Joint and Several Liability in Canada
By Peter Cronyn
Posted: 4th April 2016 09:59In Canada, the vast majority of personal injury cases are advanced on the basis of our law of negligence. In most provinces, one of the cornerstones of negligence law is the principle of joint and several liability.
With several liability, each defendant found liable is only responsible to pay his or her proportionate share of the damages. But with joint and several liability, a successful plaintiff can recover all of his or her damages from any of the defendants found liable regardless of the percentage of fault attributed to them. It is left to the defending parties to sort out between themselves the apportionment of the damages. The rationale for this doctrine is that it protects victims from being under-compensated in the event one of the defendants is unable to pay his or her share of the award. It is thought that as between the innocent victim and any one of the defendants, it is more appropriate that the latter bear the burden of any shortfall. This is particularly so, when almost all defending parties are protected with liability insurance.
An example might be a case in which a plaintiff, driving on her own side of the road, is struck in her lane head-on by another vehicle being driven by someone impaired who had been over-served at a nearby bar. The plaintiff is badly injured, has significant on-going and future cost of care, a total loss of earning capacity for the rest of her working life and significant pain and suffering. In such a case, the damage award could easily reach $6 million; so we will assume those damages for this example. Further assume, the impaired driver carried automobile liability insurance with limits of $1 million (which is typical in Canada), is otherwise impecunious and the bar where he was served carried liability insurance of $10 million. The norm in a case such as this would be to place the lion’s share of the liability on the impaired driver, appropriately so. But the bar would also be held liable in its capacity as a commercial host in either failing to ensure that it did not over-serve its patron or if having done so making sure that he did not drive. In such circumstances, a bar would typically be found between15% to 20% liable and the impaired driver would bear the rest.
If both parties were fully insured for their respective portions, there would be no issue and each insurer would only cover the proportionate share of the damage award against their respective insureds. In this case, however, the impaired driver only has $1 million available to him and the bar has $10 million. Under the principle of joint and several liability, the insurer of the bar would be required to pay $5 million and the insurer of the car of the impaired driver would only pay its full limits of $1 million, in spite of the fact that such a breakdown does not reflect the degree of fault of the parties.
The insurer of the bar does have the right to pursue the impaired driver to require him to pay his actual proportionate share but in this case because he is impecunious, there would be no point. As a point of fact though, defendants who have paid more than their proportionate share rarely do take steps to pursue any shortfall beyond the insurance coverage of any other party unless they have significant assets.
If we change the assumptions such that the bar only has liability insurance of $3 million but the value of the business is $2 million. Then owner of the bar is then at risk of losing his business as the plaintiff can force it to be sold to pay off the judgment or otherwise enforce the remaining unpaid portion of the judgment against the assets of the bar.
Obviously, members of the plaintiff’s bar in Canada are proponents of this doctrine as it greatly enhances the likelihood of recovery for innocent victims. It protects their clients if they must go to trial, but also enhances the prospects of settlement.
On the other hand any people or entities with significant assets and/or insurance are opponents of the principle, also for obvious reasons. These parties often have to bear a much higher cost of any given misfortune than their proportionate share. In addition, plaintiff’s counsel will look for deep pockets when it is not certain their client’s damages will be covered by the main tortfeasor (indeed it is arguable that a plaintiff’s lawyer would be considered negligent if they did not do so). So these parties are being drawn into litigation in which they might not otherwise if their only risk was to pay their proportionate share.
From the perspective of the party with deep pockets or significant insurance, it means having to defend many more cases than they might otherwise. In addition to that, even if they face little risk of a finding of liability against them, the fact remains that if the plaintiff does succeed in establishing even as little as 1% liability against them, they may be left having to pay a large damage award. In fact, the joint and several liability doctrine is often referred to as the “1% Rule” (that said, judges rarely, if ever, actually apportion liability as low as 1%, the lowest typically being 5%).
Plaintiffs will attempt to trade on that high risk exposure in any settlement discussions and it often means these parties have to contribute significant sums to settlements. While the risk of joint and several liability is a known one for any entity with significant assets and insurance coverage, it is very difficult to plan for and manage that risk given the uncertainty of the magnitude of the exposure.
As a result, any person or entity with considerable assets coming into Canada to do business or spend time here should be aware of this risk. Appropriate levels of insurance should be arranged and maintained and proper steps toward risk management should be implemented.
Peter Cronyn graduated from University of Ottawa Law School in 1977 and was admitted to the Law Society of Upper Canada in 1979. He has practised as a trial lawyer with the firm of Nelligan O’Brien Payne LLP in Ottawa since his call to the bar. He is a past President of both The Advocates’ Society and the County of Carleton Law Association. He is a Fellow of the American College of Trial Lawyers. From 2008 to the present, he has been selected annually to be included in The Best Lawyers in Canada in the areas of Corporate and Commercial Litigation, Personal Injury Litigation and Insurance Litigation. He is recognized as a Litigation Star by Benchmark Canada.
Peter can be contacted on 613-231-8213 or by email at firstname.lastname@example.org