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3. Joint and
Several Liability Reform - ASSOCIATION OF MUNICIPALITIES OF OntariO rÉFORME DE LA RESPONSABILITÉ CONJOINTE ET SOLIDAIRE - ASSOCIATION DES MUNICIPALITÉS DE L’OntariO |
That Council support the efforts of the Association
of Municipalities of Ontario to seek joint and several liability reform in
Ontario and to call on the Provincial Government to pursue much needed changes
to the Negligence Act.
Recommandation du ComitÉ
Que le Conseil soutien les efforts de l’Association des municipalités de
l’Ontario afin de solliciter la responsabilité conjointe et solidaire en
Ontario et de demander au gouvernement provincial d’apporter les changements
nécessaires à la Loi sur le partage de la
responsabilité.
DOCUMENTATION
1.
City
Clerk and Solicitor’s report dated 17 August 2010 (ACS2010-CMR-LEG-0014).
Report to/Rapport au:
Corporate Services and Economic Development
Committee
Comité des services organisationnels et du développement économique
and Council / et au Conseil
August 17th, 2010 / le 17 août
2010
Submitted by/Soumis par : M. Rick O’Connor
City Clerk and Solicitor / Greffier et Chef du contentieux
Contact Person/Personne ressource : D. White, Manager, Litigation and
Labour Relations /Gestionnaire litiges et Relations de travail
(613) 580-2424 x21933,
david.white@ottawa.ca
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Ref N°: ACS2010-CMR-LEG-0014 |
SUBJECT:
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Joint and Several Liability Reform
- ASSOCIATION OF MUNICIPALITIES OF OntariO |
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OBJET :
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rÉFORME DE LA RESPONSABILITÉ CONJOINTE
ET SOLIDAIRE - ASSOCIATION DES
MUNICIPALITÉS DE L’OntariO |
That the Corporate Services and Economic Development Committee recommend
that Council support the efforts of the Association of Municipalities of Ontario
to seek joint and several liability reform in Ontario and to call on the
Provincial Government to pursue much needed changes to the Negligence Act.
Que le Comité des
services organisationnels et du développement économique recommande au Conseil municipal
de soutenir les efforts de l’Association des municipalités de l’Ontario afin de
solliciter la responsabilité conjointe et solidaire en Ontario et de demander
au gouvernement provincial d’apporter les changements nécessaires à la Loi sur le partage de la responsabilité.
BACKGROUND
At the Corporate Services and Economic Development Committee’s regular meeting on May 4, 2010, the City Clerk and Solicitor presented the first quarterly report of 2010 detailing the claims settlements finalized during that time period (ACS2010-CMR-LEG-0005). That Report also identified a lobbying initiative sparked by the Association of Municipalities of Ontario (AMO) seeking legislative change on the subject of joint and several liability, known informally as the so-called “1% Rule”, and noted AMO’s white paper entitled “The Case for Joint and Several Liability Reform in Ontario” (attached as Document 1). Staff have undertaken a more comprehensive review of the AMO paper and, in keeping with the commitment made in May to provide “a more detailed report in the near future”, this Report has been prepared.
DISCUSSION
AMO’s Joint and Several Liability Reform Initiative
The issue of joint and several liability arises in the context of litigation brought by a plaintiff against more than one defendant. The principle is enshrined in Section 1 of the Negligence Act, which states:
Where damages have been caused or contributed to by the fault or neglect of two or more persons, the court shall determine the degree in which each of such persons is at fault or negligent, and, where two or more persons are found at fault or negligent, they are jointly and severally liable to the person suffering loss or damage for such fault or negligence, but as between themselves, in the absence of any contract express or implied, each is liable to make contribution and indemnify each other in the degree in which they are respectively found to be at fault or negligent.
At law, joint and several liability is defined as follows:
The condition in which rights and liabilities are shared among a group of persons collectively and also individually. Thus, if defendants in a negligence suit are jointly and severally liable, all may be sued together or any one may be sued for full satisfaction of the injured party.
Referred to colloquially as the “1% Rule” , the concept of joint and several liability dictates that a plaintiff can recover 100% of his or her damages from a single defendant, regardless of that particular defendant’s true share of fault. In other words, a defendant may be held responsible for 100% of the damages in a lawsuit even though that defendant was found to be only 1% responsible for the loss. While the paying defendant may be able to recover some contribution from a co-defendant, doing so may involve additional cost and it is likely that the co-defendant has few or no assets.
The fundamental public policy reason behind joint and several liability is the idea that a plaintiff, who has done nothing wrong, should be fully compensated for his or her loss and not forced to accept less because one of the defendants does not have the financial means to satisfy his or her portion of a judgment. Rather, the consequences should be borne by all the defendants, who bear at least some degree of fault. While the goal of this principle may be laudable, the AMO Paper identifies a number of unfortunate consequences, particularly in cases involving municipal government defendants.
In support of its call for reform in the area of joint and several liability, the AMO Paper notes that, in several cases, municipalities have been “scaling back on the provision of public services in order to limit liability exposure”. Even where they have not reduced services, local governments have seen significant increases in insurance costs and some have extended insurance requirements for outside organizations making use of municipal facilities. The cost of these increased requirements may effectively bar some smaller organizations from holding events on public property. While there are other factors affecting municipal insurance premiums, such as disproportionate increases in damage awards, the AMO Paper notes that the Frank Cowan Company has identified joint and several liability as a factor contributing to insurance premium increases.
In a number of other jurisdictions in Canada and other common law countries, concerns with the impact of joint and several liability have encouraged reform of their respective tort schemes. The AMO Paper notes, by way of example, that the provinces of Saskatchewan and British Columbia have each moved toward systems of proportionate liability (where each party is responsible only for its own share of a judgment award). Versions of these legislative schemes have also been put in place in Australia and many states in the U.S.A.
The purpose of the AMO Paper is “to provoke a discussion of the type of legal framework that is in the public interest in Ontario” and to prompt the Provincial Government “to review the fundamental elements behind the law with a view to bringing about key reforms as many other jurisdictions have done.”
Impact of Joint and Several
Liability on the City of Ottawa
In Ottawa, joint and several liability has had a major impact on the City’s approach to managing risk and defending litigation as it arises. The significance of the rule on the City flows from the fact that the City is what is known as a “deep pocket” defendant. A deep pocket defendant is one that owns or controls a large number of assets, has the means available to it to raise additional funds as necessary, and carries large insurance policies.
The City faces an additional challenge with respect to joint and several liability; it has very limited, if any, ability to re-arrange its business affairs to avoid judgment. In other words, unlike a commercial entity, the City can never dissolve or go bankrupt in response to a potential lawsuit.
As a consequence of these converging factors, joint and several liability has created two separate, but inter-related, problems when managing risk and defending actions against the City:
The impact of joint and several liability, and the tendency on the part of plaintiffs to seek out “deep pocket” defendants is evidenced in a lawsuit brought recently by the passenger in a vehicle that was involved in an accident in 2006. The action was brought against the driver of the vehicle in which the Plaintiff was travelling, who had turned left into the path of an approaching car, as well as the driver of that other vehicle. The young passenger suffered a traumatic brain injury and is permanently confined to a wheelchair, requiring constant attendant care. The total value of the claim is in the order of $20 million. The City of Ottawa and General Motors have also been added as defendants. In cases such as these, the turning driver is primarily at fault. However in this case, the City is alleged to be partially liable for not having provided an extended green arrow at the intersection and for setting too high a speed limit on that roadway. Though the City may be found to have little liability in this case, it could nevertheless be required to pay a large portion of the total claim if the drivers involved do not have sufficient insurance to cover the full amount of the loss. Given that the law in Ontario requires only that a vehicle owner maintain $200,000 worth of third-party liability insurance, this is a case where the City could be required to fund the significant shortfall and its contribution could far exceed the extent of any actual liability.
Given cases such as the one described above, pre-trial judges and mediators are increasingly recommending that the City settle matters out-of-court for amounts that exceed the City’s apparent degree of responsibility, if only to avoid protracted litigation and to minimize the risk of the City having to pay an even larger share of a damage award if the full amount cannot be recovered from the other defendants.
Other Responses to the AMO
Initiative
This initiative by the AMO for legislative reform to the liability scheme in Ontario has already received the support of a number of municipal council’s across the Province. At the time of writing this report, approximately one hundred Ontario municipalities have provided their support to this initiative.
The Association of Municipal Managers, Clerks and Treasurers of Ontario (AMCTO) has also endorsed AMO’s initiative and has written to the Attorney General and Minister of Finance to encourage consideration of reform to the Negligence Act. In particular, the AMCTO’s letter notes:
Increasingly, our members are finding that they have to operate these services with an eye to considerations that have little to deal with responding to local preferences or efficient and effective service delivery. More specifically, considerations of the liability implications of a service to the public are unduly affecting operational decisions about how and even whether to provide a service.
As of the date of this report the Provincial Government had not responded.
CONSULTATION
As this is an information report, public consultation was not required.
LEGAL/RISK MANAGEMENT
IMPLICATIONS
Legal/Risk Management’s concerns with joint and several liability have been described above, and Legal/Risk Management share the concerns of the AMO as identified in the initiative. A more detailed discussion of specific cases that were impacted by these concerns would be subject to solicitor/client privilege and/or confidentiality requirements that commonly accompany such matter, and would need to be addressed in camera.
CITY’S STRATEGIC PLAN
Not applicable.
TECHNICAL IMPLICATIONS
Not applicable.
FINANCIAL IMPLICATIONS
There are no direct financial implications to this report.
DISPOSITION
Subject to any direction by the Corporate Services and Economic Development Committee and Council, the City Clerk and Solicitor Department will continue to work with its partners in the AMO to raise these concerns with the Government of Ontario in an effort to have the legislation reviewed with a goal of creating a system that is more fair to municipalities and municipal taxpayers in Ontario.