Apology Legislation Benefits Insurers



Craig Brown for The Lawyers Weekly

January 15, 2010

Ontario recently joined B.C., Manitoba and Saskatchewan - as well as some jurisdictions outside of Canada - in enacting apology legislation. Like the others, Ontario's version provides that an apology does not constitute an express or implied admission of fault or liability, and does not nullify or otherwise affect liability insurance coverage regardless of wording to the contrary in a policy.

Those in the insurance community may worry that this means a loss of control over the defence of third party claims. Liability policies invariably assign control of the defence of claims to the insurer and include a condition requiring the insured to refrain from assuming any obligation to a third party without the insurer's consent.

The Apology Act appears to undermine the effect of these provisions. It defines an apology as: "[...] an expression of sympathy or regret, a statement that the person is sorry or in any other words or actions indicating contrition or commiseration, whether or not the words or actions admit fault or liability or imply an admission of fault or liability in connection with the matter to which the words or actions relate." It follows that, if an insured makes an apology that includes an admission of liability, the assumption of obligation implied in that may not be invoked by the insurer to deny indemnity.

But this need not be cause for concern. Besides restricting the insurer, the legislation also restricts the third party, who is prevented from using an insured defendant's apology to bolster his or her case. More importantly, apologies will likely benefit defendants and their insurers by reducing both the damages payable and the costs of reaching a settlement.

The legislation encourages interaction between the parties to a dispute at a non-legal level, allowing for the possibility of a healing process often denied by the adversarial nature of the litigation process. In other words, the Act provides for a form of restorative justice.

Much has been written about apologies in the context of litigation. Some writers express concerns that the legislation will hurt claimants by eliminating what may be the best evidence - an implied admission of liability - in support of their claims. Others worry about a possible devaluation of the moral idea of apology in that cynical defendants might utter words of apology for mere tactical advantage. But most observers, supported by empirical evidence, point to the potential for speedier, less expensive resolution of many disputes in ways more satisfying to both parties.

Consider, for example, the case of Maple Leaf Foods. On Aug. 19, 2008, the Canadian Food Inspection Agency, and Maple Leaf Foods Inc., a producer of processed foods, issued a health hazard alert warning to Canadians not to serve or eat certain deli meat products thought to be contaminated with listeria monocytogenes. The warning came too late for at least 20 people, who died, and many more who became ill as a result of consuming contaminated meat products.

The outbreak was traced to a Maple Leaf Foods plant in Toronto, the most likely cause being contaminated slicing machines. In December of 2008, less than four months after the outbreak, Maple Leaf Foods announced it had agreed to settle tort claims for a total of $27 million. On Feb. 2, 2009, the company released details of the settlement. The maximum individual payment for serious and long-lasting illness was to be $125,000. The amount payable in respect of each death was $120,000.

Two things are noteworthy about this. First, settlement was achieved extraordinarily quickly. Claims of this magnitude commonly take years to resolve. Second, the amount of the settlement, $27 million in total, is remarkably modest for an action involving more than 20 fatalities and numerous other cases of serious illness.

These observations are noteworthy because they represent significant benefits to both sides in the dispute. For the defendant and its insurers, the liability costs are contained within reasonable limits. For the plaintiffs, compensation has come promptly, they have been spared the cost and uncertainty that comes with protracted litigation and they can take at least some satisfaction from the fact that, having accepted responsibility, the company is accountable for the loss. In this sense, the plaintiffs have been appeased. More generally, an argument can be made that justice has been served.

Importantly, when the outbreak first occurred, the chief executive officer of Maple Leaf Foods immediately accepted responsibility and expressed at least implied sympathy and concern for those affected. He is quoted as saying, "It's not about money or legal liability, this is about being accountable for providing consumers with safe food."

Although this occurred before the passage of the Apology Act, proponents of the legislation would no doubt say that there is an inescapable link between the actions of the defendant and the subsequent settlement that is perceived as fair by both sides.

Craig Brown is a professor of law at the University of Western Ontario and counsel to the Toronto firm Thomas Gold Pettingill. He is co-author, with Thomas Donnelly of Thomas Gold Pettingill, of Insurance Law in Canada.
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