After-the-event insurance (ATE) has been available in Canada for over ten years, and by some estimates, it hasn’t come anywhere close to realizing its potential in the Canadian market .
Why? Lack of awareness is one possible reason, but perhaps it also has to do with deficiencies in the “traditional” model for ATE. Talk to any firm about ATE and you will often get a lukewarm response, citing concerns that ATE is a hassle to administer, and that the insurers have a spotty reputation for paying claims.
However, ATE is changing – and this is great news for firms and clients alike.
In the past few years, a new model of ATE is making significant waves in Canada. It is driving new and favourable case law, including decisions on policy disclosure and premium recoverability.
And above all, it is driving better business results and litigation outcomes, including:
Taken as a whole, it is no stretch to say that “new-model ATE” is changing the landscape for the litigation of personal injury claims in Canada.
If you haven’t explored ATE in a while, here are five ways it has changed and why it matters.
Traditional ATE insurance is purchased by the client, but new-model ATE can be purchased by your firm. This puts you in control, helping you protect your disbursements, manage your exposure to risk and reduce your losses.
This is big. When your clients purchase ATE (the traditional model), they are required, as a party to the action, to disclose the existence of insurance and make available a copy of the policy to the defendants. When defendants learn that there is no ATE coverage, they have the upper hand in negotiations because they are aware of the plaintiff’s financial vulnerability in the event that the case is lost.
However, with firm-held ATE policies (new model), the policy does not need to be disclosed to the defendant, as determined in Jamieson v. Kapashesit et al, 2017 ONSC 5784. The ability to withhold the coverage details keeps the defendant guessing, empowering you to push harder for a fair and just settlement.
Recent case law has made clear that in client-owned ATE policies, the claim proceeds belong to the client, and the law firm has no “priority” claim on the policy proceeds. This puts the client in charge of who gets paid and leaves your firm vulnerable in the event of a loss at trial. If the policy proceeds are insufficient to cover both the defence costs and your disbursements, who comes first?
With new-model ATE, held by the firm, the firm gets first priority for reimbursement from the policy proceeds, as determined in Peter B. Cozzi Professional Corporation V. Szot, 2019 ONSC 1274.
Traditional ATE is taken out on case-by-case basis at the discretion of the client. New-model ATE turns this on its head by covering all of a firm’s personal injury files in litigation, removing uncertainty and streamlining the litigation process.
There are several advantages to having all of your personal injury files covered under a single ATE policy. The first is that you don’t have to decide whether to take out ATE on a case-by-case basis. You can satisfy the standard of care in one fell swoop, with each client treated equally and each file covered once an action is commenced. Until then, simply evaluate the strength of each claim as you normally would – without any interference or scrutiny by an insurance provider. If you decide the claim is unlikely to be resolved without litigation, then the file is automatically covered under your firm-wide policy once you issue the statement of claim.
The ability to delay coverage until you need it is a big advantage in early client discussions. Traditional ATE must be purchased very early in the case lifecycle, forcing you to tackle the delicate topic of adverse costs with your clients and “sell” them on ATE. Many clients don’t understand the loser-pay system very well, and lengthy discussions about the prospect of loss and the exposure to defence costs makes clients unnecessarily worried and
anxious. Getting coverage when the action is commenced makes logical sense (why buy cost coverage before there is an exposure to costs?), and it also avoids scaring away potential clients.
Another advantage to having all of your files covered comes later, in the event of an unsuccessful trial. With traditional ATE, taken on a case-by-case basis, some insurance providers have been known to work pretty hard to avoid paying. With new-model ATE, the premiums of the many pay for the losses of the few. Because every file is covered, you face no squabbles or scrutiny into how you handled the case. Nobody is poring over the trial materials looking for a loophole to avoid paying out. As long as the claim checks out with respect to the terms and conditions of the policy – then you’re covered.
Another great feature of new-model ATE is that you can seek reimbursement from the defendant for ATE premiums payable . This means that in the event of a successful outcome, your premium can be recovered from the defendant as an allowable disbursement.
In other words, you and your client have both benefited from the protection provided by the policy – but you and your client don’t have to pay a penny.
New-model ATE, in which firms are covered for all of their plaintiff work from the time of issuing a statement of claim – is truly a game-changer.
Legal Insure, has been driving the evolution of ATE in Canada for over a decade. Our unique model for ATE is helping the top personal injury firms in Canada drive bigger settlements, protect their disbursements and improve the standard of care for their clients.
Get in touch to book a quick session with one of our consultants. We can have you up-and- running in as little as a week.
1. Insurance Business Mag
2. Armstrong v. Lakeridge 2017 Onsc 6565