Getting Sued: A Lose/Lose More Situation

Too often, I see clients being sued by someone where they really have done little or nothing wrong.  It is never pleasant giving them advice.  Invariably, the advice is that this will cost the client money.  Even if the client wins, it is almost guaranteed that they will not recover all their legal costs in defending the lawsuit.  That sucks.

The rules of court dealing with costs are skewed in favour of plaintiffs.  If you are a party to a lawsuit and you make an offer to settle, and you ultimately get a judgment that is as good or better than the offer you made, you are entitled to ask for a higher costs award.  However, plaintiffs are better off under the rule than defendants. 

I heard that the Committee that studies the rules and recommends changes was looking at this very situation.  I was pleased, as I thought the Rule should give the same benefit to plaintiffs and defendants.  To my shock, I heard that there was lobbying to make the rule skewed even more to plaintiffs.  Of course, that lobbying was coming from the lawyers who represent plaintiffs in personal injury actions. 

You see, in the personal injury field, it is usually insurers that are footing the bill for the defendant.  No-one seems to feel sorry for insurance companies (me included!).  Making them pay more money seems to bother few people, as everyone feels that they can afford it.  However, skewing the rules to get the insurance companies to foot more of the legal costs of plaintiffs is inappropriate.  It punishes far more people than it rewards.  Most importantly, it makes the people who can’t afford it (small defendants) pay more in legal fees in cases where they were sued for no reason.  The innocent defendant is punished in favour of the overzealous plaintiff.  The plaintiffs’ bar makes no secret that the reason for their lobbying is that the insurers have the money.

There is nothing you can do to prevent people from suing you.  All the risk prevention and careful planning will not deter the overzealous plaintiff from trying to get something out of you.  The Rules of court do have some tools to try to maximize your costs award if you win, but ultimately, litigation costs money.  This fact is used again and again by plaintiffs who start lawsuits with the hope that the defendant will settle quickly.

For defendants, it seems almost necessary to consider making a “nuisance” settlement offer.  A “nuisance” settlement is where the defendant offers some money just to make the thing go away.  Sometimes, the defendant will have some idea what it will cost to defend the lawsuit and will offer an amount that is relative to their anticipated costs, just to avoid the hassle.

In my opinion, the rules need to be changed to provide the same costs consequences to both sides of a dispute.  There should be no distinction between plaintiffs and defendants.  It would discourage frivolous lawsuits.