New Developments in the use of LISC Legal Cost ProtectionTM on Security for Costs Motions

One of the advantages that LISC Legal Cost ProtectionTM from BridgePoint Indemnity Company (Canada) Inc. (“LISC”) offers is that it is a useful tool in defending motions or applications for security for costs. We have previously written about the outcome of such motions and applications on this blog. A decision released by the Ontario Superior Court of Justice on July 21, 2015 reinforces the court’s acceptance of LISC Legal Cost ProtectionTM as providing adequate security for a defendant.

The plaintiff in this decision commenced an action against her former corporate employer and its president. The basis for the action was sexual harassment and sexual assault during the course of her employment in Canada. She left Canada in 2010 after she ended her employment. Each defendant brought a motion for security for costs.

As part of the motion, the Court examined the LISC Legal Cost ProtectionTM. LISC had agreed to provide Legal Cost Protection of $50,000 to offset an adverse cost award that may be made against the plaintiff. The Court disagreed with the defendants’ arguments that the LISC Legal Cost ProtectionTM was inadequate to meet the needs of security for costs. In particular, the Court wrote the following:

“The entire reason for acquiring the policy is to address the defendants [sic] concerns for some protection against their costs. The plaintiff derives no benefit from acquiring this policy and its sole purpose is to offer a measure of protection to the defendants in the event that they are entitled to costs. The exclusions listed in the policy are the exceptions to the normal course of litigation.”

In conclusion, after reviewing several factors including the conduct of the defendants that gave rise to the action, the merits of the action and the defendants’ delay in bringing the motion, the Court felt that it would be unjust to award security for costs and dismissed the motions.

This decision is consistent with other decisions where the Court has accepted LISC Legal Cost ProtectionTM, including the reported decision of Stamp v. Sun Life, 2015 ONSC 2858, as well as previous unreported decisions that we have discussed in our blogs of July 24, 2014 and April 9, 2015.

Despite repeated success in defending security for costs motions, there is an exception in Shah v. Loblaws, 2015 ONSC 5987 (“Shah”), released on October 6, 2015. Shah involves a slip and fall in a supermarket. At the time of the incident the Plaintiff was a permanent resident. When the Plaintiff’s permanent resident card expired he returned to India pending the outcome of his renewal application. The Defendant sought security for costs.

The Court in Shah disagreed with previous decisions accepting LISC Legal Cost ProtectionTM but acknowledged at paragraph 21 “that a review of the case law shows that it will depend on the circumstances of the case and the terms of the policy to be sure of the effect that such a policy will have on the analysis”. A review of the decision, however, shows that the Court failed to consider the following:

  1. Merit: The Plaintiff was injured in a slip and fall. There was no evidence to the contrary that the Plaintiff had not been injured or the seriousness of his injury. The Court failed to make any determination as to whether the action was devoid of merit, despite acknowledging the fact that the standard on such a motion was a low one;
  2. Delay: The motion for security for costs was brought well after the action had commenced in 2013 with no explanation for the delay. This is especially apparent when the Defendant knew by July 2014 that the Plaintiff was no longer in Canada given that the Plaintiff’s examination had been held by videoconference; and
  3. Exclusions: The Court failed to recognize that the LISC Indemnity Agreement was there to address the Defendant’s concerns for some protection against their costs. There was no benefit to the Plaintiff. The exclusions listed in the LISC Indemnity Agreement were exceptions in the normal course of litigation and plaintiffs would not be motivated to disqualify themselves from protection such that he or she would have to post security. Furthermore, plaintiff’s counsel would not encourage a plaintiff to act inappropriately or risk jeopardizing the litigation or the lawyer’s licence to practice.

The Court also interpreted the LISC Indemnity Agreement to not be responsible for costs up to the date of cancellation. We disagree with that interpretation. However, to provide greater clarity LISC has amended the language of the agreement to more explicitly state that LISC will pay any costs incurred by the defendant prior to the date of cancellation up to the maximum amount of protection that it has agreed to provide to the plaintiff.

A key issue in any motion for security for costs is the plaintiff’s ability to pay and the onus is on the plaintiff to prove impecuniosity. In Shah, the Court noted inconsistencies in the Plaintiff’s evidence when discussing his assets. This appears to have been a factor the Judge considered when ordering the Plaintiff to post security.

We have been advised by the Plaintiff’s lawyer in Shah that an appeal is being considered. 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.

2015.07.21 – Endorsement re LISC accepted on sec for costs” target=”_blank”>Review a copy of the Endorsement


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