Insurer had no direct entitlement to the proceeds of an After the Event policy insuring against the risk of legal costs and disbursements

09. April 2019 0

Insurance law – Costs – Duties and liabilities of insurer

Peter B. Cozzi Professional Corp. v. Szot, [2019] O.J. No. 921, 2019 ONSC 1274, Ontario Superior Court of Justice, February 22, 2019, S. Nishikawa J.

The applicant lawyer sought a declaration that proceeds of an After the Event (ATE) policy were the property of the plaintiff in an underlying legal action, who had assigned them to the lawyer. The defendant’s insurer brought a cross-application seeking a declaration that it was entitled to the proceeds. The plaintiff purchased the ATE policy through the lawyer. The policy insured against the risk of an adverse legal costs award and costs of the plaintiff’s own disbursements. The plaintiff’s damages award at trial did not exceed the statutory deductible and the court ordered costs of $161,790 against the plaintiff. The plaintiff was under a disability, but neither his litigation guardian nor the public guardian and trustee responded to the applications. The issue was whether the lawyer or the defendant’s insurer was entitled to the proceeds of the ATE policy.

The court dismissed both applications. Neither the lawyer nor the defendant’s insurer were entitled to the proceeds of the ATE policy. The contingency fee agreement between the plaintiff and the lawyer was not enforceable because the plaintiff was under a disability and entered into the agreement without his litigation guardian’s approval. Privity of contract also prevented the defendant’s insurer from making any claim under the ATE policy. The beneficiary of the ATE policy was the plaintiff, who was entitled to determine to whom proceeds would be paid.

This case was digested by Paul R. Saunders, and first published in the LexisNexis® Harper Grey Insurance Law Netletter and the Harper Grey Insurance Law Newsletter. If you would like to discuss this case further, please contact Paul R. Saunders at psaunders@harpergrey.com.

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