Shortly after I left my insurance defence practice to do plaintiffs work, I received letters from the U.S. head office of one of my larger clients, advising that it was their position, that because of my “intimate knowledge” of their claims handling procedures, I was therefore in conflict and could not take cases against them. They have, however, backed off that position.

Throughout my paper, it is, however, important to keep in mind that as is the case in any profession or industry, there are corporate citizens undeserving of the criticism which I may direct to the industry, and many more unfortunately with whom I cannot be harsh enough in a public forum.

1. CHOICE OF DEFENCE COUNSEL: COMPETENCE VS COST
This question is a no-brainer. Indeed, in a speech to the Insurance Congress, made by Lee Samis in May 2000, Mr. Samis, who is clearly a key advisor to the industry, pointed out that whereas in the past they always had top-notch counsel representing them, this was no longer the case.

As best as I can determine, the genesis of the change in the insurers’ philosophy began about ten years ago when they began to take steps to regain control of the litigation process. It was obviously felt that defence counsel were doing everything, with little or no input from the insurer. (This has now evolved to a situation today, where defence counsel can virtually not even take a baby step without prior approval from the client.)

The second stage in this evolution was probably Bill 164. Given exposure of nothing in excess of maximum general damages, the industry moved to lower hourly rates for tort (and accident benefit) lawyers they hired. It is not that they told us what we could charge, but if it was much beyond $250.00 an hour, one’s new file flow was drastically reduced.

Indeed, none of us can help but notice this movement, not only to low priced outside counsel, but their increasing reliance on in-house staff where the insurer not only has absolute control over the expense, but also over the direction of the lawsuit. Indeed, I find it is the rare insurer today, who seeks counsel’s advice – and accepts it. Keep in mind, as well, that in-house counsel allows the insurer to pay less attention to unrecoverable defence costs, where deciding whether to proceed to trial, since they are salaried employees.

Indeed, last September, a highly experienced defence counsel, in a very prominent firm, told me that over the last year, not only had no partner received a new file, but a case involving a $6,000,000.00 exposure was directed to a third year lawyer because the plaintiff had a difficult liability situation. (This is the very case that should go to more experienced counsel, since a loss of 10% on liability could blow policy limits of $500,000.00.)

The insurance industry’s strategy (or lack of it) is difficult to fathom. Firstly, recent experience tells me that the days of a jury being the insurer's best friend, at least in the GTA, are long gone, yet they keep choosing to try their cases with a jury. This, quite frankly, baffles me; they hire inexperienced counsel who are least able to deal with a jury trial, and then file a jury notice.

In addition to the above, at least two very large insurers have imposed a maximum number of hours which counsel can charge at trial, anywhere between eight to ten hours per day, including trial time. There is no reason to believe that this trend will not spread to other insurers. Therefore, they hire inexperienced counsel to deal with juries and tell them, in effect, that if they spend the preparation time required during trial, it will have to be gratis.

2. RESERVES: HOW THEY ARE SET?
Although the requirement to set reserves is mandated by law, there are significant differences from company to company. Some will reserve only the plaintiffs’ damages, while others will include expenses. Regrettably, reserves are usually set early on in the litigation process, and generally do not get elevated. For plaintiffs’ counsel, this makes settlement rather difficult down the road, making it critical that counsel, as soon as possible, send a letter, or have a meeting and present a letter, setting out some well documented demands in the hope that once mediation arrives, there is close to sufficient authority to resolve the claim.

As an aside, some insurers will set reserves at artificially low levels, particularly if their company is up for sale – a not unusual occurrence these days.

3. AUTHORITY TO SETTLE
Again, this will vary from company to company. I know of one large insurer that has less local collective authority (without access to their U.S. head office for an increase), than some individual adjusters have personally, at other companies.

One of the most irritating aspects of defence work in my experience, up until the time I left, some eight months ago, was the fact that all my clients seemed willing to overpay at mediation to shut down claims. What I have seen since I have been practicing on the plaintiffs’ side, suggests to me that there has been a change in approach. I suspect, not surprisingly, that the industry has come to realize that overpaying across the board is bad for their bottom line. Therefore, I detect a trend towards lowball authority at mediation, with a view to seeing whether the plaintiff evidences a willingness to go to trial, at which point, a more appropriate offer is usually forthcoming.

4. SETTLE OR FIGHT?
Aside from what I mentioned above, I still believe that the philosophy of avoiding trial wherever possible, remains the industry’s gold standard because of both uncertainty and expense.

However, in accident benefits, or long-term disability cases, particularly where the plaintiff has been disabled up to their “own occupation” period and have been cut-off, these insurers have far more motivation to try the case. This is really their one and only opportunity to stop the bleeding, and the expense of trial makes more sense. The alternative is, of course, to continue to pay. They therefore see a trial as their last real kick at the can. This is especially so because from the plaintiffs’ perspective, trial is almost a financial wash, since they must incur the expense of a full-blown trial to get whatever amount is owing to the date of that trial, which is usually just enough to offset their expense. All of this makes trial an attractive alternative to the long-term disability or accident benefits insurer, in this situation.

5. HOW MUCH INVESTIGATION/SURVEILLANCE?
This is one area where insurers do not seem to be tightfisted because they see the potential gain as significant.

As usual, much of their activity seems to be directed to dates on which they know the plaintiff will be on view, such as discovery dates or medical appointments. Some insurers are even directing that investigation be done on consecutive days to undercut the anticipated response where there is only one day surveillance, namely, that the day after the activity portrayed on the videotape, the plaintiff was immobilized for several days thereafter.

While not restricted to chronic pain cases, the latter is where most of the investigative dollars are spent. Considering the very nature of chronic pain is that the plaintiff has good days and bad, and that they are told by their doctors to be as active as possible on any given day, it seems to me that the money would be better spent elsewhere. The chances of catching a plaintiff on a trampoline, or covertly working, are at best slim.

6. KNOWING YOUR INSURER
At the beginning of this paper I cautioned that the insurance industry is not homogenous. There are some companies that pay claims on a very reasonable basis, while others treat claimants in a way that should cost them their licence to do business.

They differ in setting reserves, granting authority and in any number of other ways, so that it becomes critical for plaintiffs’ counsel to not only know their case, but the insurer they are dealing with, as well.