Premium Payable for After-the-Event Insurance Neither a Proper nor Necessary Disbursement

After-the-Event Insurance

After-the-event insurance or “ATE insurance” is a fairly new product in Canada available to plaintiffs in personal injury claims. Unlike before-the-event insurance which is purchased in advance and covers costs for disputes arising within the coverage period, ATE insurance is purchased after the dispute arises and provides retroactive coverage for costs of litigation. Typically, the premium is payable only upon a successful resolution. In unsuccessful cases, the opponent’s costs and expenses, as well as the policyholder’s own disbursements are covered.

Costs and Disbursements

Pursuant to the British Columbia Supreme Court Civil Rules, a successful party is typically awarded costs and disbursements in addition to damages as a means to compensate the party for their expenses related to bringing the claim. Costs relate to amounts awarded for performing tasks related to litigation as defined by the court, while disbursements are the actual expenses outlaid during the litigation, such as filing fees, expert fees, and travel costs. In British Columbia, Rule 14-1(5) of the Supreme Court Civil Rules states that disbursements may only be recovered by the plaintiff if they are necessarily or properly incurred in the conduct of a proceeding.

In Wynia v. Soviskov, 2017 BCSC 195, the Supreme Court of British Columbia considered for the first time whether the premium payable for ATE insurance could be recovered by a plaintiff from the defendant as a cost of litigation. The parties had agreed to settle the claim, but could not agree on the costs and disbursements, in particular, the $1,350 disbursement relating to the premium payable for ATE insurance. The defendants, represented by Ellen Hong at Mackoff & Company, objected to this disbursement. Registrar Neilsen, citing the principles set out by the Court of Appeal in MacKenzie v. Rogalasky, 2014 BCCA 446, denied recovery of the disbursement as neither properly nor necessarily incurred in the conduct of the proceeding. Specifically, he referred to Court of Appeal’s statement at paragraph 80 that: “[t]o be recoverable, a disbursement must arise directly from the exigencies of the proceeding and relate directly to the management and proof of allegations, facts and issues in litigation, not from other sources.”

With this decision, the Supreme Court of British Columbia has now provided clarity and certainty to unsuccessful defendants that they will not be liable for the premium payable for litigation insurance purchased by a plaintiff.