Troubling Trends in LAT Costs Awards
The Licence Appeal Tribunal (LAT) decides Statutory Accident Benefit disputes.
The LAT can award costs to either party – but in the LAT’s first 45 or so decisions, it has not done so. This is very different than litigation in Ontario’s civil courts system, where the losing side is usually ordered to pay at least some of the winning side’s legal costs.
Recent Costs Awards
In recent companion decisions MMS and Wawanesa and BF and Wawanesa, the LAT finally awarded costs. These decisions were made by Adjudicator Lester and released on January 30, 2017 after argument in writing (most LAT hearings are based on written submissions).
In both decisions, costs were awarded against the insurer for ignoring a procedural order. At the Case Conference (similar to a pre-trial or pre-hearing) in September 2016, the parties agreed to a date by which documents would be exchanged – October 25, 2016. Despite reminders from the insureds’ lawyer, the insurer failed to produce their documents by the October deadline.
Two days after the deadline passed, the insureds’ lawyer wrote to the LAT and requested costs.
On November 2, 2016, the LAT wrote to the parties and ordered the insurer to produce their documents by November 4, 2016.
On November 7, 2016, the insureds filed submissions on the costs issue and requested $1,000.
On November 8, 2016, the lawyer for the insurer, wrote to the lawyer for the insureds and to the LAT, expressing that he had requested the documents from his client and would forward them as soon as they were received.
Unreasonable Behaviour
Adjudicator Lester cited Rule 19.1 of the Licence Appeal Tribunal Rules of Practice and Procedure:
“Where a party believes that another party in a proceeding has acted unreasonably, frivolously, vexatiously, or in bad faith, that party may make a request to the Tribunal for costs.”
And, Rule 2.17 which defines a “proceeding”, as “the entire Tribunal process from the start of an appeal to the time a matter is finally resolved.”
Adjudicator Lester found that the insurer acted “unreasonably” and awarded $250 to each of the insureds. The following evidence pointed to unreasonable behaviour:
- The insurer made no attempt to produce the required documents until after the second Order was made
- The insurer and their lawyer were both present for the Case Conference and consented to the timeline for production
- The insured followed up twice prior to the disclosure deadline of the initial Order
- Most of the required documents were in the possession of the insurer and no attempts were made to comply with either Order until after the request for costs were made
- The insurer had been “disrespectful of the Tribunal’s process” and provided no explanation as to why it did not comply with the Tribunal’s Orders.
Overall, Adjudicator Lester found that the insurer’s conduct “interfered with the Tribunal’s capacity to maintain an efficient proceeding”.
That said, the requested costs, $1,000 (each), were “not proportional to the specific behavior” of the insurer. So, $250 was awarded instead.
Adjudicator Lester noted that “the award should be set high enough to discourage the conduct from occurring again.” Deterrence is also one of the criteria for punitive damages in the civil courts. While these costs awards dealt with simple procedural issues, it is very questionable whether $250 (x2) will act as a deterrent against any insurer, let alone one with assets over $8B (according to their 2013 annual report).
These decisions demonstrate that the LAT can be strict in holding parties in compliance with set timelines and the LAT’s procedures. In another LAT decision about strict procedures, JM and Wawanesa, the LAT dismissed an insured’s claim because, among other things, their submissions were too long.
The fact that it took more than 40 decisions for costs to be awarded is troubling.
Costs should be recovered where a party has a legitimate, successful claim. Costs awards allow people in difficult financial situations (after being hurt in an accident) to pay their lawyers. Costs allow people with legitimate claims to access justice.
Even more troubling is the fact that limiting costs to situations where there is poor conduct only during the LAT proceeding could give insurers a free pass to act in bad faith right up to the doorway of the LAT proceeding. This recent interpretation of Rule 19.1 basically sidesteps years of insurance case law on the duty of utmost good faith and may sidestep years of common law on punitive damages – though it remains to be seen whether a standalone action for punitive damages can still be brought against an Accident Benefit insurer in Superior Court.