Take heed. An Ontario Court Judge has recently found that a settlement agreement entered into between an adjuster and an injured Plaintiff was “unconscionable” and had to be “set aside.”
The facts of the case are a bit sketchy. It appears that Jones, who was operating a motorcycle at the time, was injured in a collision with Jenkins in 2005. One year later Jones found himself unemployed, living out of his car and using a food bank. He had debts totalling $15,000 and had not returned to work following the car accident. At that time there was no ongoing litigation as between Jones and Jenkins. It is not known whether Jones had yet consulted a lawyer about his options.
Jones entered into settlement negotiations with the adjuster representing Jenkins’ insurance company. He no doubt did this due to his dire financial situation. The adjuster asked Jones to make a proposal for settlement, which Jones did, in the amount of $241,300. The adjuster made a counter-proposal of $19,411. In making this counter-proposal the adjuster applied the $30,000.00 statutory deductible for general damages. He also reduced all heads of damages by 75% to account or Jones’ contributory negligence in having caused or contributed to the accident.
Jones accepted the offer of $19,411. Jones and the adjuster met to finalize the settlement. It appears a Release was signed by Jones. The terms of the Release were never disclosed.
Jones subsequently retained a lawyer who commenced a claim on his behalf, arguing that the Release was invalid and that the settlement should be set aside. The insurer for Jenkins brought a motion for enforcement of the Release and settlement.
The Code of Ethics of the Ontario Insurance Adjuster’s Association requires adjusters to refrain from any “misrepresentation, dishonest non-disclosure, undue influence or other mischievous practices.” The judge in this case found that the adjuster failed to meet this standard.
In making its decision, the Court found that the adjuster had access to important medical information revealing that Jones had suffered “severe and acute radial nerve damage.” The Court found that the adjuster had failed to relay this information to Jones. The Court commented that the intentional withholding of this information from Jones was “significant.”
Most troubling for the Court was that the adjuster reduced the general damages and future economic loss claims by 75%, purportedly on the basis of Jones being 75% responsible for the accident. The Court concluded that there was no evidence supporting such an assertion. The adjuster had relied upon the Fault Determination Rules to apportion 75% responsibility to Jones. The Court correctly pointed out that these Rules are guidelines applicable as between insurers only.
In making its decision the Court determined that Jones was “unsophisticated.” The Court held that Jones was relying on the adjuster to be fair, unbiased and impartial.
In the end, the Court found that there was an inequality of bargaining power as between the adjuster and Jones, and that the adjuster used his position of power to achieve an unfair advantage. The Court went on to add that the agreement reached was “sufficiently divergent from community standards of commercial morality to be unconscionable and that it should be set aside.”
One has to wonder whether the court would have rendered the same decision had Jones not been in such dire financial circumstances when the Release was signed. No doubt the adjuster representing Jenkins’ insurer was pleased with the terms of the initial Release. The adjuster went so far as to propose to Jones that he consult with a lawyer before signing the Release (which Jones declined).
We can take some solace from this decision knowing that it appears to have turned on two points: the failure of the adjuster to relay important medical information about the nature and extent of the claimant’s injuries, and the adjuster’s application of a 75% reduction to Jones’ damages by applying the Fault Determination Rules. Still, this decision highlights the difficult balancing act adjusters face in trying to achieve the most advantageous result for their insurer, and their duty to act fairly and openly with claimants.