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Ruling on ATE proceeds important for access to justice

By Kirsten McMahon, Managing Editor

A recent Ontario Superior Court of Justice decision that found it is up to the insured plaintiff to decide how his After-the-Event (ATE) insurance proceeds are to be paid is a win for access to justice, say Dominique Zipper and Joanna Milnes, both with legal expense insurance company DAS.

“This decision provides clarity on how the insurance proceeds that DAS pays out are to be used. The purpose of our policy is to protect plaintiffs and make sure that they are not put in a negative financial position as a result of seeking access to justice and pursuing their claims through to trial,” Zipper, Director of ATE insurance with DAS, tells

The case involved a plaintiff, a person under a disability with a litigation guardian, who commenced a civil proceeding for injuries sustained in a motor vehicle accident. Through his lawyer, the plaintiff obtained an ATE policy, which insures against the risk of an adverse costs award and may also include disbursements incurred.

At trial, a jury found the defendant driver liable for the accident, but the damages awarded did not exceed the statutory deductible, and the judge found the plaintiff did not meet the statutory threshold and ordered costs of $161,790 against him.

The issue before the court was who was entitled to the $100,000 ATE insurance proceeds — the plaintiff’s lawyer or the defendant insurer.

In finding the plaintiff is the only person entitled to the proceeds and has the right to determine how they are to be used, Justice Sandra Nishikawa examined the agreements governing the parties’ relationships, including the contingency fee agreement (CFA).

The judge noted that in the case of a person under a disability, the court must ensure that the CFA is fair, reasonable and in the person’s best interest.

“Here, at no time was the CFA approved by the court. Based on the evidence before me on these applications, I decline to approve the CFA,” Nishikawa wrote, finding both the CFA and the written direction regarding payment to be unenforceable and therefore can’t be the basis upon which the plaintiff lawyer’s disbursements are paid.

Milnes, ATE Business Development Specialist with DAS, says the decision provides some guidance for personal injury lawyers.

“In a situation where a plaintiff is a person under a disability, a CFA has to be approved by the court. The individual can't sign it — it needs to be signed by their litigation guardian,” she says.

The court found the ATE policy was between DAS and the plaintiff and there was nothing in the language of the policy requiring that an adverse costs order be paid before the disbursements owed to the insured’s lawyer.

Zipper says this decision doesn’t close off the opportunity for priority of payment for disbursements over adverse costs, but it has to be properly included in the CFA or written direction.

“In this instance, it wasn’t,” she says. “As the court indicated, such documents must be clear, unambiguous, and completed appropriately.”

Both Milnes and Zipper note this decision highlights the way the cards are stacked against personal injury plaintiffs in Ontario.

“This man was injured and was awarded an amount by the jury, but due to his failure to meet the threshold and the high deductible, he ended up owing more than $160,000,” says Zipper.

“If it were available to a defendant auto insurer just to take that insurance money away from plaintiffs, then they would be in the same position they would be in if they didn't have a policy,” adds Milnes.

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