Court voids claims waiver on basis of power imbalance between adjuster and plaintiff - Michael Kennedy

Justice MacPherson cited the following test for determining whether the release should be set aside as unconscionable:

Is there an inequality of bargaining power arising out of ignorance, need or distress of the weaker party?
Has the stronger party unconscientiously used the position of power to achieve an advantage?
Is the agreement reached substantially unfair to the weaker party or is sufficiently divergent from community standards of commercial morality that it should be set aside?

All parties conceded that there was an inequality of bargaining power between the experienced insurance adjuster and the plaintiff. With respect to the latter aspects of the test, Justice MacPherson found that the adjuster used his position of power to achieve an unconscionable settlement, as it was clear that the plaintiff was unsophisticated, was struggling financially and was trusting of the adjuster. Some of the adjuster's actions that were criticized by the court were as follows:

Relevant medical information (such as the accident benefits file) detailing a severe injury was in the adjuster's possession, but was not provided to the plaintiff;
The adjuster applied the statutory deductible to general damages in excess of $100,000.00;
The adjuster applied the Fault Determination Rules to determine liability and reduced the plaintiff's damages by 75% (even though the Fault Determination Rules do not apply to tort actions).

Worthy of note is that ING's adjuster advised the plaintiff to seek independent counsel, which the plaintiff failed to do. However, Justice MacPherson held that it was clear that the plaintiff had the impression that the adjuster would be fair and would look out for his interests. As such, the plaintiff's failure to consult a lawyer was not fatal. The release was therefore set aside and the action was allowed to continue.

This case emphasizes the care required when negotiating with self-represented plaintiffs who may not understand the intricacies of insurance litigation. When negotiating settlements prior to issuance of a Statement of Claim, insurance examiners must remember that they have unequal bargaining power by virtue of their expertise and deal with plaintiffs accordingly.

¹ 2011 ONSC 1426 (CanLII).

Court voids claims waiver on basis of power imbalance between adjuster and plaintiff
Michael Kennedy Partner	March 2011 By Michael Kennedy, Associate Lawyer Published first in CLC's Transportation Newsletter In Jones v. Jenkins,¹ an ING adjuster negotiated a settlement with a self-represented plaintiff. The plaintiff was seriously injured in a motor vehicle accident, but had not commenced an action against ING's insured, who was allegedly at fault. ING's adjuster directly corresponded with the plaintiff, requesting settlement proposals and making counter-proposals until a final agreement of $19,411.00 was reached and a release was signed. The plaintiff subsequently retained counsel and a Statement of Claim was issued. The defendant and his insurers argued that the signed release barred the proceeding.
Justice MacPherson cited the following test for determining whether the release should be set aside as unconscionable: Is there an inequality of bargaining power arising out of ignorance, need or distress of the weaker party? Has the stronger party unconscientiously used the position of power to achieve an advantage? Is the agreement reached substantially unfair to the weaker party or is sufficiently divergent from community standards of commercial morality that it should be set aside? All parties conceded that there was an inequality of bargaining power between the experienced insurance adjuster and the plaintiff. With respect to the latter aspects of the test, Justice MacPherson found that the adjuster used his position of power to achieve an unconscionable settlement, as it was clear that the plaintiff was unsophisticated, was struggling financially and was trusting of the adjuster. Some of the adjuster's actions that were criticized by the court were as follows: Relevant medical information (such as the accident benefits file) detailing a severe injury was in the adjuster's possession, but was not provided to the plaintiff; The adjuster applied the statutory deductible to general damages in excess of $100,000.00; The adjuster applied the Fault Determination Rules to determine liability and reduced the plaintiff's damages by 75% (even though the Fault Determination Rules do not apply to tort actions). Worthy of note is that ING's adjuster advised the plaintiff to seek independent counsel, which the plaintiff failed to do. However, Justice MacPherson held that it was clear that the plaintiff had the impression that the adjuster would be fair and would look out for his interests. As such, the plaintiff's failure to consult a lawyer was not fatal. The release was therefore set aside and the action was allowed to continue. This case emphasizes the care required when negotiating with self-represented plaintiffs who may not understand the intricacies of insurance litigation. When negotiating settlements prior to issuance of a Statement of Claim, insurance examiners must remember that they have unequal bargaining power by virtue of their expertise and deal with plaintiffs accordingly. ¹ 2011 ONSC 1426 (CanLII).
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