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Category: Risk Management

Lawyers’ Risk Appetite May Unwittingly Influence Their Clients’ Desired Exposure

Lawyers’ Risk Appetite May Unwittingly Influence Their Clients’ Desired Exposure

It is a well-established fact that litigation has risk.  The risk forms the basis of the “no win, no fee’ contingency fee agreements that are used by the majority of lawyers in retaining their personal injury clients.


A client’s appetite for risk is influenced not only by their lawyer’s professional assessment of their claim, but also by their lawyer’s personal risk appetite.   Clients will almost certainly ask their lawyer, “How good is my case?”, “What do you think it is worth?” and “How long will it take to get the case settled?”  In answering these questions, regardless of how vague the answers may be, the lawyer shapes the client’s expectation and assessment of risk.

Ian Hu, an attorney with Toronto-based LawPro, says:

“the biggest risk of malpractice claims surrounding settlements is when lawyers fail to fully discuss with their clients all the potential outcomes of a case, the risks involved with each scenario and the potential costs.”

A lawyer should ask themselves, from their client’s perspective:

  • Is this client exposed to risk that the client should be made aware of?
  • Have I advised the client of all the consequences of litigation?
  • Am I shaping the client’s view of litigation risk by not fully explaining the possible outcome of a case or by downplaying litigation cost consequences?
  • Have I conveyed my personal risk profile onto the client?
  • Have I avoided discussing costs and risks because I don’t like to discuss these items or because I am afraid that, if I do, I may scare the client away?


If your client’s claim for compensation is unsuccessful, an After the Event Insurance policy will protect them from paying their own costs and disbursements and those of their opponent as well as adverse cost awards.

The client’s risk profile may be considerably different than their lawyer’s.  Understanding their risk appetite and placing their best interests ahead of all else will  always serve you well.

Only when your clients have an ATE policy in place when pursuing a compensation claim, can they feel assured that their claim is risk free.

BridgePoint Indemnity Company (Canada) Inc. – Currently Under Restricted Operations

BridgePoint Indemnity Company (Canada) Inc. – Currently Under Restricted Operations

In the past, BridgePoint Indemnity Company (“BridgePoint”) was adamant that their product was not insurance and was not governed by the Insurance Act…..”their product was different, it was an indemnity, not an insurance policy.”

Like an Oreo Cookie without the creamy middle

An indemnity is a “contracted promise, an obligation by a person or company to provide compensation for a particular loss suffered by another person or company.” The problem is that an indemnity may be unsupported.  An indemnity is also the underpinning of all insurance contracts (i.e. insurance indemnifies but indemnities are not necessarily insurance), but in the case of an insurance policy, the promise is supported by the capital structure of the insurance company and the overview of the Regulators.

Companies that provide non-insurance indemnities are not licensed insurers and, consequently, are not required to comply with the Insurance Act and other insurance legislation. They do not have to demonstrate to regulators that they have sufficient capital or reserves to meet future claims. They are not supported by the PCICC in the event that they should become insolvent. Customers are not able to have their concerns investigated by the insurance Ombudsman or complaint process. In short, they cannot rely upon the legal protections offered by the Canadian Insurance Regulation.

Therein lies the rub—The Ontario Superintendent on insurance was of the opinion that Legal Cost Protection (the “Product”), a product offered for purchase by BridgePoint Indemnity Company (Canada) Inc. meets the criteria to be classed as insurance pursuant to the Insurance Act, R.S.O. 1990, c. I.8 (the “Act”). Section 40(2) of the Act states that no person shall carry on business as an insurer or engage in an act constituting the business of insurance in Ontario without a license under the Act. BridgePoint is not licensed.   The Superintendent at that time issued a cease and desist order.  In essence, the Product that BridgePoint was offering was insurance, but they had NOT met the licensing requirements to be an Insurance Company.

Interim Arrangement – Not Business as Usual

BridgePoint does have in place an interim arrangement with the FICOM and the FSCO that would allow BridgePoint to resume partial operations – allowing it to service its pre-existing agreements under the umbrella of a 3rd party licensed broker. However, they remain unable to sell the product to any new clients.

Best Practice Solutions

The bottom line: learning about licensed ATE insurance products from a qualified broker and putting in a proper program now will protect you from unnecessary risk in the future.

We are here to help. Call us to find out more about the licensed ATE insurance products we offer, how they work, and how they can protect you and your client.



Lawyers that go to trial will lose a case from time to time, regardless of their abilities.   Many factors outside of their control may contribute to a loss. For example, they may get an unfavorable jury or judge who has a bias in a direction against them; their witnesses may prove to be without credibility despite extensive preparation; or the other side may perform “trial by ambush” and produce a “smoking gun” at trial.  Maybe, despite their best efforts, the loss may have been avoided.  They may have made critical tactical errors or they may even have underestimated the strengths of the opposing party’s case.


Realizing very early that there always exists a potential for trial and a trial loss means that seeking downside protection early is paramount.  Redress Risk Management (Redress) can set up a cost effective After the Event (ATE) insurance program for your firm which can mitigate the fallout from a trial loss, both for your law firm and your client.  Redress’s ATE insurance can act as a litigation safety net, ensuring that a loss at trial does not devastate your client’s finances, or unnecessarily expose your firm to lost disbursements.  With this coverage in place, you and your client can approach trial with confidence.


Decompress and learn from the failure – don’t dwell.  As once said by Henry Ford “The only real mistake is the one from which we learn nothing.” 

After the conclusion of the trial, review the evidence and law arguments. Do this immediately after the trial is concluded as opposed to waiting for judgment because many of the details will be lost with the passage of time. Reviewing the proceedings will assist in developing a game plan to do better next time if you find some errors or omissions in the way the case was presented.

After your review and the learning of the results, educate your partners on potential pitfalls so that they do not fall to a similar situation. For instance, if there was a sneaky defense lawyer or a non-Plaintiff friendly judge, it is critical to earmark them for potential future cases. The players in a lawsuit are important factors to decide whether to proceed to trial or settle.

Lastly, stay motivated after losing a case. Do not to take the loss personally…. think of it as a learning experience. You are now armed to win the next case with the learning experience of the loss.  So, stay focused, move on and win the next case.

Access to Justice – Cost Awards May Not Necessarily Be Proportional to Damage Awards

Access to Justice – Cost Awards May Not Necessarily Be Proportional to Damage Awards


Limiting Cost Awards Encourages “hardball” Rule 49 Negotiations.

“In my view, to impose a rule arbitrarily limiting the amount of costs to some proportion of the recovery when there has been no offer of settlement, or only a nominal offer as in this case, would undermine the purpose of Rule 49, which is to encourage settlement by attaching costs consequences for failure to make or accept reasonable offers.  It would also encourage the type of “hard ball” approach to settlement employed in this case.” Justice Hackland, Corbett v. Odorico, 2016 ONSC 2961 (CanLII)

As Teneil MacNeil points out in her blog post Insurers Beware: Costs Awards Need NOT Be Proportional to Damage Awards” (Ontario Insurance Litigation Blog, May 12, 2016), this May, the Ontario Superior Court of Justice has reminded us that cost awards are not required to be proportional to damage awards, as exemplified by the cases of Mancini Associates LLP v. Guido et al., and Corbett v. Odorico.

Proportionality – Not a Factor

In Mancini Associates LLP v. Guido et al., 2016 ONSC 2959 (CanLII), the Honourable Justice Diamond awarded damages in the amount of $29,413.15, as well as a cost award in the amount of $40,000.  In doing so, Justice Diamond relied upon the comments of Justice Emery, who explained:

“It … has been held that proportionality should not automatically serve to reduce the costs to which a plaintiff is entitled simply because of the amount claimed is excessive in relation to the damages awarded.”

Denial of Access to Justice

Likewise, in Corbett v. Odorico, 2016 ONSC 2961 (CanLII), the damage award granted to the plaintiff was $141,500 and costs were also granted in the amount of $159,249.90.  The following comments by  Honourable Justice McCarthy in the case of Aacurate v. Tarasco, 2015 ONSC 5980 (CanLII) offer an explanation as to why:

“An over-emphasis on proportionality may serve to under-compensate a litigant for costs legitimately incurred. Assuming, as is often the case, that a successful Plaintiff’s lawyer is working on an actual fees basis (as opposed to a contingency agreement), this will inevitably result in the Plaintiff having to fund her successful litigation out of the proceeds of judgment that a court found she was entitled to. This is patently unfair to litigants who have been wronged and who choose to invest their hard-earned resources into pursuing a legitimate claim. One does not say to one’s lawyer, “I have only a modest claim. I am instructing you to do a mediocre job in advancing it.” Few litigation lawyers would be attracted to a litigation landscape where they could not recommend giving a matter the time and effort it requires to be properly advanced because the principle of proportionality predestines a costs award that promises to turn a successful result in court into a net financial loss for their client. A pattern of such outcomes would result in an unintended but nonetheless real denial of access to justice; it will send a message to litigants that it is not worth one’s while to pursue legitimate claims in court because one cannot possibly make it cost effective to do so. This is a denial of justice in the most fundamental sense. It tends to encourage those resisting legitimate but modest claims to take unreasonable positions, the logic being that any exposure to costs will be limited because of the size of the claim, regardless of the time and expense necessary to extract a judgment.”

When assessing any case, it is important to consider Rule 57.01 of the Rules of Civil Procedure:  the complexity of the proceeding, the importance of the issues, and the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding.  As the above cases have shown, while costs awards must be reasonable, this does not necessarily equate to them being proportional to a plaintiff’s damages.

ATE successfully used to defeat a security for costs motion

ATE successfully used to defeat a security for costs motion

A recent Ontario Superior Court case, Grotz v. Hilton Garden Inn Toronto, has considered the effectiveness of an “after the event” insurance policy (“ATE”) in the context of a security for costs application.  An application was brought by the defendant for security for costs where the plaintiff resides in the State of California and, as a non-resident, he bears the burden of proving the effect on him should an order for security for costs be granted.

The Judge ruled that the Master appropriately scrutinized the quality and sufficiency of the Plaintiff’s assets to determine whether they were genuine and if they provided a reasonable degree of protection in the lawsuit, after also having regard to the potential financial impact on the Plaintiff.  The Master clearly considered the specific ATE policy terms of the adverse costs insurance in question and, while it was conditional, it was certain enough to be considered security for costs.

Read the case:




Ontario – Rule 49 Offers – The end of Rider v. Dydyk

Ontario – Rule 49 Offers – The end of Rider v. Dydyk

The Ontario government introduced a minor, but significant change to the language under s.267.5(9) of the Insurance Act.  The change impacts how costs are to be calculated in auto tort matters and has significant consequences for the Plaintiff associated with Rule 49 Offers to Settle made before trial.

Prior to the changes, a party’s entitlement was made without regard to the statutory tort deductible. This meant that, if a party was served with a formal offer, the opposing party simply had to be awarded more than that offer by the court to successfully avoid adverse cost consequences.

Under the new wording, in “an action for loss or damage from bodily injury or death arising directly or indirectly from the use or operation of an automobile, the determination of a party’s entitlement to costs shall be made with regard to the effect of paragraph 3 of subsection (7) on the amount of damages.” This means that if a plaintiff is served with a formal offer, the opposing party’s award must be more than the formal offer after subtracting the statutory deductible.

Consider the simplified example below:

Formal Offer to Settle by the Defence – $40,000

Award by Court for the Plaintiff – $50,000

  • Old wording – calculation made without regard to the statutory deductible: Award by court exceeds Formal Offer to Settle by 10,000. No adverse cost consequences for the Plaintiff.
  • New wording – calculation made with regard to the statutory deductible: Award by court $50,000 less statutory deductible of $30,000 = $20,000. Net award does not exceed the formal offer, hence potential for adverse cost consequences for the Plaintiff.

To assess the reasonableness of a formal offer from an insurer Plaintiff counsel must now consider its value “net” of the statutory deductible.  An insurer may now make an offer potentially lower than they would have previously, up to the deductible limit and still be protected against adverse costs awards.

After the Event insurance is an effective method of mitigating the risk of failing to meet a Rule 49 Offer.


Good Practice

Good Practice

If a lawyer has a duty to discuss costs consequences with their client, then would the lawyer not have a professional duty to discuss ways of mitigating such costs consequences with their client? And would it not be something that the law societies should be promoting as good practice?

Litigation Mitigation Tool – is ATE a Professional Reponsiblity

Litigation Mitigation Tool – is ATE a Professional Reponsiblity

ATE insurance was originally developed in England & Wales, and was subsequently included in the Solicitors Regulatory Authority’s Code of Conduct as a topic that should be discussed with their client. It is a professional responsibility for a lawyer to ensure their client knows of their risks and the methods available of mitigating those risks. ATE insurance is a very important tool, as is the contingency fee agreement, in the continuing effort to increase access to justice for Canadians.  Could failing to provide the clients with information on ATE create exposure for lawyers in Canada.

Impact of “set-off” provision on Rule 49 Formal Offers

Impact of “set-off” provision on Rule 49 Formal Offers

Impact of Set Off Provision

If a client is in the position of assessing a Formal Offer under Rule 49 and the likelihood of successfully beating the offer at trial, it is imperative that your client has appropriate coverage to mitigate the risk.  The implementation of a set-off provision could materially impact their coverage.

Non-insurance products may contain a clause that states “Adverse Costs Awards are subject to any set off for any Costs, Interim Costs, Damages or any other compensation paid or payable to You (indemnity holder) or Your Legal Council during the pursuit of Your Claim.”. The application of this clause can materially reduce and / or completely eliminate any settlement award your client receives.

Redress After the Event (ATE) Insurance does not contain any set off provisions in a situation where adverse costs are awarded.  If your client fails to beat a Rule 49 offer, they will have access to the full ATE Policy to assist with Adverse Costs Awards and Own Costs (up to policy coverage of $100,000), meaning they will retain considerably more of their settlement.

Consider the impact of a set-off clause in this example.


                             Client in serious MVA and there are some issues

                             Client retains lawyer on CFA, 33% Success fee

                             Rule 49 Formal Offer of            $200,000    

           Client declines Formal Offer

                             Court Award                                 $175,000

                             Adverse Cost Awarded             $  55,000

                             Own Costs                                     $  59,000


Redress ATE Non-insurance with Set off
Settlement Award $175,000 $175,000
Own Legal Fees $57,750 $57,750
Own Costs $59,000 $59,000
ATE Premium* $0 $0 (Indemnity Fee)
Awarded Adverse Costs $55,000 $55,000
Total Costs $171,750 $171,750
Add Insurance Protection $100,000 $0 (Set off provision)
Net to Client $103,250 $3,250

*No ATE Premium owing as the premium is self insured.

In this example, because the client’s settlement is sufficient to cover the Adverse Cost Award and Own Cost, the set off

clause included in non-insurance indemnity agreement effectively eliminates the client’s settlement award. Under Redress’ ATE insurance program these costs are covered and the client is left with substantially more of the settlement proceeds.

The lack of a set off clause under Redress ATE Insurance is a significant “value difference.”

The bottom line: protect yourself.

Best Practice Solutions:

  1. Investigate and understand the similarities and differences between non-insured programs and licensed Canadian insurance
  2. Consider the Provincial Registered Insurance Brokers Act as a The RIBA provides oversight to licensed insurance brokers:

Document that you have made the client aware of the following:

  • That an indemnity provider is not subject to regulation or oversight under the Insurance Act,
  • Orderly payment of claims may be more difficult than with an insurer licensed under the Insurance Act,
  • The Superintendent of Insurance has no authority under the Insurance Act with respect to an Indemnity agreement,
  • That sufficient insurance can be obtained at reasonable rates from a registered insurance.

We are here to help. Call us to find out more about the licensed ATE insurance products we offer, how they work and how they can protect you and your client.