Hiring a lawyer can be a “cost-efficient” way to manage some exposures in Ontario’s expanded claims court

Hiring experienced counsel to help craft strategic offers of settlement might just be the most cost-effective way for an insurer to negotiate Ontario’s newly expanded small claims court, Todd J. McCarthy of Flaherty Dow Elliott & McCarthy told a Canadian Independent Adjusters’ Association (CIAA) Ontario chapter seminar in Toronto.
“Strategically importing counsel at the right time and making strategic offers to settle have got to be the best practice in this new regime in terms of the cost-effective management of risk,” McCarthy said.
As of January 2010, Ontario’s small claims court limit expanded from $10,000 to $25,000.
With this change, the number of unrepresented litigants expanded as well, McCarthy observed. Normally, this isn’t good news for insurers, since unrepresented litigants aren’t familiar with the intricacies of courtroom procedures and hence take more time to make their case. This in turn builds up an insurer’s legal defence costs.
But along with the expanded small claims court, deputy judges have an increased ability to award appropriate levels of costs, McCarthy noted.
For cases approaching the upper echelon of the court’s $25,000 limit, insurers can perhaps best manage their exposure by hiring a lawyer close to the settlement conference portion of the procedure (which happens before a trial), and presenting a solid offer of settlement.
If the self-represented litigant does not accept a reasonable offer of settlement, a deputy judge has expanded power to award the insurer’s costs against the final judgment, which might serve to cut down the insurer’s exposure significantly. 
For example, McCarthy noted the outcome of the March 2010 decision in Clayton v. Personal Insurance Company.
In that case, a self-represented litigant claimed insured damages to his residential home at the maximum the court allowed ($25,000). Instead, the deputy judge assessed damages at $9.373.44.
The insurer, at a cost of $7,500, hired a seasoned lawyer, who prepared a pre-trial settlement offer of $10,000.
Because the actual damages were lower than insurer’s settlement offer, the deputy judge awarded the insurer’s costs at roughly $5,000. These fixed costs were subtracted from the damage amount obtained by the self-represented litigant.
When the dust had cleared, the insurer had to pay less than $5,000 to the claimant. Mr. Clayton, McCarthy said, “still doesn’t quite know what happened.”
“In the end, having paid out $5,000, plus its lawyer’s costs of $7,500 — it’s not cheap —$12,500 was paid out in a case where the minimum exposure was $10,000 [and the maximum exposure was $25,000],” McCarthy said. “So that’s a great, cost-effective way of using the court process, using offers to settle and using the costs rules to your benefit.”