( Disponible en anglais seulement )
In the case of Ross v. Bacchus, the Ontario Court of Appeal was asked to overturn a trial judge’s imposition of a $60,000 penalty on an insurer for failing to mediate in good faith.
Leading up to the six-day trial, the parties exchanged various settlement offers. Upon request, the insurer agreed to mediate. Mediation took place a few weeks before the trial began. The mediation was unsuccessful. The trial judge found that despite these efforts, the insurer had attempted to intimidate the Plaintiff and did not attempt to settle the action expeditiously as required by section 258.5 of the Insurance Act. The trial judge found that the Defendant’s participation in the mediation was a “sham” and that it refused to participate in a “meaningful way”.
The Court of Appeal overturned the trial judge’s decision and struck down the $60,000 costs penalty.
The Court of Appeal held :
- Insurers, like other Defendants, are entitled to take cases to trial. When an insurer rejects a Plaintiff’s offer and proceeds to trial, the insurer risks both a higher damage award at trial and the imposition of substantial-indemnity costs after the date of the rejected offer. Both risks came to pass in this case. The insurer paid a significant financial penalty for its decision to proceed to trial. The cost provisions in ss. 258.5 and 258.6 do not address those risks, but instead address the failure to meet the specific obligations identified in those provisions. The trial judge’s assumptions about the insurer’s motivation for rejecting the respondent’s offer and proceeding to trial had no relevance to the determination of whether augmented costs should be awarded under the Insurance Act provisions.
- … An insurer’s statement on the eve of trial that it is not prepared to settle a claim cannot be equated with an insurer’s failure to “attempt to settle the claim as expeditiously as possible”. Nor can an insurer who actually participates in a mediation be declared to have failed to participate simply because the insurer indicated prior to the mediation that it was not prepared to settle the claim. A clear statement of the insurer’s position going into the mediation, even a strong statement, does not preclude meaningful participation in a mediation.
- … There is also no evidence that the insurer did not participate in the mediation in a meaningful way. The trial judge assumed that because the insurer’s counsel advised that his client was “not interested” in settling the case, the insurer’s subsequent participation in the mediation was “a sham”. This assumption was unwarranted. A firm position strongly put going into mediation does not preclude meaningful participation in the mediation. In any event, the insurer made a settlement offer which was not revoked before trial.
The Court of Appeal’s decision is comforting news to insurers who elect to take meritless claims to trial. Communicating a denial position before a mediation begins, then sticking to this position throughout the course of negotiations, does not render the mediation a “sham”.
Of interest, the Appellate court did not address the type of evidence that would have to be put forward in order to establish that an insurer did not participate in a mediation in a meaningful way. Considering the privilege that attaches to mediation sessions, and the fact that most mediators insist on Mediation Agreements being signed before the session begins, establishing this type of evidence will be difficult.