In this article, we will discuss a concern we hear on a daily basis: what if I lose and have to pay the long-term disability (LTD) insurance company’s legal fees? Many of our clients worry about this, and rightfully so — the last thing you want to do is pay for your insurer’s legal expenses after you’ve lost your case.
In most cases, people who take legal action against their insurance company are already in a financially precarious situation. They’ve probably been denied benefits for some time now and were depending on a lawsuit to provide them with enough funds to stay afloat. So, the idea that if you lose, you could be expected to pay the insurance company’s fees is more than daunting.
While this possibility is nerve-racking, it’s helpful to know that out of our 549+ disability insurance lawsuits (as of November 2022), not a single one of our clients has had to pay the insurance company’s legal fees — those are pretty good odds if you ask me.
However, even though the odds are slim, it’s always a risk you should be aware of. That is why whenever a client agrees to have us represent them in court, we send them a fee agreement that explicitly mentions the possibility of having to pay the insurance company’s legal expenses if they lose.
Example of the wording in our fee agreement:
“If you win or settle your case, you may receive ‘costs’ – that is, money to help you pay for legal fees. In most cases, costs pay only for part of a person’s legal expenses.
If you lose your case, a court or tribunal may order that you pay costs to the successful party on a partial or full indemnity basis. Partial payment is the most common and means that you may have to pay a certain portion of the successful party’s actual costs. The amount you pay is based on tables in the Rules of Court. Full indemnity is rare but means that you may have to pay for 80% or more of the successful party’s actual costs.”
One of our core principles at Resolute Legal is ‘education first.’ We always want our clients and our readers to understand everything about the process, including a deep understanding of the risks. That is why we include this information in our fee agreement and, ultimately, why we publish articles like this one.
The goal of this article is to teach everything you need to know about legal fee reimbursements, including how they work, when they can happen and how to prevent having to pay the insurance company’s legal fees. Our hope is that after reading this article, some of your concerns will be expelled, and you will have a better idea of how to navigate your claim.
Now it’s time to dive in!
This article is part of our Ultimate Guide to Long-Term Disability in Canada.
Situations Where You May Have to Pay the Insurer’s Legal Fees
The first thing you need to know is that legal fee reimbursements are only triggered when you file a lawsuit. So, if you hire a lawyer early on and they are just helping with appeals, but there’s no lawsuit, you wouldn’t have to pay any part of their legal fees even if you lose the appeal. However, once your lawyer files a lawsuit, that triggers rules that require the losing party to repay part of the winning party’s legal fees. In other words, no lawsuit equals no legal fee reimbursements.
Now that you know a lawsuit needs to be in place let’s talk about some scenarios where you may be ordered to pay the insurance company’s legal fees.
As we’ve already discussed, if you lose the lawsuit, you may have to pay for the insurer’s expenses. But there are a few other situations where you may have to cover their costs as well. For instance, if you drop the case without reaching a settlement, you could end up with the bill. Additionally, during the lawsuit, there are mini sessions with a judge, and sometimes the court may order to cover a small amount of the insurer’s legal fees. However, you really shouldn’t worry too much about this one.
You may be wondering if there is anything you can do to prevent this outcome, and luckily there is. Jump to the next section to find out how you can avoid paying the insurance company’s legal fees.
How to Avoid Paying the Insurance Companies Legal Expenses
One of the first things you’ll find out when hiring a lawyer to sue an insurance company is if you win the case, they pay towards your legal fees, but if you lose, you can get stuck with the bill. After hearing that, the next thing they want to know is if there is any way they can prevent this from happening, and fortunately, there are actually a few ways to reduce the risk.
But before we get into that, it is crucial to know that it’s always going to be a possibility. Even if you do everything to mitigate this outcome, it can still happen — but remember, it is extremely rare.
Now that we’ve covered that disclaimer, let’s dive in!
Don’t sue the insurance company
The first and simplest way to avoid paying your insurance company’s legal fees is to not sue them. While this may seem obvious, it is the best way to avoid the risk altogether.
You should especially consider avoiding a lawsuit if you and your lawyer think your case is unwindable or the risk is too high. Instead of going the legal route, you can always try a few rounds of internal appeals — that way, if you lose, you won’t be ordered to pay them anything.
However, even if there are issues with your case, that doesn’t necessarily mean you shouldn’t pursue a legal appeal/lawsuit. If you are unsure whether a lawsuit is the right move for you, reach out to an experienced disability lawyer. They can provide you with more information about your level of risk and the best course of action.
Need advice on your case? Call us at (888) 732-0470 to schedule your free consultation today.
Accepting a settlement
Another way to avoid the risk is to reach a settlement with the insurance company. Settlement opportunities usually come up at various points throughout the suit. Some settlement offers are good, and others are not. Either way taking a settlement will mitigate the risk of having to pay the insurance company’s legal fees.
Additionally, insurers will usually give you an opportunity either before or during the trial to drop the suit in exchange for not having to pay their legal fees. In almost every case, good or bad, the insurer will give you this chance. While it’s not the best offer, it does protect you from having to pay their legal fees.
Overall, keep accessing your risk throughout the lawsuit and remember you can almost always take a settlement offer.
Talk to us
Not to toot our own horn or anything, but a good way to avoid paying legal fees is to talk to us before you file a lawsuit. At Resolute Legal, we will never take on a case we don’t think we can win. And even if we don’t take your case, we will always be clear about why. If we think the risk is too high, we will inform you that a lawsuit may not be in your best interest.
Further reading: How Much Does a Disability Lawyer Cost in Canada?
Does the Insurance Company Have to Pay My Legal Fees?
The same rules that apply to you also apply to the insurance company, so if they lose, then they would have to pay your legal fees. Additionally, if they drop the case or the judge orders them to cover a small amount of your legal fees in a mini session, then they would have to pay.
The amount they have to cover is going to be different depending on your case and what province you live in, but generally speaking, it will never be more than 40 to 50% of your legal fees.
So what if you want the insurance company to pay for more than 40-50% of your legal fees? What if you want them to reimburse for 100%?
Can I Force the Insurance Company To Pay 100% of My Legal Fees?
Well, the answer to that is it is highly unlikely. You can always argue to have them cover 100% of your legal fees but keep in mind it probably won’t happen.
This idea that you could even get 100% coverage comes from a 2017 Canadian disability insurance case where the judge required the insurance company to pay for 100% of the claimant’s legal fees. As you know, in most cases, judges will only require insurers to pay 40-50% of fees, so this ruling caused quite a bit of commotion in the disability claims world.
The insurance company ended up appealing the decision, and the court of appeal actually upheld the judge’s ruling. Meaning they supported the original judge’s verdict. However, the court of appeals clarified that this is not a general rule that will apply to everyone. They explained that this was an exceptional case that warranted full reimbursement; however, all other cases will continue to be examined on a case-by-case basis. So this means that just because someone wins, they won’t necessarily get 100% of their legal fees covered.
Recap
Many people worry about having to pay the insurance company’s legal fees, but as we’ve discussed, there are a lot of things you can do to mitigate that risk. You have a lot more control than you think! On top of that, the likelihood that you would actually have to cover their expenses is quite low. As mentioned at the beginning of this article, Resolute Legal has never had a client who has had to pay for the insurance companies’ legal fees.
Overall, remember it is always a risk, but as long as you make wise decisions and work with an experienced disability lawyer, you will likely have nothing to worry about.
If you have any questions about this article or your claim, feel free to book a free consultation with us. You can reach us toll-free at 888-732-0470.
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