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 much longer than the usual length of time these proceedings usually 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, had been forced to drop out of college after having a breakdown and 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 often heavy-handed, and arguably unfair to the insured.

Similarly, in a recent decision of 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 assistance of a lawyer, the woman 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 and 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.  The insurer therefore applied to the arbitrator to have the settlement enforced.

In considering the matter, the arbitrator fully examined the manner in which the insurer had dealt with the woman in assessing her claim and in negotiating the settlement.  The arbitrator found several troubling shortcomings.  For example, the arbitrator found it “remarkable” that the insurer had provided the insured with certain forms as mandated by regulation, but had ignored informing her about certain optional benefits available to her.  The insurer had also failed to its insured, a form that would have advised the insured about certain changes in the provincial benefits scheme that affected the insured’s entitlement.

Most troubling, the arbitrator concluded that the insurer fell far short of the “brightline” obligation to clearly inform its insured 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 its insured was “properly, completely, and unambiguously informed” before deciding to agree to a settlement. 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 in that even though it knew its insured had been leaving voicemail messages trying to rescind the settlement, the insurer delivered the settlement funds to her then-lawyers in trust.  As a result, the funds remained locked in the lawyer’s trust account and out of the insured’s control, pending resolution of their dispute.  Then, 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.  In relation to 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 the end, in light of insurer’s overall failure to meet its statutory obligations to its insured, the arbitrator ordered that the settlement be set aside as invalid and the matter was ordered to proceed to an arbitration hearing.

The above two scenarios underscore the importance that all insured persons and especially victims of catastrophic injury need experienced legal representation to help them properly advance their interests against insurers.   Insurers can be very aggressive in mounting a defence and defending against benefit claims.  Despite the legal obligation that the insurers must ensure that benefits claimants are fully advised of their rights and entitlements, this does not always occur, whether by accident or by design.