How After-The-Event (ATE) Insurance can affect trial costs

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A personal injury trial does not necessarily conclude with a judge or jury ruling. There are always costs to consider at the conclusion of a trial, such as the awarding of legal costs (generally to the winning party) as well as possible deductions.

Case example

At the conclusion of the Markovic v. Richards et al. trial, there were two post-trial issues to be decided, both regarding costs.

The first question was whether or not the plaintiff's premiums for after-the-event (ATE) insurance is a compensable disbursement. The second issue was whether or not the new prejudgment rate set out in the Insurance Act on January 1st, 2015 was retroactive and could be applied to the current case.

ATE insurance is legal cost protection that, in some cases, may be purchased by a party involved in a dispute, most commonly by a plaintiff, as protection against the risk of having to pay the opponent's costs if they lose their case.

With regard to whether the fees for ATE insurance are a compensable disbursement, Justice Milanetti noted that currently, the only legal precedence for this type of disbursement is in the U.K., where the court decision on this issue came only after legislative reform affected a significant overhaul of the ATE insurance system. The U.K. restructuring of personal injury litigation permits a claimant to recover the cost of ATE insurance premiums from a defendant if his/her case is successful.

In the absence of an overhaul in the system of financial litigation in Canada, Justice Milanetti concluded that the legal rulings in the U.K. have no significance on the current case. While ATE insurance provides some degree of comfort for the plaintiff, Justice Milanetti argued that it is nevertheless an entirely optional expense. Further, it does nothing to advance litigation and in fact, can sometimes discourage well-reasoned claims due to the surety of knowing that one would not have to pay any costs to an adversary whether or not a claim is successful.

Justice Milanetti also stated that the ATE insurance is only offered by one legal expense insurer that provides full legal expense coverage, including disbursements and adversary costs in the event of an unsuccessful case. Also, the premium is only payable if a case is won.

For these reasons, the judge concluded that it is unfair to expect an insurer to cover the disbursement of ATE insurance premiums and therefore ruled against the plaintiff.

On January 1st, 2015, the Ontario Insurance Act was amended to reflect a change in the prejudgement interest rate for non-pecuniary damages (which compensates a claimant for pain and suffering), changing the rate from 5 percent annually to about 1.3 percent (as defined in the Courts of Justice Act).

In a determination on whether the new prejudgement interest rate is retroactive and could be applied to this case, Justice Milanetti analyzed the respective interpretations of the ruling in Somers et al. v Fournier et al., from the decisions in El-Khodr v. Lackie and Cirillo v. Rizzo.

In El-Khodr v. Lackie, the judge ruled that prejudgment interest is substantive in nature and thus not retrospective in its application. Accordingly, the plaintiff was entitled to the pre-January 2015 five percent per annum interest rate on his award for non-pecuniary loss.

Justice Milanetti agreed with this decision and applied it to the current case, awarding Mr. Markovic prejudgment interest at the five percent rate on his non-pecuniary damages. Because the Government of Ontario did not include language in the 2015 amendment to clearly specify how interest rates should be applied during the transitional period, the courts will continue to be required to rule on the intentions of this legislature, as was done in El-Khodr v. Lackie as well as the current case.

In the absence of legislation governing whether ATI Insurance can be compensated for plaintiffs who have won their case, this issue will also likely continue to be decided by the courts. 

Whether your case is successfully resolved through negotiation and mediation, or via arbitration or trial, an experienced personal injury lawyer on your side is crucial to ensuring a favourable outcome and receiving the full compensation you deserve.

At Gluckstein Lawyers, our team of personal injury lawyers have a long history of successfully representing clients in personal injury claims and insurance disputes.

If you or someone you love was seriously injured due to someone else's negligence, please do not hesitate to call or visit us today.


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