Going Through The Motions: Potential Cost Consequences Of Failing To Meaningfully Mediate
Under the Insurance Act, an insurer is required to participate in mediation if the insured requests mediation. The insurer is also required to "attempt to settle the claim as expeditiously as possible". What are the consequences of an insurer going through the motions and refusing to settle a claim or taking a strong position at mediation that a plaintiff will not succeed and that the only issue they will discuss is how much of its costs the plaintiff will cover?
These two issues have been litigated and the decisions provide insight for both insurers and insureds.
In Keam et al v Caddey et al, the Ontario Court of Appeal looked at the issue of whether a insurer could refuse to participate in mediation. The insurer took the position that the plaintiff, who had been involved in a motor vehicle accident was not entitled to any benefits as the injuries did not meet the statutory threshold. The trial judge agreed and the plaintiff appealed. On appeal, the Court of Appeal ruled that, regardless of the insurer's position, the Insurance Act provision made it mandatory for insurer to participate in mediation if the insured wished to do so. As the insurer had refused to do so, additional costs in the amount of $40,000 were awarded.
This decision set the threshold that an insurer was required to participate. However, in a recent decent, Dimopolous v Mustafa, evaluated what level of participation was required. After trial, the successful plaintiff asked for additional costs on the basis that the defendant insurer had "aggressively opposed settlement" at mediation and throughout the action. The plaintiff successfully challenged mediation privilege which prevents the disclosure of mediation materials and what occurs at mediation.
The defendant's mediation brief stated: "it is the defendant's position that the plaintiff will be shut out at trial and will be liable for the defendant's costs. This defendant is only willing to negotiation [sic] the quantum of costs." The plaintiff argued that this statement demonstrated an unwillingness to participate in the mediation in good faith.
The trial judge rejected this assertion and comprehensively reviewed the defendant's mediation brief which meticulously set out a number of reasons why it believed that the plaintiff's evidence was weak and why it believed that the plaintiff would not prevail at trial. The position set out in the brief clearly articulated the defendant's position allowing the plaintiff to gain a better understanding of that position.
The trial judge stated: "insurers, like any defendant, are entitled to take a case to trial. If the defendant loses, it will be subject to a damages award and substantial indemnity costs. That is a risk that the defendant is entitled to take. I also note that an insurer’s statement that it is not prepared to settle a claim cannot necessarily be equated with an insurer’s failure to “attempt to settle the claim as expeditiously as possible.”
The plaintiff, having failed to establish that the insurer had not meaningfully participated in the mediation was not awarded any additional costs.
The Lesson: Any party, even one under a statutory obligation to participate in mediation, is not required to settle an action. Rather such a party is allowed to take the case to trial. As long as a party provides a reasonable basis for their position during mediation, it is likely that the court will rule that the party has meaningfully participated and is not simply going through the motions.
Dimopolous v Mustafa, 2016 ONSC 4119, http://www.canlii.org/en/on/onsc/doc/2016/2016onsc4119/2016onsc4119.pdf;
Keam et al v Caddey et al, 2010 ONCA 565 http://www.canlii.org/en/on/onca/doc/2010/2010onca565/2010onca565.pdf
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