By: Lindsay Charles, partner, and Kathleen Hunter, student-at-law
What is a mediation?
Mediation is the process of negotiating between two parties in a dispute in the presence of an independent neutral third party, known as the mediator. The role of the mediator is to help facilitate settlement by encouraging compromise and exploring fair and mutually acceptable settlement options. The mediator is not empowered to impose a settlement, rather, they assist in relationship building and providing an unbiased perspective to the positions of the parties.
Generally, a mediation is voluntary, informal, and confidential (if an agreement is signed beforehand detailing such), meaning that no parties are forced to accept a particular settlement, and there are less rules than other court processes. These features encourage dispute resolution. For these reasons, this process usually occurs earlier on in the litigation process in hopes of avoiding a trial.
A successful mediation will end with a signed agreement or contract, and this agreement then becomes binding. However, mediation may be helpful in even resolving some issues, even if not all are agreeable.
When is it mandatory?
In the past, mediation was simply a voluntary tool open to parties to utilize for more expedited and efficient dispute resolution. However, it has since been made mandatory in certain situations, such as under the Ontario Mandatory Mediation Program and Section 258.6(1) of the Insurance Act, R.S.O. 1990, c.I.8.
Ontario Mandatory Mediation Program
In Toronto, Ottawa, and Windsor, mediation has become mandatory for all civil matters in an effort to save judicial resources by expediting matters through the civil litigation system and encouraging forums for settlement early on. The Ontario Mediation Program applies in the above listed cities, in all types of civil matters, and is governed under Rule 24.1 of the Rules of Civil Procedure. Under Rule 24.1, most civil lawsuits in these jurisdictions must go to mediation, subject to various exceptions, such as:
- Family law matters
- certain cases covered by rule 75.1
- cases mediated under the Insurance Act 258.6 a year or less before the delivery of the first defence, or answer to the complaint, in an action
- Toronto Commercial List cases
- mortgage actions under rule 64
- Construction Act lawsuits, except trust claims
- Bankruptcy and Insolvency Act lawsuits
- lawsuits certified as a class proceeding under the Class Proceedings Act
- lawsuits exempt from mandatory mediation due to a court order (rule 24.1.05)
Section 258.6(1) of the Insurance Act
Under section 258.6(1) of the Insurance Act (the “Act”), which applies to all of Ontario, mediation is statutorily mandated. This section of the Act applies to personal injury actions arising out of use of an automobile with an insurer defending the action. Under this section, mediation is statutorily mandated, if requested. This means that when a plaintiff requests that mediation be scheduled under section 258.6(1), the defendant has a “positive obligation to appoint, schedule and conduct such mediation within the timeframes and procedures set forth”.
Scheduling a Mediation: Failure to Respond, Refusal, and Penalty
While mediation is mandatory in Toronto, Ottawa and Windsor under the Ontario Mandatory Mediation Program, and is statutorily mandated under section 258.6(1) of the Insurance Act, what happens if you request a mediation and the other side declines or doesn’t respond?
The failure to mediate can, at times, lead to cost consequences.
Section 258.6(2) of the Insurance Act, states that non-compliance with this section will be considered by the court when awarding costs.
This section of the Insurance Act is reflected below:
- Mediation
258.6 (1) A person making a claim for loss or damage from bodily injury or death arising directly or indirectly from the use or operation of an automobile and an insurer that is defending an action in respect of the claim on behalf of an insured or that receives a notice under clause 258.3 (1) (b) in respect of the claim shall, on the request of either of them, participate in a mediation of the claim in accordance with the procedures prescribed by the regulations. - Failure to comply
(2) In an action in respect of the claim, a person’s failure to comply with this section shall be considered by the court in awarding costs. 1996, c. 21, s. 22.
The potential cost consequences associated with the failure to mediate are reflected in the Court of Appeal decision of Williston v Hamilton (Police Service), where an augmented cost award was awarded as a result of the failure to comply with section 258.6(1). The Court held that where a party has repeatedly requested to mediate and the insurer has never agreed to participate, despite an obligation to do so, an augment costs award is warranted.
Similarly, even if mediation is not mandatory, there can still be cost consequences. In Canfield v Brockville Ontario Speedway, the refusal to mediate was considered when assessing costs. This case arose out of Belleville which is not subject to the mandatory mediation provisions of Rule 24.1. Despite this, when it came to fixing costs, the plaintiff argued that the defendant had refused its request to mediate and that this case likely would have settled with a mediator and avoided significant costs. Justice Graeme Mew ultimately found that it was unreasonable for the insurer to decline mediation, and that this should be reflected in the disposition of costs. Justice Mew conceded that not all cases are meant for mediation and that a refusal to mediate will not automatically be considered a factor in exercising one’s discretion as to costs, before ultimately concluding:
- The present case is not one of those circumstances where a plaintiff was trying to shake down an insurer by demanding mediation of a wholly unmeritorious case. To the contrary, it is a case where the insurer took a tough and uncompromising stance. That, of course, is a defendant’s prerogative. Defendants do not have to settle. But if reasonable opportunities to mediate are spurned, that can be a relevant factor when fixing costs.
The Ontario Court of Appeal commented on the cost consequences of an insurer’s failure to participate in mediation in Keam v Caddey, setting out it is a remedial penalty:
- It is remedial because it is intended not only to compel compliance by insurers with an important statutory purpose, but also to provide a remedy to the other party who was deprived of the opportunity for an early settlement of the claim. It is a penalty, because it is not intended to be merely compensatory of costs unnecessarily incurred by the other party or parties, as that objective is already addressed by other costs provisions of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, but to provide a meaningful consequence to an insurer that elects not to comply.
The unfortunate reality is, that where a claim is settled prior to trial, there is no mechanism for any such consequence. However, following trial, where an insurer has not complied, the trial judge is required to consider the appropriate cost consequence of the insurer’s actions. It must also be noted that the cost consequences can apply whether the plaintiff or the defendant has been successful at trial.
As the legislature did not provide a specific cost consequence for an insurer’s failure to participate in mediation, such as substantial indemnity costs against a losing defendant or deprivation of full costs of a winning defendant, the trial judge must exercise their discretion and determine the appropriate cost penalty in each case.
For more information on s. 258.6(1), see our blog, “Tactical Move: Requesting a Mediation Under Section 258.6(1) of the Insurance Act”.