YOU SHOW ME YOURS: PROCEDURAL CHANGES TO RULES OF COURT NOW REQUIRE PRODUCTION OF INSURANCE POLICIES

A small procedural change to British Columbia's Supreme Court Rules is set to cause headaches for counsel and the insurance industry. By virtue of Order in Council No. 414 effective July 1, 2007 a party to an action in B.C. must provide to all other parties, by way of a List of Documents, any insurance policy under which an insurer may be liable to satisfy all or part of a judgment in the action or to indemnify or reimburse a party for money paid in satisfaction of all or part of the judgment. Further, a party must answer any question on Examination for Discovery relating to the existence and content of any insurance policy under which an insurer may be liable as well as the amount of money available under such a policy and any communications from an insurer denying or limiting liability under the policy. This would include any non-waiver / reservation of rights letter. Further, the insurance policies producible would include not only primary but any excess policies which could be required to respond. However, no information concerning the insurance policy is admissible in evidence at trial unless it is relevant to an issue in the action.

In the short term, effective July 1, 2007 counsel will have to prepare a Supplemental List of Documents containing all relevant insurance policies. Further, insured's who are facing an Examination for Discovery will need to be prepared to answer questions related to the policy. This will likely have some counsel scrambling to obtain and produce copies of the applicable insurance policies.

In the long term this has obvious implications for the conduct of litigation. On the plus side, plaintiffs might abandon actions where the defendant has low insurance limits or has little or no coverage for the claim. On the negative side, insurers may find themselves exposed to bad faith “blackmail”. In this scenario, plaintiffs offer to accept the policy limits on a claim that may or may not be worth that much. The offer comes with the express or implied threat that the insurer risks a bad faith claim by its insured if the insurer fails to settle and the insured is subsequently exposed to a judgment in excess of policy limits.

The rule change will also assist plaintiffs seeking to compel insurers to attend mandatory mediation under B.C.’s mediation regulations. Under these regulations, one party to the action can compel another to mediate. “Party” is defined to include the insurer of a party in the action. The proposed change to the Rules of Court will require defendants to identify their liability insurers who, in turn, can be directly compelled to attend mediation.

The complete wording of the new Rule contained in Order in Counsel 414 can be viewed at: www.cwilson.com/insurance/reviews/OIC_414.pdf

If you have any questions about the Supreme Court Rule changes or any other insurance matter, please contact Krista Prockiw (telephone 604-643-3105 or e-mail kxp@cwilson.com) or any other member of the Clark Wilson LLP Insurance Practice Group.