CANADA Law and Practice Contributed by: Chris McKibbin, Avi Sharabi, Alex Valova and Douglas Treilhard, Stieber Berlach LLP
5.4 Cost Risk Management and Funding Solutions Canada offers products to manage or transfer litiga- tion cost risk. As a baseline, provincial rules of court provide for the recovery of costs of the successful party, which often range between 50% and 70% of actual costs incurred. While costs awards are in the discretion of the presiding judge, successful litigants often recover a significant portion of their costs. 5.5 AI-Driven Claims Volumes and Complaints AI has allowed claimants (especially self-represented ones) to generate large volumes of evidentiary records in short order. Receiving thousands of pages of evi- dence still requires defence counsel to review and assess the merits of that evidence, regardless of how incoherent it may appear. Moreover, AI has allowed litigants (especially those who are self-represented) to submit legal docu- ments, such as pleadings and written submissions, which seem coherent on their face. Only upon care- ful human inspection does it become clear that the arguments refer to hallucinated decisions or misrep- resent the holdings in actual decisions. This places a higher burden on defence counsel to scrutinise the legal positions being taken, not just for logic, but for authenticity. Both factors will increase defence costs across all lines of coverage, but especially in matters involving self-represented claimants. 6. Third-Party Claims and Defence Trends 6.1 Third-Party Claims and Direct Actions Direct actions by third parties against liability insurers are available, but relatively uncommon. Subsection 132 (1) of Ontario’s Insurance Act is a representa- tive provision applicable to non-auto insurers. It pro- vides that, where an insured incurs a liability for injury or damage to the person or property of another, is insured against that liability and fails to satisfy a judg- ment awarding damages in respect of the liability, the claimant may recover by action against the insurer up to the face value of the policy, but subject to the same equities as the insurer would have if the judgment had been satisfied. As the duty to defend is broad in Can-
The volume of civil sexual abuse claims, including class actions, has increased due to several factors, including the elimination of limitation periods, the con- tinuing evolution of the law of vicarious liability and damages awards trending upwards. In construction-related claims, construction delays remain a principal source of disputes, as do deficiency disputes, which often involve various trades as well as engineering and architectural professionals. Insurers do frequently fund defence costs for these matters, which can be significant depending on the number of parties involved. Health care liability is an evolving area post-pandemic, as the public has somewhat shifted away from tradi- tional physician and hospital care settings to private clinics, telehealth and alternative (ie, non-physician) healthcare providers. With damages awards in this area trending upwards, medical malpractice claims may increase. 5.2 Shifting Risk Landscape The evolving risk landscape has increased exposures for companies and management. There has been an uptick in D&O liability claims, as well as technology errors and omissions claims in Canada. Issues such as ESG demands, AI governance, cybersecurity and increased reliance on technology to manufacture and deliver products and services only increase litigation exposure for boards, management and a wide array of industries. With the potential for serious damages awards in these claims, insurers must carefully con- sider the scope of indemnity and monitor these claims to assess the appropriate resolution strategy. 5.3 Defence Costs and Litigation Complexity The complexity of claims against insureds is increas- ing, particularly in multi-party and high-value disputes. This often increases defence costs for several rea- sons. Document production on large construction dis- putes, for example, can run to hundreds of thousands. These disputes also often require different types of expert reports, including those on liability and dam- ages. These reports can be costly, as the experts must analyse the project’s scope, which can span several years.
52 I NSURANCE L I T IGATI O N 2026
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