Two recent cases have critically assessed whether or not adverse cost insurance policies should be disclosed to the defence: Abu-Hamid v. Napar¹ and Fleming v. Brown.² In Abu-Hamid, Master Short concluded that the adverse costs insurance policy should not be disclosed to the defence.
He did, however, rule that defence counsel is entitled to know the policy limits of the adverse costs insurance policy. In Brown, Justice Grace disagreed with Master Short’s decision. Justice Grace concluded that defence counsel is entitled to inspect the adverse costs insurance policy pursuant to Rule 30.02(3) of the Rules of Civil Procedure. This Rule states that, “a party shall disclose, and if requested, produce for inspection any insurance policy under which an insurer may be liable, (a) to satisfy all or part of a judgment in the action; or (b) to indemnify or reimburse a party for money paid in satisfaction of all or part of the judgment.”
The ruling in Brown is significant for strategic reasons. By inspecting the adverse costs insurance policy, defence counsel will be able to determine when their client is entitled to costs, and how much their client may be entitled to. This knowledge could be significant when the defence is deciding whether to take a case to trial, whether to bring a summary judgment motion, whether to bring a security for costs motion, or whether to bring a procedural motion. I include a brief analysis of both cases below.
1.0 ABU-HAMID V. NAPAR 2016 ONSC 2894
In this case, the defence asked plaintiff’s counsel at examination for discovery whether or not the plaintiff had adverse costs insurance. Plaintiff’s counsel refused to answer this question. The defence brought a refusal’s motion to obtain an answer to this question and several other questions that were refused.
In his analysis Master Short considered Rule 30.02(3) and decided that, “I am of the view that the existence of such protection (the adverse costs insurance policy) is relevant to the resolution of personal injury disputes, and ought to be disclosed at the same stage as disclosure by the defendant is required under Rule 30.02(3).” However, Master Short went on to rule that the specifics of the policy are not of any “probative value in this case”. Although the wording in Rule 30.02(3) states that “a party shall disclose and, if requested produce for inspection any insurance policy for which an insurer may be liable…” (emphasis added), Master Short invoked his authority under Rule 1.04 (proportionality) and Rule 1.05 (the ability to impose such terms as are just) to order that the plaintiff only disclose the limits of the policy, and not produce the policy for inspection by the defence. Master Short did not address how he got around the mandatory wording in Rule 30.02(3).
2.0 FLLEMING V. BROWN
In this case the plaintiff was asked at discovery whether he had adverse costs insurance; the question was refused. After discoveries, the plaintiff’s lawyer wrote to defence counsel and informed him that the plaintiff did have adverse costs insurance and that it had a limit of $100,000. The defence moved for production of the policy.
Justice Grace disagreed with Master Short’s analysis. Justice Grace found that the adverse costs insurance policy should be produced pursuant to this Rule. In coming to this conclusion, Justice Grace considered three things. First, Justice Grace found that an adverse costs insurance policy falls within the parameters of Rule 30.02(3)(b). This means that Justice Grace concluded that the adverse costs insurance policy was “an insurance policy under which an insurer may be liable to indemnify or reimburse a party for money paid in satisfaction of all or part of the judgment.” Second, he concluded that this rule applies to “a party”, and that disclosure of an insurance policy is not only a defence obligation. Third, Justice Grace concluded that whether or not the policy is relevant to an issue in the action does not matter when considering whether the adverse costs insurance policy should be produced for inspection. As Rule 30.02(3) states, whether an insurance policy is relevant to an issue within the action only comes in to play when considering whether to admit the policy as evidence. As a result, Justice Grace ordered that the adverse costs insurance policy be produced for inspection.
3.0 THE SIGNIFICANCE OF FLEMING V. BROWN DECISION
The Ruling in Brown is significant because it will allow defence counsel to determine when their client is entitled to costs, and how much their client may be entitled to. Knowing under what condition costs are payable to a defendant, and how much, will provide each defendant with important information to decide how best to defend its case.
¹ 2016 ONSC 2894
²2017 ONSC 1430