The Lawyers Weekly - September 17, 2010

Keam
Continued From Page 1

mediate — or alternatively demanding that plaintiffs’ pay half of any mediation costs — in violation of the Act and its regulations.

He said the Court of Appeal’s decision makes it clear that insurers who flout their statutory obligation to participate in mediation — and their companion duty to “attempt to settle the claim as expeditiously as possible” under s. 258.5(1) of the Insurance Act —now face substantial costs sanctions, even if the defendant ultimately wins the case at trial.

As Justice Feldman put it
“the cost consequences will fol-
low whether the plaintiff or the
defendant has been successful at
trial, so that, for example, where
a plaintiff’s claim is dismissed,
the trial judge may deprive the
winning defendant — repre-
sented by the insurer that
refused to accept a request to
mediate—of all or part of its
costs that would normally follow
the event.”
“There is no exit for the
insurer,” Hatfield emphasized.
However, the statutory obli-
gation to participate in media-
tion on request applies equally
to plaintiffs. “In theory a cost
sanction could be awarded
against a plaintiff for failing to
mediate when requested,” Hat-
field acknowledged. “However,
in reality, I must admit I have
never heard of a plaintiff refus-
ing to mediate a case.”
Matthew MacIsaac, counsel
for the defendants along with
lead counsel Robert Rogers of
Hamilton’s Evans Philp, told
The Lawyers Weekly no decision
has yet been made on whether
to apply for leave to appeal.
In the wake of Keam, he
queried whether it remains open
to an insurer as “a tenable pos-
ition” to reasonably argue that a
plaintiff’s injuries are not “ser-
ious and permanent” and thus
do not meet the Insurance Act’s
threshold for litigation. “Would
you be considered to be mediat-
ing in bad faith, or wasting time,
if you go to mediation with that
position that the injury doesn’t
meet threshold?” he asked. “If
the injury doesn’t meet the
threshold, the chances are you
are not going to volunteer to pay
anything on it. Could the plain-
tiff’s counsel then, at the end of
the day, say: ‘Well they attended
mediation, and mediated in bad
faith because they had no inten-
tion of paying’—and does that
ultimately result in increased
costs against the insurer?”
MacIsaac also queried how
Keam jibes with the Court of
Appeal’s ruling in McCombie v.
Cadotte, (2001), 53 O.R. (3d)
70. McCombie seems to indicate
that plaintiffs who fail to meet
their s. 258.3(1) Insurance Act
duty to attend a defence medical
before suing should face cost
sanctions only if their failure to
attend prolongs the litigation,
considered by the court in
awarding costs.” (Section
258.5( 5) further stipulates that
an insurer’s failure to attempt to
settle a claim as expeditiously as
possible “shall be considered by
the court in awarding costs.”)

“

…the Legislature’s approach recognizes that
participation in mediation could have a salutary
effect on one or both sides, with input from an
experienced and respected mediator.
MacIsaac noted. “It seems what
the Court of Appeal is saying
with [Keam] is that there will be
cost consequences [for failing to
mediate] regardless, so it’s
tough to reconcile the two deci-
sion from the same level.”
Hatfield’s client, Glen Keam,
suffered chronic pain after
receiving soft tissue injuries to
his neck and back in a 2003
auto accident. The defendants’
insurer twice refused the plain-
tiffs’ request that the defendants
participate in mediation. This
violated s. 258.6(1) of the Insur-
ance Act which requires the par-
ties to participate in mediation
at either party’s behest. More-
over, O.Reg. 461/96 requires the
defendant’s insurer to pay the
reasonable expenses and fees of
the mediator (which typically
range from $3,000 to $5,000,
Hatfield said.)

The defendants maintained for more than four years after Keam sued, that the plaintiff’s injuries did not meet the s. 267.5( 5) Insurance Act litigation threshold of a “serious and permanent” injury. In light of its position, the defence said mediation would be futile and it therefore refused two separate requests from the plaintiffs for mediation.

The plaintiffs ultimately won their case, but the trial judge rejected their request for substantial indemnity costs of $196,145. Instead he awarded partial indemnity costs of $110,000. He accepted the insurer’s position that it was entitled not to participate in mediation because of its belief that Keam’s injuries did not meet the “serious and permanent” threshold for litigation.

The plaintiffs based their
request for a “remedial cost pen-
alty” against the defendants on
s. 258.6( 2) of the Insurance Act
which stipulates that a person’s
failure to participate in a
requested mediation “shall be
“In this case the respondents’
insurer took the position that the
claim did not meet the threshold
and therefore there was nothing
to negotiate,” Justice Feldman
observed. “However, it is this
approach that the Legislature
has disavowed by making media-
tion mandatory. Rather, the
Legislature’s approach recog-
nizes that participation in medi-
ation could have a salutary effect
on one or both sides, with input
from an experienced and
respected mediator.”
Justice Feldman said that in a
case where the insurer has not
fulfilled its obligation to medi-
ate, the trial judge must con-
sider the appropriate cost con-
sequences.