Cost Awards at the LAT: Time for a Change
Many aspects of the accident benefits system in Ontario changed in 2016. Some of the most substantial changes pertained to the significant reductions in benefits that were made available to Ontario drivers who were injured in motor vehicle collisions.
However, changes were also made to the dispute resolution process for accident benefits. Before the 2016 changes came into effect, benefits that were denied by an insurer could be disputed before the Financial Services Commission of Ontario (FSCO). Drivers in Ontario could also bring an action against their accident benefits insurer in the Superior Court of Justice to dispute these denied treatment plans and benefits. Since 2016, drivers can no longer bring an action against their accident benefits insurer in court and all accident benefits-related disputes are adjudicated before the Licence Appeal Tribunal.
Under the previous system, an adjudicator with FSCO could award costs to the successful party. These costs included filing fees, legal fees, and disbursements. Such awards were an important part of the accident benefits dispute resolution process. Parties to a dispute often had to rely upon expert evidence or the testimony of treating medical professionals. The costs associated with obtaining this evidence could be prohibitive for Ontario drivers who did not have the financial resources of the insurance companies on the other side of these disputes.
Under the current system, these awards for costs are no longer an option. The legislative authority to award costs is now governed by the Tribunal’s Common Rules of Practice and Procedure (the “LAT rules”) as well as the Statutory Powers Procedure Act (“SPPA”). Section 17.1 of the SPPA allows a tribunal to make an order to pay costs, however this order can only be granted where the conduct of a party “has been unreasonable, frivolous, vexatious, or has acted in bad faith”. Section 19.1 of the LAT rules has near identical language.
In light of the above, while the LAT maintained the authority to order a party to pay all or part of another party’s costs, that costs award is now limited to circumstances wherein the party has behaved unreasonably, vexatiously, or in bad faith.
On October 2, 2017, sections 19.5 and 19.6 were added to the LAT rules, which provided further limitations as to when an adjudicator could award costs. Section 19.5 set out additional factors to be considered when awarding costs, which included:
…the seriousness of the misconduct; whether the conduct was in breach of a direction or order issued by the Tribunal, whether or not a party’s behaviour interfered with the Tribunal’s ability to carry out a fair, efficient, and effective process; prejudice to other parties; and the potential impact an order for costs would have on individuals accessing the Tribunal system.
In addition to limiting the circumstances under which a costs award could be ordered, these changes also limited the amount that an adjudicator could award. Section 19.6 outlined that the amount of costs cannot exceed more than $1,000.00 per day of attendance at a motion, case conference, or hearing.
In practice, the Tribunal has rarely awarded costs even close to the maximum set out in the LAT rules.
In the past 12 months, there have been three reported LAT decisions wherein costs were awarded. The highest amount awarded was $250.00[1]. The other awards were for $106.00[2] and $100.00[3].
Though the above amounts pertain to more recent decisions by the LAT, these numbers are consistent with the cost awards that have been granted since the LAT’s inception. The introduction of sections 19.5 and 19.6 would appear to have provided the LAT with more flexibility to award costs, but this has not been the case, unfortunately.
Cost awards from the LAT are disproportionate to the value of the benefits being disputed
Disputes before the LAT range significantly in terms of their value. Treatment plans that are disputed are often worth only a few thousand dollars. However, disputes over catastrophic impairment or entitlement to post-104 income replacement benefits are worth far more. Being designated as catastrophically impaired grants the insured access to up to $1,000,000.00 in medical and rehabilitation benefits. A catastrophically impaired individual also gains access to housekeeping and home maintenance benefits, among other things. Similarly, income replacement benefits are worth $20,800.00 a year until the insured reaches age 65 (assuming they have not purchased optional benefits). Cost awards capped at $1,000.00 per day are completely disproportionate to the potential value of the benefits in dispute.
Not only has the legislation limited the adjudicator’s ability to award costs, but in practice, adjudicators are rarely taking advantage of the limited discretion that they have.
Disputes before the LAT can stretch for several days, involve multiple expert witnesses, and result in significant disbursements for a party. The inability to reclaim these costs is problematic for even a well-resourced law firm, let alone a self-represented individual. The inability/failure of the LAT to provide for adequate cost awards acts as a barrier for self-represented individuals to access the justice system. It ignores the fact that the insurer is often a well-financed corporation with near-limitless resources. It has created a system wherein an insurer has little need to assess claims fairly or reasonably, as they will face effectively no consequences for improperly denying an insured’s access to the benefits they need and deserve.
The LAT has not given insurers any meaningful reason to adjudicate claims in good faith
Aside from failing to compensate a party for the costs they incurred in disputing access to a particular benefit, the incredibly small amounts ordered by the LAT send a clear message to the insurers that they will face virtually no repercussions for acting unreasonably or in bad faith.
In O.R. v. Unifund Assurance Company[4], the adjuster for Unifund was to be a witness for the insured/claimant. Counsel for Unifund insisted on personal service of the summons for the adjuster, but refused to provide the claimant/insured with the home address of the adjuster and refused to accept service by email. As the adjuster was working from home due to the COVID pandemic, this was the only location in which personal service could be effected. The Tribunal ultimately found that Unifund’s behaviour was a “direct attempt to thwart” previous Orders of the Tribunal in this matter. The Tribunal went on to note that, in light of the COVID pandemic, Unifund’s actions were deemed particularly egregious. As such, the Tribunal found that Unifund’s behaviour was “unreasonable, vexatious, in bad faith, and, ultimately, an attempt to thwart an Order of the Tribunal”. Despite this poor behaviour, and despite the reprimand of the Tribunal, Unifund was ordered to pay a mere $250.00 for their conduct.
Cost awards at the LAT and ineffective and need to be overhauled
The current system for awarding costs at the LAT is in desperate need of an overhaul. The inability of a party to reclaim their legal fees, disbursements, etc. from the tribunal completely ignores the substantial expense that accompanies many of these hearings. Such a position disproportionately favours the insurance companies that have the resources to write off such significant costs. Furthermore, the current system serves to restrict access to justice under the accident benefits regime.
There is effectively no downside for an insurer to simply adopt a position wherein every treatment plan is refused. While they will incur some costs for the benefits that they ultimately have to pay, such costs are more than made up for by the treatment plans they improperly denied, but were not disputed due to the limited resources of the insured. Furthermore, even where an insurer engages in conduct which the LAT finds to be “egregious” “vexatious” and in “bad faith”, there is no meaningful punishment for such behaviour. Why would an insurer concern themselves with such tactics when the worst they are likely to face is a cost award of a few hundred dollars at the most?
Accident benefits are part of what we all pay for with our insurance premiums. As rates continue to rise and insurers continue to rake in record profits, there needs to be some ability on behalf of the insured to balance the scales. Unfortunately, the current system for costs under the LAT only serves to perpetuate this imbalance. Without a significant overhaul of costs awards at the LAT, the insured will continue to find itself at the mercy of their insurer with very little ability to fight back.
[1] O.R. v. Unifund Assurance Company 2021 CnaLII 13001 (ON LAT)
[2] Jevco Insurance v. Owusu-Achiaw 2021 CanLII 18941 (ON LAT)
[3] Corpuz v. Aviva General Insurance 2021 CanLII 18909 (ON LAT)
[4] Supra n. 1
About the Authors
Nick understands that those who have suffered through the trauma of a serious personal injury are already in a position of vulnerability, and is committed to helping them through this difficult process, offering the support and advice they need. Specifically, he seeks to help right the balance in an insurance system that is becoming increasingly antagonistic toward injured individuals.