Court voids claims waiver based on power imbalance between adjuster and plaintiff

The Ontario Superior Court of Justice has voided a release waiving all claims against a defendant and his insurer in an auto accident claim, based on the fact that the insurance adjuster had used his unequal bargaining power to low ball a settlement agreement with the plaintiff.

Specifically, the court noted the adjuster did not share information with the plaintiff about the true extent of the plaintiff’s serious injuries. Also, the adjuster had incorrectly applied Fault Determination Rules, significantly reducing the settlement offer.

In Jones v. Jenkins, the plaintiff, Brandon Patrick Jones, was injured in a motor vehicle accident when his motorcycle collided with a vehicle driven by Jack Jenkins.

Jenkins wanted the court to enforce a release in which the plaintiff agreed to receive a payment of $19,411 in return for a waiver of any future claims against Jenkins and his insurer, ING Insurance Company of Canada.

The agreement was reached after discussions between the ING insurance adjuster and Jones. The adjuster asked Jones to make a settlement offer based on heads of damages such as disfigurement, pain suffered, future pain and future loss of employment. Jones proposed $241,000.

The adjuster made a counter-offer. A deductible of $30,000 was applied to the general damages. Also, based on the adjuster’s assertion that Jones was 75 per cent responsible for the accident, the general damages ($35,000 net of the deductible) and future economic loss ($22,500) were reduced by 75 per cent. The total counter-proposal was $19,411.

The court described the plaintiff, who trusted the adjuster, as “unsophisticated” and “not good with words.”

Jones feared losing his job after the accident, and so he stated to a person filling out a medical report that he felt he had recovered and could return to work.

But the adjuster had access to Jones’ accident benefit file, which indicated Jones had suffered a much more serious injury – severe and acute radial nerve damage – than disclosed in the medical report. The adjuster should have shared this information in the file with the plaintiff, the court noted.

Also, the court found: “More troubling is the fact that the adjuster reduced the general damages and future economic loss claim by 75 per cent purportedly on the basis of the plaintiff being 75 per cent responsible for the accident. There is no evidence that this was the case.

“There was no reason to apply Fault Determination Rules as they were guidelines which were only applicable as between insurers and not as between a plaintiff and a defendant.”

As a result, the court found the adjuster had “used his position of power to achieve an advantage and that the agreement reached was sufficiently divergent from community standards of commercial morality as to be unconscionable and it should be set aside.”