david@canadianunderwriter.ca
Some time ago, Mark S. Wilson, a lawyer at Anderson Wilson LLP, told a Kingsway General Insurance Company seminar that insurers needed to become better political lobbyists in today’s “plaintiff-friendly legal environment.”
The question is: How is this going to happen, and who will spearhead the charge?
Certainly, Smith’s observation that the courts are “compensation-minded” is a refrain heard throughout the industry, whether expressed as casual, off-the-record grumblings or in the form of publicly released papers. The Insurance Bureau of Canada (IBC), for example, recently posted on the Web a study it commissioned entitled The Impact of Recent Legal Developments on Liability Insurance. The paper warns insurers of several looming legal threats:
* The possibility, depending on what the Supreme Court of Canada says in Fidler v. Sun Life Assurance Co.377, that courts will start awarding aggravated damages for “wrongfully” denied claims, even if the insurers have incorrectly denied claims in good faith.
* The development of class actions in Canada that threaten to increase insurers’ exposure.
* The expansion of tort laws so that defendants are now exposed to vicarious liability claims from which they would have been immune under previous interpretations of tort law. For example, the IBC paper argues, courts are now routinely “grossing up” future care awards to cover tax on earned interest, which leads to larger awards for loss of earnings.
The latest example emerged from the Ontario Court of Appeal in late May. In Plester v. Wawanesa Mutual Insurance Company, the Ontario Court of Appeal considered a case in which a business burned down and the insurer denied the claim because it believed the fire was caused by arson. Police ruled the fire “suspicious,” but never laid any charges. Court evidence indicated the cause of the fire was a live issue and may well have been inconclusive.
The jury found the insurer was liable for denying the claim and awarded punitive and aggravated damages for damaging the reputation of the claimants by accusing them of arson. Effectively, the jury found the insurer did not have any solid proof of arson. The insurer appealed the jury’s trial decision to the Ontario Court of Appeal.
On one hand, the Court of Appeal seemed to throw a bone to insurers. It found, for example, that the jury had not heeded the judge’s instructions on awarding aggravated damages, and therefore reduced the amount from CD$175,000 to CD$50,000. The Appeal Court also set the record straight explaining that when insurers make private offers to settle claims, jurors shouldn’t misinterpret those settlement offers as the insurer attempting to cover up their responsibility for paying claims they reserve the right to deny.
Alas, any comparatively minor gains the insurers made in that case, the appellate court ultimately took away. For example, the appellate court opened up the possibility for an estate in Ontario to receive punitive damages, even though Ontario legislation says nothing explicit about this matter. Basically, the court interpreted legislative silence to the detriment of insurers. That’s the kind of thing that will drive the insurance defence bar crazy.
Essentially, one plaintiff in the case died while the litigation was grinding through the courts. The estate carried on the litigation in his name. One question for the court thus became: Is an estate able to collect punitive damages – awarded for damages caused against a property or person (i.e. their reputation) – when the plaintiff is now dead?
Some provinces have legislation that specifically prohibits estates from collecting punitive damages. Others specifically allow estates to collect punitive damages. Ontario legislation says nothing either way. It’s instructive that Ontario’s Appeal court interpreted the silence to the detriment of insurer defendants..
How should insurers answer judicial decisions that don’t go their way? Simple: change the laws. Who makes the laws? Politicians. And the political arena is one place where the insurance industry could use a few heavy-hitting gladiators.
If the industry hasn’t done so already, it should make better use of lobbyists or political action committees (PACs) to make their views and positions known to politicians. Forgive us if these lobbyists and committees are already working quietly behind the scenes, twisting arms and bending the ears of politicians. But if they do exist,
insurers and their lawyers obviously aren’t impressed with the results thus far. As Smith says, it may be time for insurers to become more political if they don’t like these recent results coming out of the courts.