial arrangements that have not been disclosed.
Ontario case law suggests that the existence of ATE policies should be
disclosed but is divided on whether details regarding the coverage must be
provided (contra Abu-Hmaid. v. Napar, 2016 ONSC 2894; pro Fleming v.  Brown,
2017 ONSC 1430). Much will turn on the terms of the policy in question.

In any case, while ATE coverage is beneficial in reducing risk for litigants, it
does not assist them in proving elements of their case as pled and as such, this
writer anticipates that future claims in BC for the associated premiums will
face an uphill struggle.

Download as PDF

Alexander D.C. Kask

Alexander D.C. Kask

Alexander D.C. Kask is a partner with Guild Yule LLP and practices in the areas of professional liability, health law, municipal law, insurance law, administrative law, product liability, highways liability, golf course liability, safety standards regulation, and personal injury litigation. Read full biography