Simplifying Claims

The recent modernization of rules in Ontario and British Columbia reflect a trend towards simplifying procedure and fast-tracking litigation so that courts and the justice system are more accessible. It is now anticipated that more than one-third of the claims issued in Ontario’s Superior Court will be put under simplified procedure — a prospect that warrants attention. These rule changes further enhance litigation as a viable option for dispute resolution and require the insurance industry to rethink how it addresses claims disputes.

Effective in January 2010, the Ontario Rules of Civil Procedure were amended to raise the monetary limits for small claims matters from $10,000 to $25,000, and for Rule 76 (simplified procedure) cases in Superior Court from $50,000 to $100,000. Various changes have been made to make Rule 76 matters more efficient and bal- anced with procedural safeguards. In British Columbia, the Rules of Court have been significantly overhauled. As of July 1, they were renamed the Civil Rules, and they now include Rule 15-1 (Fast Track Litigation), which applies to claims for up to $100,000.Although B.C.’s Rule 15-1 has some similarities to Ontario’s simplified procedure, there are significant differences that will be discussed in this article.

The changes to the rules in Ontario and British Columbia, among others, highlight the principle of proportionality: each case is dealt with in a manner proportionate to what is involved, the jurisprudential importance of the case and the complexity of the proceeding. Proportionality is now a vital concept insurers should understand so as to minimize legal expenses and risk of exposure to cost consequences.

CHANGES TO THE ONTARIO RULES

In Ontario, Rule 76 now requires litigants to use simplified procedure for claims of up to $100,000 (exclusive of interest and costs) in monetary amounts or fair market value of any real or personal property, or else face severe cost consequences. Rule 76 specifically excludes class actions, actions under the Ontario Construction Lien Act (except trust claims) and actions under case management. At any time, the parties may agree to bring their actions under simplified procedure for claims exceeding $100,000. Any claim for more than $100,000 may be brought under simplified procedure unless an opposing party objects in its pleadings. In practice, a number of case management masters and judges in the Toronto area have encouraged the use of simplified or an equivalent procedure even though the claims go beyond the monetary jurisdiction of Rule 76.

The recent changes to Ontario’s simplified procedure embody many of the recommendations made by Coulter Osborne, former associate chief justice of Ontario, in his November 2007 report on civil justice reform, as well as the culmination of reviews and experiences since the pilot project was first introduced in 1996. Justice Osborne’s two key recommendations were adopted in the new rules: an increase in monetary limits to $100,000, and the availability of oral discovery for up to two hours. Another significant change is the modification of the summary trial procedure to include a brief examination-in-chief. In addition, the rules for both ordinary and simplified procedure have been changed and harmonized by applying the proportionality principle and including new standards narrowing production of documents and expanding the scope of summary judgment.

One of the primary driving forces behind simplified procedure is cost consequences. With an increase in monetary limit, these consequences become more broadly applicable. If a plaintiff or any other claimant (i. e., by counterclaim or third-party claim) fails to put a matter under simplified procedure and receives a judgment of $100,000 or less, then the court shall not award costs to the successful party, even if they received a judgment better than a previous offer to settle. However, cost consequences will not apply where it was reasonable for the party to issue a claim under ordinary procedure. When a transfer from ordinary to simplified procedure occurs, the court may award an adjustment of costs up until the transfer date. For simplified procedure, courts have applied proportionality to lessen both the potential recovery of costs by successful parties and the exposure to costs against for unsuccessful parties.

There are various advantages and disadvantages in pursuing a claim under simplified procedure. One of the ongoing concerns of parties is that protracted litigation results in significantly higher legal costs. The benefits of simplified procedure include the requirement of timely production and limits on discoveries, motions and other costly procedures. Simplified procedure requires the parties to exchange sworn affidavits of documents and produce documents and lists of witnesses within 10 days of the close of pleadings; complete discussions of settlement within 60 days; commence formal steps towards a pre-trial conference within 180 days; and provide expert opinion, if any, at least five days before the pre-trial conference. Under simplified procedure, the parties may proceed to either a summary or ordinary upon consent, or as a judge so decides at the pre-trial conference.

The summary trial under simplified procedure is a distinctive feature that has been made more functional by allowing for limited examination-in-chief and cross-examination of witnesses who provide affidavits. The new standard for a summary judgment application is open to interpretation, but courts may now exercise their discretion and weigh the evidence, evaluate the credibility of a deponent and draw any reasonable inference from the evidence. These changes could transform summary judgment into a more viable option for those clear cases where there is no genuine issue requiring a trial.

CHANGES TO THE BRITISH COLUMBIA RULES

Recent changes to the B.C. Rules of Court warrant some attention in light of sweeping reforms. British Columbia’s Rule 15-1 not only includes monetary or property claims for up to $100,000 but also encompasses lien actions and other actions subject to a trial of three days or less. Some of the primary differences between these two models is that the Ontario model:

• provides more detailed limitations and controls the timing of various litigation steps, particularly document production, discoveries, expert opinion, settlement and pre-trial conferences;

• provides for a tailored procedure for summary trial;

• applies to jury trials (but this may have been limited by recent case law applying proportionality); and

• has more detailed cost consequences.

On the other hand, the model in British Columbia is broader in scope and includes explicit limits to cost consequences based upon proportionality and up to $11,000 for recovery of costs upon success for a trial of three days or less.

WHAT IS THE IMPACT ON INSURERS?

Changes to the Ontario and British Columbia rules affect insurers and their strategies in preparing and litigating a claim. Under simplified procedure, there may be advantages in reducing the time to trial and limiting the more expensive procedures such as discoveries and motions. Coverage disputes, in particular, may be amenable to simplified procedure given their focus on interpretation of insurance contracts. As well, subrogation claims of less complexity and for lower amounts — particularly those that have been adjusted — also seem amenable. Insurers may also consider engaging simplified procedure or fast track for claims exceeding $100,000.

Simplified procedure and fast-track litigation may be beneficial in situations of potential insolvency, where parties are competing over remaining assets. The faster a party obtains judgment, the faster it can register its judgment in priority against and seek recovery of assets.

However, insure rs will need to investigate and assess a claim, produce relevant documentation and retain an expert, if necessary, much earlier than under ordinary procedure. The cost consequences, particularly under Ontario’s simplified procedure, will require parties not only to assess claims early, but also to periodically re-assess their quantum and consider whether to amend their pleadings into or out of simplified procedure. Accordingly, insurers should consider addressing issues of coverage and uninsured interests earlier in the process — especially in subrogated cases, when the insurer steps into the shoes of the insured and has the onus of proof. For subrogation cases, the insured may have an uninsured interest that brings the total claim outside of simplified procedure; there is potential for an insured to be prejudiced by the unilateral waiver of certain procedural rights.

Simplified procedure also pressures the claimant to secure expert opinion — and the opposing party to reply — prior to the pre-trial conference. These types of decisions require an early investigation of facts and assessment of claims. The two-hour limit to examinations for discovery is better than none at all, but may be a disadvantage in more complex cases. The prosecution of subrogation claims involving technical or engineering issues, for example, often requires lengthy discoveries that are beyond the limits of Rule 76. In some cases, the claimant’s damages may not be wholly resolved by the earlier discovery, making an assessment of quantum and liability exposure more difficult.

The changes to the simplified procedure have made summary proceedings more viable, shifting the focus in litigation from oral testimony and argument to affidavit evidence and written submissions. Affidavit and discovery evidence becomes essential in summary proceedings, and adjusters investigating claims may wish to focus on evaluating potential witnesses and obtaining their sworn statements so as to prepare claims that may come under simplified procedure or summary judgment. These statements are often invaluable, especially when the opportunities for discoveries and cross-examination are rather limited.

Overall, the recent changes to Ontario’s simplified procedure provide insurers with a more refined and cost-effective option to litigating claims. Simplified procedure has now become a significant and enduring tool in the lawyer’s toolkit, and insurers should become well aware of the same.

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Changes to the simplified procedure have made summary proceedings more viable, shifting the focus in litigation from oral testimony and argument to affidavit evidence and written submissions. Adjusters may wish to focus on evaluating potential witnesses and obtaining their sworn statements.