TEN INITIAL CONSIDERATIONS FOR INSURANCE MEDIATIONS
June 10, 2021 | Joseph Sullivan, Sullivan Mediations
Largely due to the skyrocketing cost and delay related to the litigation of insurance claims, private mediation has become a mainstay of this practice area. Insurance related lawsuits dominate both the civil jury and non-jury lists across Ontario and therefore, it is not an overstatement to assert that the resolution of these claims through mediation or otherwise is vital to our justice system.
Civil cases only get so much “airtime” in our courts because of the quite proper prioritization of criminal and urgent family matters. This has only been exacerbated by the dramatic stall in the justice system caused by the pandemic.
In Ontario, the emergence of mediation in this field coincided with the introduction of no-fault automobile insurance in the 1990’s. Suddenly, there seemed to be many more experts testifying in the subset of automobile insurance actions which are the big volume of insurance cases before our courts. Not only were the usual medical-legal experts used in tort (for both sides), but counsel now had the opportunity to call accident benefits’ medical experts, which are numerous. All of this led to longer and longer trials and larger costs’ consequences at the end.
This paper will address some recommended preliminary matters to consider long before the mediation takes place. It is not an exhaustive list as some cases have unique circumstances.
1) When should counsel discuss mediation with their client? I had primarily a defence practice, but I also acted for plaintiffs. In either case, I recommend discussing mediation with your clients just after the discovery stage. For plaintiffs, the concept might appear unusual whether the mediation is done by videoconference or in person. A decent explanation as to how a mediator works can get the plaintiff thinking early about what to expect.
As defence counsel, I usually discussed mediation at my post-discovery file review with the insurer. This gives us an opportunity to decide who should be the mediator, gives us lots of time to book even the busiest of mediators and finally allows us to discuss what records/undertakings we absolutely must have.
2) What documents must we have to mediate? There are undertakings and there are UNDERTAKINGS. Some are more important than others. As defence counsel, when the mediation is booked, I alerted plaintiff counsel what documents I definitively needed to proceed with the mediation whether it be, for example, an employer file, tax returns or some prior doctors’ notes. Politely, I advised counsel if these records are not received 4-6 weeks prior to mediation (when I was getting settlement authority) then the mediation could be cancelled.
3) Should the defence mediate if she or he does not intend to pay anything? Infrequently, an insurer had decided it will offer zero “all day” at a mediation, but they must attend because of a statute or Rule (Insurance Act or Rule 24.1). Under Rule 24.1 a mediation must take place before the case can be listed for trial. Here, defence counsel might want to give plaintiff’s counsel a heads up. In other cases, I still recommend the plaintiff attend as the mediation process can allow plaintiff counsel to showcase the risk to the defence and to the adjuster.
4) Who pays for the mediation? When mediation became popular in the early 1990’s, both sides split mediation costs in almost all cases so both sides had a “dog in the fight” incentive to settle. Shortly afterwards, a practice developed where the defence would pay if the case settled. Next, in 1996 in automobile tort mediation, the defence became required to pay for the mediation costs by statute irrespective of result.
s 258.6 Insurance Act
258.6 (1) A person making a claim for loss or damage from bodily injury or death arising directly or indirectly from the use or operation of an automobile and an insurer that is defending an action in respect of the claim on behalf of an insured or that receives a notice under clause 258.3 (1) (b) in respect of the claim shall, on the request of either of them, participate in a mediation of the claim in accordance with the procedures prescribed by the regulations.
Failure to comply
(2) In an action in respect of the claim, a person’s failure to comply with this section shall be considered by the court in awarding costs. 1996, c. 21, s. 22.
3. (1) If a request for mediation is made under subsection 258.6 (1) of the Act, the plaintiff and the defendant’s insurer shall, within 10 days after the request is made, agree on and appoint a person to be the mediator. O. Reg. 461/96, s. 3 (1).
(2) If the plaintiff and the defendant’s insurer are unable to agree on the appointment of a mediator, each of them shall, within 10 days after the request is made, name a person to participate in the mediator’s appointment, and the two persons named shall together appoint a person to be the mediator. O. Reg. 461/96, s. 3 (2).
(3) The mediation shall begin on a date agreed to by the plaintiff and the defendant’s insurer or, if they are unable to agree on a date, within 14 days after the mediator is appointed. O. Reg. 461/96, s. 3 (3).
(4) The mediator may adjourn the mediation, with or without conditions,
(a) if the plaintiff or the defendant’s insurer is represented in the mediation and the representative is not authorized to bind the person he or she represents; or
(b) the plaintiff or defendant is not present at the mediation. O. Reg. 461/96, s. 3 (4).
(5) The mediator shall give the plaintiff and the defendant’s insurer a written report identifying the issues that were settled and the issues that remain in dispute. O. Reg. 461/96, s. 3 (5).
(6) The defendant’s insurer shall pay all reasonable fees and expenses of the mediator. O. Reg. 461/96, s. 3 (6).
Keam v. Caddey
Keam v. Caddey, 2010 ONCA 565 (CanLII) was the first Court of Appeal case that imposed a costs’ penalty on an insurer for failing to mediate. Feldman J.A. stated:
 The legislature has clearly determined that in every case where one party is willing, mediation is the best way to try to promote the settlement of claims and to avoid the expense of a possibly lengthy and certainly costly trial. The legislature has provided no exceptions to this policy or to the obligation to mediate that it has imposed to implement the policy.
 Because there are no exceptions to the obligation, the insurer has no option whether or not to participate. There can be no legitimate reason to refuse to participate because to elect not to participate constitutes a breach of the insurer's statutory obligation.
 In this case, the respondents' insurer took the position that the claim did not meet the threshold and therefore there was nothing to negotiate. However, it is this approach that the legislature has disavowed by making mediation mandatory. Rather, the legislature's approach recognizes that participation in mediation could have a salutary effect on one or both sides, with input from an experienced and respected mediator.
Also see: Canfield v. Brockville Ontario Speedway, 2018 ONSC 3288 (CanLII) where Mew J. considered a failure to mediate in a costs’ decision where there was no formal obligation to mediate under the Rules or the Insurance Act .
5) Who to Invite? Especially in automobile cases, there may be multiple actions such as a companion accident benefits’ claim, companion long-term or short-term disability claims, or another accident. From time to time, the “target” defendant wants everyone at the table. Consider this when booking the mediation.
6) The Mediation Agreement. Please review when you receive it. It may be necessary to confirm funding with your opponent and your client. There can be important terms such as:
• Immunity protections for the mediator.
• Commentary about the use of virtual software like Zoom during the mediation (the parties to satisfy themselves about the security and usage of technology).
• Caucuses are open unless otherwise agreed.
• The process is confidential, and no part of the mediation may be introduced as evidence in any later trial.
• The mediator may not be summonsed to trial.
7) Please sign the Mediation Agreement and return to the mediator. I avoid haggling over mediation funding on the day of the mediation. It can start the day off on the wrong foot and burn up mediation time when counsel can be reviewing the file.
8) What outcome is being sought exactly? Please consider this when preparing your client. For example, in LTD cases, an insurer defendant might be seeking a surrender of the policy and a term that it will not be liable if the insured plaintiff gets new employment with an employer who has the same LTD carrier and becomes liable. Another example is confidentiality clauses: best not to surprise a plaintiff with any unusual terms and likewise best to make sure a plaintiff fully understands the scope and breadth.
9) Funds Delivery, secondary approvals. Are there any odd issues as to when settlement funds might be delivered? For example, some overseas insurers take months to deliver funds. Perhaps let the opposition know this pre-mediation. Are secondary approvals required after the mediation or do the attending parties have full binding authority to settle?
Are there Family Law claimants who must sign off on any deal? Subrogated claims such as OHIP? Court approval for parties under disability? Is there a claims committee that must sign off on any proposed deal? Let the other side know prior to mediation.
10) Will there be a structured settlement requested? Plaintiff’s counsel: please raise this prior to mediation as many standard insurers have specific “set in stone” requirements for structures such as which broker will be acceptable, will the structure be assigned, is a reversion in issue, must the Life company be of a certain size? Importantly, get up-to-date quotations and decide whether to share with your opponent. Some defendants cannot structure, but smart brokers can find ways around this. I recommend broaching this topic prior to mediation if it will be requested.
Wrapping up, prudent planning long before the mediation day can make the process smoother and avoid bumps in the settlement road.
ABOUT THE AUTHOR
Joseph operates Sullivan Mediations in Hamilton, Ontario and mediates across Ontario. After a peer review, he was invited into the Canadian Academy of Distinguished Neutrals: https://ontariomediators.org/joseph-sullivan. He also is a Qualified Arbitrator as recognized by the ADR Institute of Canada.