The Insurance Act requires insurers to attempt to settle claims arising from car accidents as “expeditiously as possible.” The Act also requires that either party to a motor vehicle action participate in mediation if the other side requests it.

But what kind of teeth does this section really have in practice?  Judging from a recent Ontario Superior Court decision, the consequences for insurers who fail to abide by the letter and the spirit of the Act can be considerable.

In Ross v. Bacchus the defendant insurer agreed to attend a mediation, but wrote beforehand that they were really “not interested” in settling the case.  The plaintiff’s offers to settle went down from $94,065 to $79,065 as the trial approached, but offers from the defendant’s insurer dropped from $40,000 to just over $30,000. The plaintiff was clearly trying to reach a negotiated settlement and the defendant’s insurer was not..

At trial, the jury awarded the plaintiff $248,000 in damages. Following the jury’s verdict, Justice Ramsay awarded the plaintiff costs on a substantial indemnity basis (a higher rate than usual) from the date of his offer to settle until the trial, along with costs on a partial indemnity basis (the usual rate) up until the offer, for a total of $140,000 plus HST.  Justice Ramsay went further and also granted the plaintiff an additional $60,000 as a result of the insurer’s failure to mediate as required by the Insurance Act. He wrote:

I infer that it took a six-day trial with all its attendant risk for the sake of $50,000. This is a litigation strategy that the defendant could well afford, but the plaintiff could not. I infer that the insurance company conducted itself this way in the hopes of intimidating the plaintiff and deterring other plaintiffs who have meritorious cases. It did not attempt to settle the action expeditiously as required by s.258.5 of the Insurance Act. It is clear to me that the defendant’s participation in mediation was a sham. It refused to participate in any meaningful sense. It did not comply with s.258.6 of the Act. Consequences of these omissions should follow when costs are considered….

Read the decision on CanLII here.  At McNally Gervan LLP we are ready and able to deal with claims even when the going gets tough. If you have a claim or a question, don’t hesitate to contact one of our lawyers for a free consultation.