Insurers too quick to settle

Insurers are too quick to settle legal actions against them, John Campion, a partner at Fasken Martineau DuMoulin, told a panel at the National Insurance Conference of Canada (NICC).
Campion is known within the insurance community for his role as defence counsel for insurers in McNaughton Automotive Ltd. v. Co-Operators General Insurance Company.
In McNaughton, the Ontario Court of Appeal decided in 1981 that an automobile insurer was not entitled to reduce payment to its insured by the policy deductible in a total loss property damage situation such as a car wreck. The Supreme Court of Canada effectively upheld McNaughton when it denied leave to appeal the Ontario Appeal Court decision. But in an extremely rare move, the Ontario Appeal Court in 2005 found that it had wrongly decided McNaughton and overturned its original decision in the case.
The 2005 decision effectively erased class action proceedings against 140 insurers. Policyholders were suing insurers for the return of their deductibles in salvage situations.
Class action litigation, Campion warned insurers, is not a game for those who are not experienced in the field. Every trial decision, no matter how small, is highly significant for you [insurers].
For this reason, he said, the idea of moving immediately into to settlement, in my respectful view, is just the wrong path.
Campion said insurers need to be more aggressive in defending class actions, because the class action plaintiffs bar is itself becoming much more innovative, aggressive and experienced in the art of class action litigation and legislation. It is not easy for the defence bar to hammer out settlements favourable to insurers, Campion noted, unless plaintiff lawyers feel the cold steel against the ribs of a pending legal war.
Sadly, there is a need for strong, innovative defences in a very sophisticated field, he said.
In defending against McNaughton, Campion worked with a legal defence team to obtain a judgment in an Alberta court that said insurers were entitled to collect the deductibles in salvage cases. He then used the Alberta decision to argue that the Ontario Court of Appeal had wrongly decided McNaughton in 1981.
Counsel for the plaintiffs in McNaughton, Won J. Kim, the managing partner of Roy Elliott Kim OConnor LLP, told the NICC panel he had underestimated the ultimate impact of the Alberta court decision. In addition, he said, he did not take intro account the resolve of the insurance industry to fight McNaughton out, even though the Supreme Court had seemingly pronounced its final word on the subject.