In Al-Khouri v. Hawari, 2019 ONSC 3681, the defendant’s insurer was sanctioned for its conduct at a pre-trial conference.
The defendant’s insurer took a “no liability” position and refused to negotiate a settlement.
Justice Trimble referred to rule 50.05(2) of the Rules of Civil Procedure, which indicates: “a party who requires another person’s approval before agreeing to a settlement shall, before the Pre-trial Conference, arrange to have ready telephone access to the other person throughout the Conference, whether it takes place during or after regular business hours”.
Justice Trimble asked the insurance claims handler if she had authority to settle the case, up to the policy limits if the facts supported it, or whether she had to report to a committee or an individual to obtain further instructions. In the event she did not have settlement authority, he asked whether she had arranged to have an effective decision-maker available by phone.
The claims handler advised Justice Trimble that she reports to a committee for instructions and that she had not made arrangements for an effective decision-maker to be available by phone.
Justice Trimble found that the insurer did not comply with rule 50.05(2) and awarded costs of $1,000 against the defendant.
This is surprising, especially since Justice Trimble also indicated that where a claims representative does not have sufficient authority to settle the case and where “…the claims representative, having considered the discussions at the Pre-Trial, thinks that a settlement should be pursued or that a decision is required…, the person to provide that authority is [to be] readily available, in short order, by telephone”.
This suggests that, if the claims handler who attended the pre-trial conference believed that the “no liability” defence was a valid one and, thus, that no money should be offered, then there should have been no need for someone else at the insurance company to be available by phone.
A costs award at a pre-trial conference in relation to settlement authority should be rare. Opinions on the merits of a claim often vary. If an insurer proceeds to trial and is wrong in its assessment, then it will have to pay costs following the trial.
It is submitted that rule 50.05(2) is meant to apply to situations where a party believes that a matter should be settled, but requires another person’s approval before settling. This can occur in cases where an insurer needs the approval of an insured or an excess insurer to settle a claim. If the insured or excess insurer has not provided authority in advance, then it must be available by phone.
If a claims handler has evaluated the claim and does not believe that a contribution to a settlement is warranted or does otherwise not agree with a pre-trial judge’s assessment of the claim, the insurer should not be sanctioned in the form of costs at a pre-trial conference.