Canadian personal injury lawyers have a choice when it comes to legal expense insurance. But, those with the foresight to protect their whole portfolio with an Omega policy are sitting pretty following the recent decision in Peter B. Cozzi Professional Corporation v. Szot (“Cozzi”), secure in the knowledge that what happened in Cozzi won’t happen to them.
Since the introduction of legal expense insurance in Canada, the Courts have slowly weighed in on various issues from policy disclosure to who pays the premium. The decisions vary depending on the ATE provider, but the Omega Policy stands out as the only policy where the premium was successfully recovered from the defendant in Armstrong v. Lakeridge Resort Ltd., (“Armstrong”) and the only policy not subject to the disclosure requirements in the Rules Jamieson v. Kapashesit et al  (“Jamieson).
Cozzi, the Court’s most recent decision on ATE, is not to be missed if the ATE policy is sold directly to the plaintiff. The Court in Cozzi made clear that ATE policy proceeds belong to the policyholder. Where the policyholder is the plaintiff, the proceeds belong to the plaintiff. This leaves it up to the plaintiff, and not the plaintiff’s lawyer, to decide where those proceeds go.
What happens when the plaintiff is facing a cost award, and the plaintiff’s lawyer has outstanding disbursements? Who will the plaintiff pay? Will the plaintiff be more inclined to pay an insurer threatening to take his/her home or will they pay their lawyer? Will the plaintiff want to “share” the proceeds, potentially leaving their lawyer with a shortfall? No prudent lawyer wants this left to chance, or the plaintiff’s whim when faced with an unwinnable choice.
The facts in Cozzi are not unique. The Plaintiff, who had a $100,000 ATE Policy, lost at trial and was ordered to pay significant costs to the defendant insurer. The Plaintiff’s lawyer, however, took a Direction from the Plaintiff to use the ATE proceeds to pay the lawyer’s disbursements leaving little to cover adverse costs owed. Aviva objected to the disposition of proceeds in favour of the plaintiff’s lawyer and sought an order that they be paid in priority. The case is complicated by the fact the plaintiff who signed the Retainer, and the Directions regarding the ATE policy proceeds, was a person under a disability. The court found that the documents were executed improperly. In the course of considering the issues, however, the Court made clear that the policyholder is entitled to the proceeds. There will be a further hearing to determine to whom the proceeds should go once a proper litigation guardian has been appointed.
This is a complication most plaintiff lawyers don’t need or want. Many lawyers encourage their clients to take out ATE policies to help offset the risk to the lawyer if the case fails either before or at trial. The ability of the lawyer to recover their own disbursements has been a vital part of the product’s allure. Cozzi introduces an element of unwelcome risk as it relates to disbursement recovery. More often than not, the proceeds will be insufficient to fully pay the plaintiff’s lawyer’s disbursements and the adverse costs owed. The inherent conflict in a plaintiff owned policy vis a vis the plaintiff lawyer is never more evident. The plaintiff’s lawyer is interested in getting his / her disbursements paid. The plaintiff, however, is interested in insulating themselves from an adverse cost award. These interests conflict when both cannot be satisfied.
The Omega Policy eliminates this uncertainty. The policyholder is the law firm. Any claim funds are payable to the policyholder and the distribution of funds beyond that point are in the law firm’s hands.
The Omega Policy is the only ATE product available offering this unique feature, putting the plaintiff lawyer squarely in the driver’s seat and entirely in control of how the product they purchased will be used. Taken together with their success on the ATE premium in Armstrong and non-disclosure of the policy in Jamieson, the Omega ATE policy stands out above the rest.
 Peter B. Cozzi Professional Corporation v. Szot, 2019 ONSC 1274
 Armstrong v Lakeridge Resort Ltd., 2017 ONSC 6565
 Jamieson v. Kapashesit et al 2017 ONSC 5785