Adverse Costs Insurance

The risk it covers

Our contingency fee arrangement means you owe us no fee if the case is lost, and you do not repay the disbursements we advanced. What it cannot protect you from is the other side.

In Ontario the losing party usually pays a share of the winner's legal costs. In a serious injury or malpractice case fought to trial, that figure can be very large, and it is owed by you personally rather than by us. For most clients that exposure, not the contingency fee, is the genuinely frightening part of litigation.

What the policy covers

Adverse costs insurance, also called after the event or ATE insurance, is a policy you can purchase at the outset of your case. It is widely available in motor vehicle, slip and fall and other general injury claims. It is not available in every kind of case, and medical malpractice is the significant exception, dealt with below. On the policy we can arrange for the claims where it is offered, it indemnifies you against two things:

• An adverse costs award, meaning costs a court orders you to pay the other side
• Outstanding disbursements owed to us, meaning the expenses we advanced to build your case

On that policy, coverage is up to $200,000, subject to a deductible of $2,500. Those figures are current as at the date at the top of this page; the terms available at the time you retain us will be set out in your retainer materials.

What it costs, and when you pay

The premium is $2,599 plus applicable sales tax. You pay nothing up front. The premium is paid at the conclusion of your case, out of the proceeds of your settlement, in the same way as fees and disbursements.

If you have to make a claim on the policy, meaning the case did not produce a recovery and you are facing a costs order, the premium is waived. You do not pay for insurance in the circumstances where you need it.

Put plainly: if you win, the premium comes off your settlement. If you lose, you pay no premium and the policy responds.

Can the premium be recovered from the other side?

Usually not, and you should plan on the premium coming out of your recovery.

The weight of Ontario authority holds that an ATE premium is not a compensable disbursement recoverable from the defendant, on the reasoning that the insurance is a discretionary choice of the plaintiff rather than an expense that advances the litigation. That was the conclusion in Markovic v Richards and it has been followed in several cases since.

The point is not entirely settled. At least one Ontario decision has gone the other way, allowing the premium where the costs of advancing the claim were very large and the fear of an adverse award would otherwise have deterred a meritorious case. We will pursue recovery where it is arguable on your file, but we will not budget on the assumption that it succeeds.

Markovic v Richards, 2015 ONSC 6983; compare Armstrong v Lakeridge Resort Ltd, 2017 ONSC 6565.

If you decide against it

Declining is a perfectly reasonable choice and many clients make it. What you should understand is what you are accepting.

Without the policy, an adverse costs award is yours to pay personally, and the disbursements we have advanced remain owing out of any recovery. There is no fund standing behind either. You should also know that the insurance is generally purchased at the outset and may not be available to buy later, once the shape of the case is clearer. This is not a decision that stays open.

Medical malpractice claims are the exception

If your claim is against a physician, a hospital or another health professional, do not assume this cover is available to you. Adverse costs insurance generally is not offered for medical malpractice claims at all. Where an insurer will consider one, the premium is substantially higher than the figures above and the underwriting is far more demanding. Expect an insurer to want the merits assessed, including supportive expert opinion, before it will even quote.

The reason is the risk profile. Malpractice claims are defended harder than any other kind of injury claim, they reach trial more often, they run for years, and the costs exposure at the end of one is very large. Insurers price and screen accordingly, and frequently decline.

The consequence is uncomfortable and worth stating plainly. In the area where the adverse costs risk is greatest, it is also hardest to insure against. That does not make a malpractice claim unwise. It does mean the risk conversation matters more rather than less, and it is part of why we will press you on a realistic assessment at mediation and again at the pre-trial conference rather than leaving it to the courthouse steps.

Is it worth it?

There is no universal answer, and the honest calculation depends on your file.

Cases likely to resolve early, with modest disbursements and clear liability, carry less of the exposure the policy addresses. Cases with contested liability, heavy expert costs, or a real prospect of trial carry a great deal more, and those are the files where the cover does most work in the claims for which it can be obtained.

The other half of the calculation is not financial. Some clients litigate perfectly well knowing the risk is there. Others find that it affects every decision they make, including whether to accept a settlement they should be refusing. If the exposure is going to sit on your shoulders through the whole case, that is a reason to insure it.

Common questions

Can I get this for a medical malpractice claim?

Usually not. Adverse costs insurance is generally unavailable for malpractice claims, and where an insurer will consider one the premium is much higher and the underwriting far more involved. We will tell you early whether cover is realistically available on your file rather than leaving you to assume it is.

Do I have to decide right away?

Effectively yes. The policy is purchased at the outset of the case and may not be available later. You should raise any questions before you sign your retainer rather than after.

Does it cover my own lawyer's fees?

No, and it does not need to. Under a contingency fee arrangement you owe no fee if the case is unsuccessful. What the policy covers is the other side's costs and the disbursements we advanced.

What is the deductible for?

It is the first portion of any claim, which remains your responsibility. On the current policy that amount is $2,500.

What happens if the costs award exceeds the policy limit?

The policy responds up to its limit and you would be responsible for the balance. This is worth discussing where a case is large enough that a costs award could realistically exceed the coverage.

Does buying it mean you think my case is weak?

No. We do not offer it selectively based on our view of a file, and taking it is not a comment on your prospects. Every case that goes to trial carries a risk of losing, including strong ones.

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