Insurers’ “Hardball” Tactics Mean Good Legal Representation is Essential

The Toronto Sun newspaper recently reported on a case in which an auto insurer had used particularly aggressive tactics to defend a claim brought by a young woman who had endured catastrophic injuries during a rear-end vehicle collision when she was only 17 years old.

As described in the Sun article, the arbitration lasted 16 days – which is double the usual length of time they customarily take – and featured the insurer’s lawyer antagonistically questioning the young woman on the nature and extent of her injuries.  This was despite her evidence that post-accident she had been repeatedly hospitalized, had expressed suicidal tendencies, was prone to angry outbursts, and had been forced to drop out of college after having a breakdown.  She said she was now wholly incapable of sustaining employment.

This case is certainly not the first time that insurers have “played hardball” while defending insurance claims.  Indeed, even in less-objectionable situations the conduct of insurers is oftentimes heavy-handed, and arguably unfair to the insured.

To use another recent example, in a decision called Ali v. Dominion Of Canada General Insurance Co., [2017] O.F.S.C.D. No. 6, the arbitrator was asked to consider an insurer’s questionable tactics in seeking to enforce a settlement it had reached with an insured woman over her motor vehicle accident benefits.  Immediately after signing the deal, which was reached with the help of a lawyer, she changed her mind and tried to exercise her right to formally retract it, as she was entitled to do under a brief “cooling off” period prescribed by regulation.  She promptly left voicemails with the insurer stating her intent to back out.

However, the insurer resisted on various technical grounds, and insisting that a full and binding settlement had been reached.  It applied to the arbitrator to have the settlement enforced.

This gave the arbitrator an opportunity to fully examine the manner in which the insurer had dealt with the woman in assessing her claim, and in negotiating with her.  It found several troubling shortcomings.  For example, the arbitrator found it “remarkable” that the insurer had provided her with certain Forms as mandated by regulation, but had ignored telling her about certain optional benefits available to her.  It had also failed to give her a particular Form that would have advised her about certain changes in the provincial benefits scheme that affected her entitlement.

Most troublingly, the insurer fell far short of the “brightline” obligation to clearly inform her of the full range of benefits to which she was entitled, and of the details of the settlement reached. The arbitrator noted that the insurer bore the onus of proving that the woman was “properly, completely, and unambiguously informed” before deciding to sign away her rights. In the arbitrator’s view, the insurer’s failure to do so in this case was “not just unfortunate”, but rather affected the validity of the purported settlement as a whole.

The arbitrator also noted one particular instance of questionable conduct by the insurer:  Even though it knew the woman had been leaving voicemail messages trying to rescind the settlement – and unbeknownst to her – the insurer delivered her settlement funds to her then-lawyers in trust.  The funds remained locked in the lawyer’s trust account, out of the woman’s reach, pending resolution of their dispute (and they still sat there, untouched, on the date of arbitration).  Rather egregiously, the insurer then tried to point to the woman’s non-return of the funds as evidence that she had actually accepted the settlement.  About this strategic stance, the arbitrator said:

Under these circumstances, and in light of the clear breakdown of the solicitor-client relationship between [the woman] and her then-counsel, it was at least imprudent of the insurer to deliver the funds to that firm in trust. Arguably, it was also an aggressive attempt by the Insurer to enforce the purported full and final settlement. [The woman], who was effectively unrepresented in that interim period, would not at the time have been aware that the funds had been delivered.

In light of insurer’s overall failure to meet its statutory obligations to the woman, the arbitrator ordered that the settlement be set aside as invalid.  The matter was ordered to proceed to an arbitration hearing.

These two scenarios underscore an important point:  All insured persons – and especially victims of catastrophic injury – need experienced legal representation to help them properly advance their interests against insurers.   For one thing, insurers can be very aggressive in mounting a defence and defending against benefit claims.  And secondly, despite their having a legal obligation to ensure that benefits claimants are fully advised of their rights and entitlements, this does not always occur, whether by accident or by design.