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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.

Arch Insurance Canada Partners with Redress Risk on new Legal Expense Insurance Product

Arch Insurance Canada Partners with Redress Risk on new Legal Expense Insurance Product

Toronto, Ontario – January 13, 2017

Arch Insurance Canada Ltd., in partnership with Redress Risk Management Inc. (“Redress”), today announced the launch of a new Legal Expense Insurance (LEI) product in Canada.  The LEI product offers protection to personal injury plaintiffs against the potential costs associated with their claims.

“LEI product uptake continues to be strong across Canada with expanding adoption by the legal community, which increasingly recognizes LEI as an important tool for their clients.  Lawyers and their clients demand credible, long-term insurance capacity and financial stability.  For these reasons, Redress is thrilled that Arch Insurance Canada has entered the market,” said Byron Dudley, President of Redress.

“Our goal in working exclusively with Redress is to offer an industry-leading product that provides a real benefit to individuals pursuing a legal claim, and their legal representatives.  This product also demonstrates how insurance is evolving to meet the needs of Canadian consumers,” said Hugh Sturgess, President & Chief Executive Officer of Arch Insurance Canada.

For more information on this product,

About Arch Insurance Canada Ltd.

Arch Insurance Canada Ltd. is a commercial property casualty insurer based in Toronto and is licensed to transact insurance in every province and territory in Canada.  Arch Insurance Canada Ltd. has an A+ rating (outlook stable) from S&P and A+ (outlook developing from AM Best).

For more information, visit

About Redress Risk Management Inc.

Redress Risk Management is a leading Canadian provider of After the Event risk management solutions directed to the legal community, specializing in Personal Injury.  Redress empowers results for clients in British Columbia, Alberta, Ontario and the Eastern Provinces via technical expertise.

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.

FICOM Rules on BICO Indemnity Product – Issues Cease and Desist Order

FICOM Rules on BICO Indemnity Product – Issues Cease and Desist Order

In the matter of the Financial institution Act R.S.B.C. 1996, C 141 and BridgePoint Indemnity Company (Canada) Inc., FICOM ruled that BICO’s Certificate of Indemnity is a contract of insurance and that BICO is conducting insurance business. Hence, BICO is conducting insurance business in British Columbia without authorizations and is in breach of section 75 of the ACT.

FICOM order pursuant to Sections 244(2)(a), (e)(ii), and (f), and 238 of the Act that:

1) BridgePoint Indemnity Company (Canada) Inc. immediately cease conducting insurance business in the Province of British Columbia, including the advertising, soliciting, offering, sale, and adjusting of legal expenses insurance under the product names Legal Cost Protection, LegalProtect, and Trial Protect;

2) BridgePoint Indemnity Company (Canada) Inc. provide the Superintendent with a copy of every contract issued by it which insures risk located in British Columbia and is currently in force, within 10 days of the issuance of this Order; and

3) BridgePoint Indemnity Company (Canada) Inc. arrange for the assumption of all current contracts insuring risk located in British Columbia by an authorized insurance company, at the sole expense of BridgePoint Indemnity Company (Canada) Inc. and without penalty to any insured under those contracts, within 90 days of the date of this Order; or otherwise deal with current contracts in a manner satisfactory to the Superintendent.

TAKE NOTICE that BRIDGEPOINT INDEMNITY COMPANY (CANADA) INC. may request a hearing before the Superintendent under section 238(2)(a) of the Act or appeal to the Financial Services Tribunal under section 238(2)(b) of the Act.

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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:




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.

What is and is not covered by ATE

What is and is not covered by ATE

Understand Your Coverage: Knowledge is Critical

When your clients (“policy holders”) purchase an After the Event (“ATE”) Policy they purchase substantial protection against unforeseen and potentially substantial costs .

ATE coverage varies from supplier to supplier and is subject to change, so it is important to review the policies that bind your clients so that you can manage their claim appropriately.

What does ATE cover? 


  • The most that will be paid is the lesser of the maximum of the policy limit (the standard policy limit is $100,000) or the amount liable to pay under policy holder’s coverage;

Withdrawals / Retainer Agreement Break

  • If the policy holder’s civil action is withdrawn or there is a Retainer Agreement Break, the insurer will pay the policy-holder opponent’s legal costs as assessed or agreed (including the insurer’s agreement) and the policy holder’s own disbursements;

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