The sooner ATE insurance is obtained, the better
By Kirsten McMahon, AdvocateDaily.com Managing Editor
It’s recommended that lawyers and their clients insure personal injury claims as soon as possible because, as litigation progresses, Plaintiff Cost Insurance (PCI) can become more expensive or unavailable, say Dominique Zipper and Joanna Milnes — both with legal expense insurance company DAS.
“PCI is an After-the-Event (ATE) insurance product. Ideally, lawyers should obtain PCI at the same time the client is signing the contingency fee agreement (CFA),” Milnes, ATE Business Development Specialist, tells AdvocateDaily.com. “Firms can include a paragraph in the agreement that explains PCI and, during the initial meeting with the client, they have the opportunity to discuss the risks and benefits of obtaining the product.”
PCI is a policy that fully protects a client against their opponent’s adverse costs and their own disbursements, should the case fail or be abandoned.
Zipper, Director of ATE, says she recommends files are insured no later than six months post-retainer.
“The price of the product will be higher if a case has been active for a longer period of time, so it's important that your client accepts the insurance at the time of retainer,” she says.
There are a couple of reasons that factor into increasing premiums the longer you delay, Zipper notes.
“Our data clearly shows that when we take on older files, the frequency and severity of claims are both higher. While an individual lawyer may feel a particular case is a ‘slam dunk,’ we price our product based on age," she says.
The closer a case is to trial, the less likely it is to settle, Zipper says.
“In addition to proximity to trial, there's the distance from when the case started — and they're both factors in why a case is going to be risky,” she says. “If years have gone by, there's probably a disagreement about damages or liability, which means that you're not as likely to resolve it before trial than a case that’s one day old."
Zipper says there's also a higher likelihood a plaintiff could be awarded zero dollars at trial due to a liability dispute.
“It increases the likelihood that you're going to have a high-severity loss,” she says.
Milnes reiterates that the sooner insurance is obtained, the better.
“There's a threshold period of time prior to trial where a file is no longer insurable — full stop. We won't even consider it,” she says, adding that some lawyers find it difficult to accept that a case won't be insurable after a certain point.
“I think they find it to be unduly restrictive," Milnes says. "Although a lawyer may feel like they can't lose, we know from our years of data on PCI, as well as our practice experience, that there are so many unpredictable elements, particularly with jury trials. And if it is a 'slam dunk' case, why isn't the defence settling?"
DAS, the first company of its kind to enter the Canadian market, has been offering legal expense insurance in Canada since 2012, and that experience and breadth of claims data also helps it to accurately underwrite and determine the pricing for these products, Milnes notes.
“Our data shows there's a good reason for us to take that position,” she says. "If we took on all those risky cases, our losses would spike, and our rates would increase. We strive to keep the rates reasonable for everyone by not taking on those cases."
"This is an access-to-justice product, and we want every single plaintiff to be able to afford this protection,” Milnes says.