Tag: conflict of interest

Insurance Giant Argues Former In House Lawyer Cannot Act for Plaintiff Suing Them

Reasons for judgement were released today by the BC Supreme Court, Vancouver Registry, dismissing arguments by the Manufacturer’s Life Insurance Company attempting to have a former in-house lawyer of theirs acting as plaintiff counsel in a breach of contract claim against them.
In today’s case (McMyn v. Manufacturer’s Life Insurance Company) the insurer argued that, as a former in-house lawyer, Plaintiff’s counsel had knowledge of their “business practices, litigation strategies, insurance policies and certain claims personnel” and it would be unfair to allow him to now use this knowledge against them.
In dismissing the application Mr. Justice Myers provided the following reasons:

[32]    With respect to the claim for LTD benefits, it is up to the plaintiff to show that she fell within the terms of the policy.  The terms of the policy are certainly not secret.  It cannot be argued or assumed that Manulife has some secret interpretation of the policy that Mr. Fishman has knowledge of.  It is hard to see that knowledge of the claims people would have any effect on Mr. Fishman’s train of inquiry on that issue, including the handling of examinations for discovery.  As in most LTD claims the real issue will no doubt be – and no one argued otherwise – Ms. McMyn’s medical condition and how that fits into the wording of the policy.

[33]    With respect to the bad faith claim, the plaintiff must show a failure of Manulife to act with reasonable promptness or a failure to deal with the insured fairly:  702535 Ontario Inc. v. Non-Marine Underwriters, Lloyd’s London, England, [2000] O.J. No. 866 (Ont. C.A.).  That will obviously depend on the way this claim was handled based on the evidence in this case.  Knowledge of how the claims people may have handled past claims will be of little or no assistance.

[34]    Manulife argued that Mr. Fishman has insight into how the claims people or Mr. Lizé perform in examinations for discovery.  That might be true.  But it must be put into perspective.  First, in terms of witnesses selected for examination for discovery or at trial, the relevant witnesses are those that have familiarity with the facts of the claim.  That is something that any lawyer would be able to ascertain through document discovery or interrogatories.  Mr. Fishman has no inside knowledge of that because he was not at Manulife when the plaintiff filed her claim.

[35]    Knowledge of how Manulife personnel perform in examinations for discovery might provide a minor advantage.  But any lawyer who had previously done an examination for discovery or cross-examination in trial of that witness would also have that insight.  It is to be borne in mind that Manulife as a major LTD insurer in Canada is an institutional litigator.  This is not a one-off claim being made against it.  Any lawyer specialising in LTD claims would be expected to act against Manulife multiple times and most likely come up against the same Manulife personnel.

[36]    Insofar as Mr. Fishman being aware of Manulife’s claims handling procedures, once again he has been gone from the company for over two years.  The issue will be the way this claim is handled.  If there are Manulife claims handling manuals their existence will come out in the examinations of discovery conducted by any counsel.

[37]    In Sandhu the Court noted, at para. 32, that the approach to this type of application is a “cautious one” and that the court should only interfere in “clear cases”.  While the Court of Appeal disqualified the lawyer, this case comes nowhere near to the facts in that case, where the lawyer had knowledge of confidential information pertaining directly to her new client.

[38]    Regarding Mr. Fishman having handled bifurcation applications, Manulife said Mr. Fishman is aware of Manulife’s preference for bifurcation of bad faith claims.  So would any lawyer who was previously on the receiving end of that type of application from Manulife.  In this case, the simple fact is that Manulife will make the application or it will not.  I fail to see what confidential strategy could have been involved in bifurcation claims that would give Mr. Fishman an advantage.

[39]    Finally, I do not place any significant weight on Mr. Lizé having been appointed as the case manager on this file.  He was not appointed until after Manulife knew that Mr. Fishman was acting on the case.  Manulife also appointed Mr. Lizé as the case manager on the Galley action.  Manulife says it would be inconvenient to appoint another case manager, because they would have to come from out of town for discoveries, trial or meetings.  However, for a company the size of Manulife that must be a small consideration.

[40]    In Atco, the Court concluded that the case the lawyer was acting on against Atco was sufficiently connected to the work he had done at Atco to raise the rebuttable presumption that he had confidential information pertaining to the new retainer.  The connections in that case were more direct than the ones here.  In Atco the lawyer knew all of the data and other corporate information relevant to Atco’s rate applications.  Here, there is only a general knowledge of claims practices and company personnel.

[41]    I conclude that the connections between this case and the work Mr. Fishman did at Manulife are not sufficient to raise the presumption that he had obtained confidential information that could be used in this case.

ICBC Under "No Obligation" To Advise You of Your Legal Rights

As previously discussed ICBC adjusters often operate in a legally permissible conflict of interest.  When dealing with ICBC it is important to know that “your” adjuster has no obligation to advise you of your legal rights regarding a claim for compensation against the at fault motorist.  This was demonstrated in reasons for judgement released this week by the BC Supreme Court, New Westminster Registry.
In this week’s case (Morris v. Doe) the Plaintiff was injured in a hit and run collision.  She sued ICBC under s. 24 of the Insurance (Vehicle) Act although the claim was dismissed at trial with Madam Justice Ker finding that the Plaintiff failed to make all reasonable efforts to identify the at-fault motorist.
The Plaintiff was ordered to pay ICBC costs following trial.  The Plaintiff opposed arguing this would “financially cripple” her and that such a result would be unfair because ICBC failed to advise the Plaintiff of the steps she needs to take to make a successful claim for compensation.  Madam Justice Ker rejected this argument finding that the law imposes no duty on ICBC adjusters to do so.  In upholding the costs award against the Plaintiff the Court provided the following reasons:











[8] During his oral submissions, counsel for the plaintiff argued that costs ought not to be awarded against the plaintiff as the defendant, the Insurance Corporation of British Columbia (“ICBC”), through its adjusters ought to have advised the plaintiff of the importance of immediately obtaining legal advice on the steps she needed to take to satisfy the unidentified motorist provisions of the Act.  Counsel appears to argue that it is this failure and circumstance connected with the case that renders it manifestly unfair to award costs against the plaintiff in this case, citing Currie v. Thomas Estate (1985), 19 D.L.R. (4th) 594 (B.C.C.A.) at para. 47 and the reference therein to the speech of Viscount Cave in Donald Campbell & Co. v. Pollack, [1927] A.C. 732 (H.L).

[9] No statutory authority or case authority was provided to support the proposition that ICBC through its employees has a duty to provide a potential plaintiff with a warning that it is in their interests to obtain legal advice.  Indeed, counsel recognized and seemed to suggest that the law, although not there yet, ought to be moving in that direction. ..

[51] It is clear from the decisions cited in my original judgment dismissing the action that ICBC has no obligation to advise a plaintiff of the nature of the steps they need to take in order to satisfy the court they have taken all necessary and reasonable steps to ascertain the identity of the offending unidentified driver.

[52] I do not understand the jurisprudence or the governing statutory provisions to place any sort of positive obligation on ICBC through its employees to either advise a plaintiff of the steps they must take to ascertain an unknown driver’s identity or of the need to obtain independent legal advice on this provision.

[53] I cannot accede to counsel’s suggestion that ICBC or an insurer has a positive obligation to advise an insured of the need to obtain legal advice.  To do so would fundamentally change the nature of the contractual relationship between the insurer and insured and place the insurer in a position of quasi-authority requiring it to provide an element of legal advice, something adjusters and claims managers may not be well suited to do and may create a host of unanticipated and unforeseen consequences.

[54] While the comments of Barrow J. in Tessier are compelling as to the fairness that at least notifying a plaintiff of the provisions of the Act would appear to create, the fact of the matter is that there is no statutory authority mandating that ICBC advise or alert a potential plaintiff of the provisions of s. 24(5) of the Act.

[55] Moreover, the jurisprudence since 2003, and most recently re-stated in Wah Fai Plumbing, establishes that denying a successful litigant its costs based on pre-litigation conduct or for reasons that appear to impose quasi-liability on the successful party and sanction non-actionable conduct is not an appropriate or principled application of the costs rules.

[56] I must say again that, in this case, I have a great deal of sympathy for the unsuccessful plaintiff, particularly in light of ICBC’s failure to set her straight at the outset when it was apparent she did not understand the process.  However, by the time the statement of defence was issued in October 2007, it would have been clear to the plaintiff and her counsel that her case was in peril, or definitely not nearly as strong as initially believed.













If all of this seems unfair you can click here to read my views regarding a solution to this conflict of interest.

Lawyer Shopping Not Enough to Create Conflict of Interest in Personal Injury Claim


Reasons for judgement were released last week by the BC Supreme Court, Vancouver Registry, addressing conflicts of interest when a lawyer sues a person who previously contacted their firm following a motor vehicle collision.
In last week’s case (Caballero v. O’Callaghan) the Defendant was the owner of a vehicle which was involved in a single vehicle collision.  The Plaintiff was a passenger in the vehicle and was injured.  Shortly after the collision the Defendant owner contacted several lawfirms including the firm that eventually was retained by the Plaintiff.
The Plaintiff ultimately sued both the owner and driver of the vehicle he was in.  A few years into the lawsuit the Defendant owner brought an application to dismiss the Plaintiff’s lawyer arguing he was acting in a conflict of interest.   Madam Justice Loo disagreed finding that while the Defendant did phone the Plaintiff’s lawfirm, he never spoke with the Plaintiff’s lawyer nor did he retain the firm.  In dismissing the application the Court provided the following reasons:



[36] The facts in this case fall within what is often referred to in these types of cases as a “shopping case”. Mr. Wells was looking or shopping for a lawyer and for legal advice. What he told Ms. D’Souza is most likely what he told the “numerous” lawyers he contacted on September 20, 2006.

[37] A reasonable person informed of all of the facts would not conclude there is a risk that Mr. Wells will be prejudiced by the information he provided to Ms. D’Souza or Slater Vecchio, or that anything unjust would arise.

[38] If I am wrong, there are other facts that I can take into account in deciding whether this application should succeed or whether Mr. Cantu should maintain his right to be represented by the counsel of his choice. Mr. Wells has known about this action since at least in or around October 20, 2008 when Quinlan Abrioux entered an appearance on his behalf. Yet he delayed almost two years before he first raised the issue of a conflict. Since December 2006 Slater Vecchio has done a significant amount of preparatory work for the trial which is set for ten days commencing February 6, 2012. Mr. Cantu selected Slater Vecchio as his counsel. As a result of the injuries he sustained in the accident, Mr. Cantu had to close his business, has been unable to find other employment, and is currently working with a vocation counsellor to consider his future employment options. He has either undergone or expects to undergo hip surgery with an expected long and painful recovery period. He is anxious to have the action resolved and move on with his life.

[39] However, apart from any delay argument, I conclude that the interests of justice do not require this Court to remove Slater Vecchio as lawyer for the plaintiff and the application is dismissed with costs.



A Suggested Change at ICBC To Benefit British Columbians


Whether you are a plaintiff lawyer, a defence lawyer, an adjuster or someone insured with ICBC I think we can all agree that there is one ICBC practice that could change to better serve British Columbians.  I’m talking about the practice of assigning the same adjuster to deal with Tort and No-Fault Benefit claims.
As I’ve previously discussed, ICBC usually fulfills two roles in the context of injury claims.  The first is that they insure people for “no-fault” benefits.  If you are insured, whether or not you are at fault for a collision ICBC provides some basic coverage for medical/rehabilitation expenses and a modest wage loss benefit in the event of total disability.  If you are seeking coverage ICBC assigns an adjuster to process your claim no-fault benefits.
At the same time ICBC usually provides coverage to the at fault party for any claims made against them.  When a faultless party is injured and wishes to be compensated for the full extent of their damages they make a tort claim.  ICBC assigns an adjuster to process these tort claims.  The difficulty, however, is that ICBC typically assigns the same adjuster to deal with the faultless parties claims for no-fault benefits and to process the tort claim made against the at fault party.
As a business decision ICBC’s policy makes sense.  Why assign two people to look after various claims being advanced as a result of a single event?  It is more cost effective to get one adjuster to learn about the crash, the parties involved, the various injuries and the claims being advanced.  As a practical matter, however, one person cannot fulfill both these roles in a completely impartial way.
In reality adjusters processing a no-fault benefits claim have a very different duty compared to an adjuster processing a tort claim.  In a no-fault benefits claim the adjuster owes a duty to the injured party to provide them with their insurance benefits.  If therapies are required these should be covered.  If disability occurs wage loss benefits should be provided.
In tort claims, however, the adjuster owes a duty to the at fault party.  If claims are being advanced the at fault party will want those settled for as little as possible as the funds are paid from their coverage.  It is difficult to imagine how one adjuster can fulfill these competing duties fairly and impartially.  The conflicting duties create an inherent conflict of interest.  (You can click here to read an article providing a real world example of how this conflict can play out to harm the interests of a person injured through no fault of their own).
After reading this you may be asking yourself whether ICBC’s practice is lawful.  Unfortunately, the answer is yes.  This practice has been brought before the Courts and is tolerated.
However, just because a practice is accepted does not make it right.  Since the Courts are not able to correct this practice the ability to change is in the hands of ICBC.
The solution is simple.  ICBC can assign separate adjusters to deal with tort and no-fault claims.  Once done ICBC can set up internal ‘walls’ to prevent the adjusters from accessing each others files.  This would add more fairness to the application process for no-fault benefits.  This would also help ensure that information shared by a party with their insurer to receive medical treatment is not automatically disclosed to the agent of the person responsible for causing the injuries.  This is a proposed change, I hope, we could all agree on.
As always, feedback is welcome on this forum and I’d appreciate views from others about this topic, particularly views from people who feel these proposed changes would not be beneficial.

Lawyer Ordered to Repay Legal Fees Collected During "Conflict of Interest"


Lawyers owe their clients a duty of loyalty and cannot act if their personal interests or interests of other clients create a conflict of interest.  Where a conflict of interest arises a lawyer needs to obtain informed consent from a client to continue acting or sometimes stop acting for the client altogether.  If a lawyer fails to do so he/she can be exposed to various consequences including the loss of their right to claim fees for services rendered.  Reasons for judgement were released last week by the BC Supreme Court, Vancouver Registry, discussing this area of law.
In last week’s case (Campbell v. Ragona) the Plaintiff was injured in a motor vehicle collision in Hong Kong in 1992.  He hired a Vancouver lawfirm to prosecute his claim.  The Vancouver firm retained a Hong Kong firm to assist in the prosecution.  A trial was held on the issue of fault in 1998 and a Hong Kong judge found that the motorist who struck the Plaintiff’s vehicle was at fault for the crash.     The ‘damages‘ portion of the trial did not proceed in a  timely fashion.   In 2004, some 12 years after the crash, the at fault driver brought a motion to have the lawsuit dismissed for ‘want of prosectution’ and succeeded.  The Plaintiff appealed this dismissal.  Prior to having the appeal heard the Plaintiff settled his lawsuit on a compromised basis with the at fault motorist and waived his right to sue the Hong Kong lawfirm that acted on his behalf.
The Vancouver lawfirm continued to act for the Plaintiff during the settlement negotiations.  After the claim was settled the Plaintiff sued his Vancouver lawyer and lawfirm arguing that they were negligent and that they continued to act on his behalf despite a conflict of interest.  Mr. Justice Pearlman agreed with the Plaintiff and found that the Vancouver lawfirm should have insisted that the Plaintiff obtain independent legal advice after the Hong Kong lawsuit was dismissed for want of prosectuion.
Mr. Justice Pearlman went on to award the Plaintiff the difference between the realistic trial value of his personal injury  lawsuit and the settlement amount.  The Court went on to order that the Vancouver firm ‘discourge‘ the legal fees collected for representing the Plaintiff.  In making this order Mr. Justice Pearlman made the following comments about a lawyer continuing to act after a conflict of interest arises:

[563]     The rationale for the duty of loyalty, including the duty to avoid conflict, was explained by Wilson J.A. (as she then was) in Davey v. Woolley, Hames, Dale & Dingwall (1982), 35 O.R. (2d) 599 (C.A.) at 602:

The underlying premise … is that, human nature being what it is, the solicitor cannot give his exclusive, undivided attention to the interests of his client if he is torn between the client’s interests and his own or his client’s interests and those of another client to whom he owes the self-same duty of loyalty, dedication and good faith….

[565]     The codes of conduct published by both the British Columbia Law Society and the Canadian Bar Association contain provisions requiring the withdrawal of a lawyer if the lawyer’s continued employment would place the latter in a conflict of interest.  The Canadian Bar Association Code of Professional Conduct Rule XII Commentary 4(c) provides:

Obligatory Withdrawal

4. In some circumstances the lawyer will be under a duty to withdraw …:

(c) if it becomes clear that the lawyer’s continued employment will lead to a breach of these Rules such as, for example, a breach of the Rule relating to conflict of interest (Chapter V).

[566]     Similarly, the Law Society of British Columbia’s Annotated Professional Conduct Handbook, Chapter 10, s. 1 states:

Obligatory withdrawal

1. A lawyer is required to sever the solicitor-client relationship or withdraw as counsel if:

(d) the lawyer’s continued involvement will place the lawyer in a conflict of interest, …

[568] Mr. Ragona knew, at the very latest, on June 9, 2004 that there was the potential for a claim for professional negligence against him and his firm.  Mr. Ragona told Mr. Campbell that he could or should get independent legal advice when they met at the offices of AHBL on June 23, 2004.  At that time, the plaintiff indicated that he did not wish to obtain independent legal advice, and Mr. Ragona did not insist that he do so….

[574]     Independent legal advice at this point would probably also have ensured that if Mr. Campbell chose to continue with AHBL’s representation, he would do so on the basis of an informed waiver of the conflict of interest.

[575]     A client must have a full understanding of the nature of the conflict in order to make an effective waiver. This may require independent legal advice: Moffat v. Weinstein (1996), 135 B.L.R. (4th) 298 (Ont.Gen.Div.).

[576]     In some cases, nothing short of the lawyer ceasing to act for the client will suffice to avoid subsequent liability for the consequences of breach of fiduciary duty: Davey v. Woolley, Hames,Dale & Dingwall (1982), 35 O.R.(2d) 599 (C.A.), leave to appeal to SCC refused, 37 O.R.(2d) 499. In my view, given the nature of the conflict, and AHBL’s role in the loss of Mr. Campbell’s right to maintain his action in Hong  Kong, this was a case where AHBL ought  either to have informed the plaintiff that they could no longer act, or they should have insisted that that the plaintiff take independent legal advice, at their expense, before they settled his claim. If AHBL did not withdraw, then they were under a duty to insist that Mr. Campbell obtain independent legal advice: Re A Solicitor (1995), 14 B.C.L.R. (3d) 100 (C.A.).  Because Mr. Ragona continued to act for Mr. Campbell and did not insist upon the plaintiff obtaining independent legal advice, he and AHBL must bear the consequences of their breach of the fiduciary duty to avoid conflicts of interest.

[577]     The defendants are responsible for the consequences flowing from their breach of fiduciary duty.  The plaintiff bears the onus of proving a causal relationship between a breach of fiduciary duty and any loss for which he claims compensation.  Here, by the time of the breach of the duty to avoid conflict of interest, which occurred upon dismissal of the Hong Kong action for want of prosecution, Mr. Campbell had already suffered the loss resulting from inordinate delay in the prosecution of his action, for which he claims damages in contract and tort.

[578]     In Strother v. 3464920 Canada Inc., [2007] S.C.R. 177 at paras. 75 and 76, Justice Binnie held that the remedy of disgorgement may be ordered for either prophylactic or restitutionary purposes.  The prophylactic purpose is served by appropriating “for the benefit of a person to whom the fiduciary duty is owed any benefit or gain obtained or received by the fiduciary in circumstances where there existed a conflict of personal interest and fiduciary duty or a significant possibility of such conflict, the objective is to preclude the fiduciary from being swayed by considerations of personal interest.” Strother at para. 75, citing Chan v. Zacharia (1984), 154 C.L.R. 178 (Aust H.C.) per Deane J., at p.108.

[579] The prophylactic purpose of disgorgement is intended to teach fiduciaries that conflicts of interest do not pay.  The plaintiff is not required to prove a loss in order to recover a gain or benefit received by the fiduciary as a result of its breach of duty: Strother, at para.77.

[580] Subsequent to the dismissal of Mr. Campbell’s action for want of prosecution, Mr. Ragona, in breach of the fiduciary duty he owed to avoid conflict of interest, accepted the plaintiff’s offer of hourly remuneration for work performed on the file. He did so in order to benefit himself and his firm, at the plaintiff’s expense. The plaintiff is entitled to disgorgement of all fees or benefits received by Mr. Ragona and AHBL in consequence of this breach of their fiduciary duty to avoid conflict of interest  : Strother at para. 83.

[581] There will be an order that AHBL disgorge and pay to Mr. Campbell’s estate the sum of $84,391.86, representing the full amount of the fees charged by AHBL in their account rendered to Mr. Campbell dated December 29, 2004.

Infant Injury Claims in British Columbia and Conflicts of Interest


When an infant (for the purposes of civil lawsuits anyone under 19 years of age is considered an ‘infant’ in British Columbia) is injured and wants to sue for damages they can’t start a lawsuit on their own.  They must do so through an adult ‘litigation guardian‘.
For obvious reasons, it is common for a parent to fill the role of litigation guardian.  Oftentimes in infant injury claims Defendants argue not only that the child is to blame for the accident but also that the child’s parents are to blame for failing to adequately supervise their children.  If this defence is raised against a parent litigation guardian it can place them in a conflict of interest.  So what can be done in this situation?  Reasons for judgement were released demonstrating one possible outcome to such a fact pattern.
In today’s case (Gill v. Morin) the Plaintiff was “grievously hurt” when his ATV struck or was struck by a car driven by the Defendant.  He started a lawsuit against the motorist with his mother acting as litigation guardian.  The Defendant denied fault and argued that the Plaintiff’s mother was to blame for “failure to adequately supervise (her) son”.
Once placed in this conflict of interest the Plaintiff’s mom applied to the Public Guardian and Trustee (“PGT”) and asked them to take over the lawsuit.  The PGT refused to do so unless they were “insulated from any claim for costs” in the event it turned out to be a losing lawsuit.
The parties turned to the Court for a solution.  The Plaintiff asked the Court to order that the PGT act as litigation guardian.  The PGT opposed this arguing that the lawsuit should simply be put on hold until the infant becomes an adult.  The Defendant opposed the PGT’s position arguing this would result in unfair delay.
The Court ultimately sided with the PGT and held that the lawsuit should be put on hold until the infant’s 19th birthday and from there he could decide whether to carry on with the lawsuit.  Master Keighley provided the following analysis:

[32] It is indeed regrettable that this defendant, who may eventually be found to be blameless with respect to this accident, may be obliged to wait several more years for the issues of liability and perhaps quantum to be resolved, but in the absence of any specific evidence, I am not prepared to find that the defendant is prejudiced by a stay of this action until the plaintiff obtains the age of majority. The limitation for this cause of action will not begin to run against the infant plaintiff until he reaches the age of majority on February 2, 2012 and it seems to be the defendant is no more prejudiced by a stay of proceedings then he would be had the plaintiff waited until then to commence this action.

Result

[33] In the result then, Piar will be removed as litigation guardian forthwith. The third party’s application to appoint the PGT as litigation guardian is dismissed. The action will be stayed until the infant plaintiff reaches the age of majority. Should counsel be unable to resolve the issue of costs, that issue may be brought back before me.

If you are faced with a similar dilemma this case is worth reviewing in full as the Court summarizes a handful of useful precedents disposing of similar applications at paragraphs 16-30 of the reasons for judgement.

Does Your Injury Claims Lawyer Also Act for ICBC?

I’ve written about this topic before and below I reproduce my previous post on Injury Lawyers working both sides of the fence.  I’m doing this because  I have been approached by a number of people who recently found out that their lawyer also acts on ICBC’s behalf in other Injury Claims.  These individuals apparently were not told this when they first retained their lawyers and their displeasure in learning this after the fact is understandable.
Before reproducing my previous post, however, I’d like to share my usual advice when people are confronted with this situation.  If you hired a capable lawyer who is doing a good job for you try to work things out.  The reason being is that if you hire a second lawyer you will have to pay a second lawyer.  If the lawyer’s failure to disclose this potential conflict of interest is a deal breaker then so be it, however, if it isn’t and the lawyer is doing an otherwise decent job save yourself the extra legal fees that come with hiring a new lawyer.  While I certainly don’t condone this lack of candor (and in case you’re wondering, No I don’t act for ICBC) it is important to keep focused on the big picture which is whether your lawyer is doing a good job.
With that out of the way, here is my previous post on this issue:
You’ve been injured in an accident. You don’t feel comfortable with how things have progressed with ICBC in your settlement negotiations so you decide to hire a lawyer. You find a qualified ICBC claims lawyer and off you go. You assume, reasonably so, that the lawyer is acting for you and not ICBC, right? Not always…

Lawyers typically have many clients. Many ICBC claims lawyers work both sides of the fence, that is, they represent injured people in advancing ICBC claims on some files and on other files they represent ICBC in defending against ICBC injury claims. Other lawyers restrict their practice to one side or the other.
Many people see lawyers working both sides of the fence as an inherent conflict of interest. They want their lawyer to represent injured people only, not insurance companies. Others like the idea that their lawyer also represents ICBC sometimes because perhaps such a lawyer has better insight into the defence tactics used by ICBC.
The problem, and the reason why I write this post, is that sometimes the potential conflict of interest is much worse than simply having a lawyer who works both sides of the fence. It is a problem of a lack of informed consent.
ICBC has contracted with many law-firms in BC for services in the defence of motor vehicle accident claims. ICBC requires some of these firms to sign an agreement called the Strategic Alliance Agreement (SAA).
Under the SAA, law firms whose lawyers are retained to act for ICBC are not permitted, when representing a plaintiff on another file, to sue ICBC for bad faith or to seek punitive, aggravated or exemplary damages against ICBC.
Specifically, the SAA states that “ICBC may impose penalties against the firm…..(where) the firm, or any member of the legal team, in the performance of the legal services, fails to act in the best interests of ICBC or ICBC’s insureds…
Also, that “members of the legal firms team will not directly or indirectly: commence or participate in claims or actions, or counsel or assist others in bringing claims or actions against ICBC which include allegations of bad faith, or claims for punitive, aggravated or exemplary damages.”
What a conflict of interest!
The Law Society of BC (the institution that governs lawyers in BC) has held that it is ok for a lawyer who represents ICBC and who is bound by the terms of the SAA to also act against ICBC in another claim. HOWEVERclients need to be advised about this potential conflict of interest. Sepcifcially, “A lawyer (bound by the SAA) may properly act against ICBC for clients whose cases fall outside of the restrictions. However, a lawyer acting in these circumstancesMUST ADVISE THESE CLIENTS OF THE LAWYER’S RELATIONSHIP WITH ICBC AND THE IMLICATIONS OF THE RESTRICTIONS THE LAWYER IS UNDER.
It is all about informed consent. There is nothing wrong in hiring a lawyer to represent you who has signed the SAA but you are entitled to know about these restrictions. If you know about these restrictions you may not want to hire such a lawyer and instead retain an icbc claims lawyer who is not bound by any contractual restrictions with ICBC. Ask your lawyer if he signed the SAA, you may be surprised by the answer.
If your lawyer signed the SAA and did not tell you this up front, you were deprived of an opportunity to make an informed decision. If this occurred you may want to ask yourself why your lawyer kept this information from you…?

ICBC Defence Lawyers and Ethical Obligations to their Client

I have previously blogged about ICBC lawyers and ethics obligations and I write more on this topic.
If you are sued for a BC car accident and are insured by ICBC they will appoint a lawyer to defend your claim.  That lawyer has 2 potentially conflicting duties, they are 
1.  To you the client
2.  To ICBC (the client that is paying the bills)
This ‘joint retainer’ is permitted by the Law Society of BC provided that the interests of YOU THE CLIENT and ICBC don’t conflict.  If there is a conflict the lawyer must withdraw form the joint representation.
The Law Society’s Ethics Committee published information recently to hep ICBC defence lawyers to “avoid allegations of bad faith and professional negligence‘.  I thought this would be useful information for members of the public as well, particularly for anyone who may be concerned about the approach that a lawyer appointed by an insurance company in the defence of a tort claim is taking.  
Below is the article in it’s entirety which I am reproducing from the Law Society’s website:
http://www.lawsociety.bc.ca/publications_forms/alert/03-02.html

Avoiding allegations of “bad faith” and professional negligence in defending third-party liability claims

A lawyer appointed by an insurer to defend a third-party liability claim has two clients: the insurer and the insured. The lawyer owes obligations to both clients and, as discussed below, the insurer owes obligations to the insured. Care must be taken by the lawyer to identify and avoid conflicts of interest between the two clients and to ensure that they are both fully protected.

The words “bad faith” might conjure up the image of an uncaring lawyer who allows an insurer to disregard the interests of an insured when handling the defence of a claim. Such an approach by a lawyer is in fact very rare – almost without exception, counsel who are appointed to defend third-party liability claims recognize their obligations to both clients and do their best to provide thorough and timely advice as well as competent service. However, with the increasing size of damage awards, situations where there is inadequate insurance are becoming more frequent.

Although allegations of bad faith and professional negligence can arise in various circumstances, the risk is greatest when the insured faces a potential claim for damages for an amount greater than the available third-party insurance policy limits. Claims against insurers and defence counsel by insureds who find themselves facing large judgments in excess of their policy limits tend to fall into two broad classes:

  • failing to settle the case before trial for an amount within the policy limits, or
  • failing to provide a full defence and thus minimize the extent of the excess judgment.

It is almost invariably the insurer who has the ultimate power to make decisions about settlement and conduct of the defence. However, when an insured claims that the insurer has breached its good faith obligations in this regard, the insured and in some cases even the insurer may seek to shift blame for this to defence counsel.

Staying out of hot water

The Lawyers Insurance Fund has received increasing numbers of reports in recent years relating to the defence of actions arising out of motor vehicle accidents. A review of them gives rise to a number of observations and suggestions. These may help BC lawyers avoid being drawn into bad faith litigation if there is a judgment in excess of the available insurance limits:

  • Write to the insured at the outset to advise of the retainer, its scope and its limitations. Be sure that the insurer is also aware of the scope and limitations of the retainer.
  • Once appointed to defend, do not advise either party on insurance coverage issues. Do not act on behalf of the insurer in any action relating to insurance coverage issues (including Part 7 actions). Be aware of what the coverage issues are, so that you can identify conflicts and avoid them.
  • If there is a possibility of a claim exceeding the limits, write to the insured advising of the risk of an excess judgment and the insured’s personal exposure to execution, recommend independent legal advice, advise of the possibility of conflicts of interest and explain your limited role – the defence of the case only. Instructions from the insurer are not required to send this letter. If the insurer has already provided such notice to the insured, review it for sufficiency.
  • Consider recommending that the insurer obtain independent legal advice on any coverage issues and its obligations to its insured. Many insurers will be well aware of the need to do so, but there may be circumstances where it is appropriate to remind the insurer that such matters are not part of your role as defence counsel.
  • Consider recommending that the insurer pay for independent counsel for the insured where there is significant uninsured exposure and where the insured is unable or unwilling to pay for counsel.
  • Keep the insurer and the insured or insured’s independent counsel fully informed of all material information and developments. This includes providing copies of all reports to the insured or independent counsel.
  • As with any case, conduct an investigation and assessment of liability and quantum and be alive to the need to revisit these issues with the emergence of additional information. If expert evidence may be helpful, seek instructions to obtain it. If there may be contributory negligence, seek instructions to develop the evidence to prove it.
  • Be aware of and advise the insurer and the insured or independent counsel of all possible sources of recovery, including other insurance and third-party claims. It may be appropriate to advise independent counsel or the plaintiff’s lawyer that other possible sources of recovery could be pursued.
  • Insurers are becoming increasingly concerned to limit defence costs. As an outgrowth of that concern, counsel are often put on a “short leash.” Be vigilant to ensure that the duties owed to the insured are not compromised by paying too much attention to the insurer’s concern with the “bottom line.” Most often these matters are capable of being resolved through a frank and open dialogue with the insurer. In those rare cases when a disagreement remains between counsel and the insurer on what is required to provide a full defence, advise the insurer and the insured or independent counsel of those concerns.
  • Avoid making any admissions without the informed consent of the insured.
  • With respect to settlement negotiations, advise both the insurer and the insured, or the insured’s independent counsel, of all offers made by other parties. Provide recommendations on all offers received and on offers that could be made on behalf of the insured. Address settlement at all stages of the litigation, even the early stages if it is apparent that the claim is likely to exceed the limits. When offers are extant, follow up to obtain instructions promptly.
  • Be alive to the possibility of conflicts at all times. When acting for more than one defendant, consider whether there are any conflicts between them.
  • Record your advice, instructions and steps taken in writing.

Most cases settle shortly before trial, a time when you will be preoccupied with preparation for trial. By addressing the issues outlined above well in advance, you will help ensure that the insurer and the insured are better prepared to address their relationship with respect to coverage and settlement issues should these arise immediately before trial.

The insurer’s duty to the insured

The leading two cases in BC respecting “bad faith” claims against insurers are Fredriksonv. Insurance Corporation of British Columbia (1990) 44 BCLR (2d) 303 (SC) and Shea v. Manitoba Public Insurance Corp. (1991) 55 BCLR (2d) 15 (SC). Both decisions arise out of motor vehicle accident claims, although most of the principles will likely apply in the handling of other liability cases. Defence counsel should be familiar with each case. As noted, when insurers breach their duties of good faith, defence counsel may be drawn into ensuing bad faith litigation for alleged failure to prevent this from happening.

In Shea, Finch, J. (as he then was) recognized the legitimate interest of an insurer to try to effect a saving on the policy limits if there exists a reasonable prospect of settling the claim for less than the limits (as was the case in Fredrikson). However, the insurer has no legitimate interest in trying to settle a claim for less than the policy limits when it is clear (as it was in Shea) that the claim will exceed the available coverage.

The obligations of an insurer to its insured, where the insured faces an excess exposure, were summarized by Finch J. in Shea, as follows:

I would summarize my view of the law touching on the insurer’s duty to its insureds in the circumstances of this case as follows:

1. The relationship between insurer and insured is a commercial one, in which the parties have their own rights and obligations;

2. Within the commercial relationship, special duties may arise over and above the universal duty of honesty, which do not reach the fiduciary standard of selflessness and loyalty;

3. The exclusive discretionary power to settle liability claims given by statute to the insurer in this case, places the insured at the mercy of the insurer.

4. The insureds’ position of vulnerability imposes on the insurer the duties:

a) of good faith and fair dealing;

b) to give at least as much consideration to the insureds’ interests as it does to its own interests; and

c) to disclose with reasonable promptitude to the insured all material information touching upon the insureds’ position in the litigation and in the settlement negotiations;

5. The fact that the insured is at the mercy of the insurer for the purposes of settlement negotiations gives rise to a justified expectation in the insured that the insurer will not act contrary to the interests of the insured or will at least fully advise the insured of its intention to do so;

6. While the commercial nature of the relationship permits an insurer to assert or defend interests which are opposed to, or are inconsistent with, the interests of its insured, the duty to deal fairly and in good faith requires the insurer to advise the insured that conflicting interests exist and of the nature and extent of the conflict;

7. The insurer’s statutory obligation to defend its insured imposes on the insurer, where conflicting interests arise, a duty to instruct counsel to treat the interests of the insured equally with its own; and where one counsel cannot adequately represent both conflicting interests, an obligation to instruct separate counsel to act solely for the insureds, at the insurer’s own cost;

8. The insurer’s duty to defend includes the obligation to defend on the issue of damages, and to attempt to minimize by all lawful means the amount of any judgment awarded against the insured. In this case, that would include arguing that court order interest and no fault benefits are payable in addition to the policy limits, where such an argument is available in law; and

9. Defence preparations and settlement negotiations must take place in a timely way and, where last minute negotiations are required, advance planning must be made to ensure that the insureds’ interests are given equal protection with those of the insurer.

*  *  *

If an insurer complies with these guidelines, there is little likelihood that a claim will be advanced against the insurer for bad faith or against counsel for professional negligence.

Does Your Lawyer Act for ICBC? Ask, You May Be Surprised By The Answer…

You’ve been injured in an accident. You don’t feel comfortable with how things have progressed with ICBC in your settlement negotiations so you decide to hire a lawyer. You find a qualified ICBC claims lawyer and off you go. You assume, reasobly so, that the lawyer is acting for you and not ICBC, right? Not always…
Lawyers typically have many clients. Many ICBC claims lawyers work both sides of the fence, that is, they represent injured people in advancing ICBC claims on some files and on other files they represent ICBC in defending against ICBC injury claims. Other lawyers restrict their practice to one side or the other.
Many people see lawyers working both sides of the fence as an inherent conflict of interest. They want their lawyer to represent injured people only, not insurance companies. Others like the idea that their lawyer also represents ICBC sometimes because perhaps such a lawyer has better insight into the defence tactics used by ICBC.
The problem, and the reason why I write this post, is that sometimes the potential conflict of interest is much worse than simply having a lawyer who works both sides of the fence. It is a problem of a lack of informed consent.
ICBC has contracted with many law-firms in BC for services in the defence of motor vehicle accident claims. ICBC requires some of these firms to sign an agreement called the Strategic Alliance Agreement (SAA).
Under the SAA, law firms whose lawyers are retained to act for ICBC are not permitted, when representing a plaintiff on another file, to sue ICBC for bad faith or to seek punative, aggravated or exemplary damages against ICBC.
Specifically, the SAA states that “ICBC may impose penatlies against the firm…..(where) the firm, or any member of the legal team, in the performance of the legal services, fails to act in the best interests of ICBC or ICBC’s insureds…
Also, that “members of the legal firms team will not directly or inderectly: commence or participate in claims or actions, or counsel or assist others in bringing claims or actions against ICBC which include allegations of bad faith, or claims for punitive, aggravated or exemplary damages.”
What a conflict of interest!
The Law Society of BC (the institution that governs lawyers in BC) has held that it is ok for a lawyer who represents ICBC and who is bound by the terms of the SAA to also act against ICBC in another claim. HOWEVER, clients need to be advised about this potential conflict of interest. Sepcifcially, “A lawyer (bound by the SAA) may properly act against ICBC for clients whose cases fall outside of the restrictions. However, a lawyer acting in these circumstances MUST ADVISE THESE CLIENTS OF THE LAWYER’S RELATIONSHIP WITH ICBC AND THE IMLICATIONS OF THE RESTRICTIONS THE LAWYER IS UNDER.
It is all about informed consent. There is nothing wrong in hiring a lawyer to represent you who has signed the SAA but you are entitled to know about these restrictions. If you know about these restricitons you may not want to hire such a lawyer and instead retain an icbc claims lawyer who is not bound by any contractual restrictions with ICBC. Ask your lawyer if he signed the SAA, you may be surprised by the answer.
If your lawyer signed the SAA and did not tell you this up front, you were deprived of an opprotunity to make an informed decision. If this occurred you may want to ask yourself why your lawyer kept this information from you…?
Do you need to speak with an ICBC Claims Lawyer?  Contact Erik Magraken for a free consulation.

Contact

If you would like further information or require assistance, please get in touch.

ERIK
MAGRAKEN

Personal Injury Lawyer

When not writing the BC Injury Law Blog, Erik is the managing partner at MacIsaac & Company, based in Victoria, B.C. He is also involved with combative sports regulatory issues and authors the Combat Sports Law Blog.

“Work hard, be kind and enjoy the ride!”
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